
    The President, Directors, and Company of the Nantucket Pacific Bank, respondents v. Horatio N. Stebbins. The same v. The same.
    One Potter, of Massachusetts, and Stebbins, the defendant, on the 15th of August, 1864, exchanged notes, each giving to the other his two notes, of the same date and amount, and having the same time to run. Potter, holding the two notes received from the defendant, on the security of them and of other notes, amounting in all to $11,956.04, procured the plaintiffs on the 23d of August, 1854, to discount his note of that date for $8000, payable ten days thereafter. He failed to pay his $8000 note. He was proceeded against as an insolvent, in Massachusetts, and on the 11th of October, 1854, Shaw & Swain were appointed trustees of his estate by a commission of insolvency, and he assigned his property to them as such trustees. When both of the said notes, so made by Stebbins, became due, and separate suits had been brought thereon, only $3614.67 of the other collaterals had become due, and they had been paid. When the said two actions were tried, and they were tried together, all of the other collaterals had matured and produced enough to pay the note which the plaintiffs discounted for Potter, into the sum of $196.11, including interest.
    
      Held, that the plaintiffs were entitled to judgment in the actions on the notes made by Stebbins for the amount of the notes, with interest and the costs of the actions; that each note was a good consideration for the one exchanged for it; that at the time Potter conveyed his estate to Shaw & Swain, as trustees in the insol- . vency proceedings, the defendant could not have compelled the notes made by him to be set-off against those he received in exchange therefor; that any equities which Stebbins might have, could only be considered and determined . in an action or proceeding, to which Potter, Shaw, and Swain were parties.
    That an order or provision in the judgments, permitting him to be discharged therefrom on paying to the plaintiffs the balance due to them from Potter on the $8000 note, and the costs of the twc actions, and the residue of the moneys into court, to abide its further decision, on application for such moneys to be made either by Shaw & Swain, or by the defendant, on due personal notice to the other of the time and place,of such application, secured to the defendant all the relief to which he was entitled in such actions on such a state of facts.
    (Before Duer, Bosworth and Woodruff, J.J.)
    December 13, 1856;
    February 14, 1857.
    These actions came before the court on an appeal by the defendant from the judgment rendered in each of them. They were tried before Mr. Justice Duer, without a jury, on the 26th of December, 1855, and the appeals were argued together, the facts in each case being substantially the same.
    The first action is on a note made by the defendant, dated the 15th of August, 1854, and payable to the order of Thomas Potter, two months from its date, for $1936.42; and indorsed by Potter to the plaintiffs. On the 7th of March, 1856, judgment was given for the plaintiffs for $2120.54 damages, and $136.28 costs.
    The second action is on a note of the same date as the other, made by Stebbins to order of Potter, payable three months from its date, for $2084.37, and indorsed by Potter to the plaintiffs. Judgment was given for the plaintiffs in this action, on the 7th of March, 1856, for $2270.39 damages, and $115.03 costs.
    The plaintiffs are a Massachusetts corporation, doing business at Nantucket, in that state, and have power to receive, hold, and own promissory notes, etc.
    On the 23d of August, 1854, the plaintiffs discounted for said Thomas Potter, of Nantucket, Massachusetts, his note for $8000, dated on that day, and payable ten days after date, to the order of William Mitchell, cashier at the Leather Manufacturers’ Bank in the city of Néw York.
    To secure the payment of his note, and to induce its discount, Potter deposited with the plaintiffs the following notes and acceptances as collateral securities, viz. t
    1 Note of E. W- (Gardner, due Sept. Í2W, 1854, for $ 924.00
    2 “ Horatio N. Stebbins, due Oct. 1518, “ 1936.42
    3 “ Samuel Woodward, due Oct. 2023, “ 1025.00
    4 “ Blow and March, due Nov. 14, “ 1665.67
    5 “ Horatio N. Stebbins, due Nov. 15ls, “ 2084.37
    6 “ Decker and Godine, due Nov. 24S7, “ 1320.58
    7 Acceptance of W. & F. W. Whittemore, due Jan. 1821,
    1855, for . . ...... 1500.00
    8 Acceptance of W. & F. W. Whittemore, due Jan. 22M
    1855, for........ 1500.00
    The total amount of these collaterals was, $11,956.04.
    The notes Nos. 2 and 5, are the notes on which these suits are brought.
    Potter failed to pay the note for $8000 at its maturity.
    On the 11th of Octover, 1854, an assignment of his property was made to John H. Shaw and Alanson Swain, by a commissioner of insolvency, under the insolvent laws of the state of Massachusetts, the said Potter being insolvent.
    All the above collaterals were paid on the days when they fell due, except Nos. 2 and 5, the notes of defendant, on which nothing has been paid.
    Defendant’s first note became due and was protested October 18,1854. On that day only $924 of the collaterals had come due, and only that sum had been paid on the $8000 note.
    Suit was brought on that note Nov. 3, 1854. On that day only $1949 of the collaterals had become due, in addition to the note in question, and only that sum had been paid on the $8000 note.
    Defendant’s second note came due and was protested Nov. 18, 1854. On that day only $3614.67 of the collaterals had become due, besides the notes of the defendant, and only that sum had been paid on the $8000 note.
    Suit was brought on the second note, Nov. 25, 1854. On that day only $3614.67 of the collaterals had become due, besides the notes of defendant, and only that sum had been paid on the $8000 note.
    On the 25th of Jan., 1855, after the last collateral was paid, there remained due to the plaintiffs the sum of $183.23 on the $8000 note, and that sum, with interest from that date, is still due thereon.
    The two notes in suit were given by defendant to Potter in exchange for two notes of the same date, tenor and amount respectively, made by Potter to the order of Stebbins, and payable at the Leather Manufacturers’ Bank in the city of New York.
    These notes were not paid by Potter, and when they became due Potter failed to take them up. Defendant was the holder and owner of them at the time of the commencement of these actions. One of these notes, viz., the $1936.42-100 note was indorsed by Stebbins, and he had it discounted, and received the money on it; and afterwards, on the day it became due, he paid the money and took it up, and has since been the holder of it. The other note, viz., the $2084.37-100 note, was not used in any way by defendant, but held by him ever since it was made.
    They were afterwards proved by the defendant before the Commissioners in Insolvency.
    
      The exchange of notes between defendant and Potter was made in the city of Few York.
    This statement of facts was admitted to be true, but the right to object to proof of any of such facts and to their relevancy was reserved.
    The defendant’s counsel objected to the relevancy of such of the foregoing facts as related to the insolvency of Thomas Potter, or to the assignment of his property by a commission of insolvency under the insolvent laws of Massachusetts, or to the two notes of Thomas Potter held by defendant, having been proved by the defendant before the commissioner in insolvency.
    The court overruled the objection, and the defendant’s counsel excepted.
    The said statement of facts and admission were there'received in evidence.
    The court made its decision on the 6th of March, 1856, and decided that, it appearing to the court as a conclusion of law upon the said facts, that if upon the said facts any equities arise in favor of the defendant, in respect to the note on which this suit is brought, such equities can only be considered in an action or proceeding in which the said Thomas Potter and his assignees are before the court; and it therefore appearing that the said facts constitute no defence to the plaintiffs’ suit, but that the plaintiffs, either in their own right, or as trustees of the said Thomas Potter, and persons claiming through him, are entitled to recover from the defendant the whole amount of the said note with interest.
    The court made an order, in each action, simultaneously with the decision thereon, that on perfecting judgment, an execution might be issued to collect the costs, but none should be issued to collect the damages short of thirty days.
    That if within the thirty days, the defendant should pay the costs and sheriff’s fees, if any, to the plaintiffs, and should also pay the damages with interest, into court, to abide its further order, and give notice thereof, the execution should be countermanded. If he failed to make such payment and give notice within the thirty days, execution might be issued forthwith for the whole judgment, and then the further provisions of the order should be of no effect.
    It then further provided, that if the moneys were paid and notice given within the thirty days, the plaintiffs, within thirty days thereafter, should servé on Potter, Shaw and Swain, in person, a copy of said order, and upon filing with the judgment record, proof of such service, by affidavit or admission, the plaintiffs should be discharged from all liability to Potter, Shaw and Swain, or to either of them, or to any person claiming under them for or on account of the notes, or either of them, or the proceeds thereof; that the defendant might apply to the court, at any Special Term, for the moneys so paid into court, upon petition, on proof of personal service of it, on Potter, Shaw and Swain, at least forty days before the time named for presenting it, if served out of the state, and at least twenty days if made in the state.
    That Potter, Shaw, and Swain, or either of them, or any one claiming under them, might apply to the court at Special Term for the moneys so paid into court, on petition and due proof of personal service thereof on the defendant at least twenty days before the time named for presenting it.
    The order in each action was in the same terms, except that the order in the first action permitted execution to be issued forthwith to recover not only the costs of that action but also $196.11, parcel of the damages, being the balance, with interest, due to the plaintiffs from Potter, over and above the amount realized from the other collaterals, on the security of which his note for $8000 had been discounted.
    Judgment was entered in each action on the 7th of March, 1856, absolute and unconditional in its terms, for the recovery of the amount of the note and interest, with the costs of suit.
    The defendant duly excepted to so much of the decision of the court, made in each action, as decides as conclusions of law:
    That if upon the facts, any equities arise in favor of the defendant in respect to the note on which this suit is brought, such equities can only be considered in an action or proceeding in which the said Thomas Potter and his assignees are before the court, and that said facts constitute no defence to the plaintiffs’ suit; but that the plaintiffs, either in their own right or as trustees of the said Thomas Potter, and persons claiming through him, are entitled to recover from the defendant the whole amount of said note with interest:
    That the president, directors, and company of the Nantucket Pacific Bank, the plaintiffs, do recover of Horatio N. Stebbins, the defendant, the amount of the note and interest, besides costs and disbursements.
    The defendant also excepted to so much of said decision, as found as facts, that on the 11th day of October, 1854, an assignment of his, (the said Thomas Potter,) property, was made to John H. Shaw and Alanson Swain, by a commissioner of insolvency, under the insolvent laws of the state of Massachusetts, the said Potter being insolvent; and that the two notes of Potter, held by defendant, were proved by the defendant before the commissioner in insolvency.
    The defendant also excepted: that any testimony relative to the insolvency of, or assignment by said Thomas Potter, or to the proof of said notes before the commissioner, was irrelevant and inadmissible.
    That the decision is contrary to law, and against the evidence.
    The answer of the defendant stated that the two notes in question, with others, were transferred by Potter to the plaintiffs to secure his indebtedness to them; that they had realized enough from the other collaterals to pay them in full; the making of notes by Potter in exchange for those in suit; that they are owned by the defendant and unpaid; that after the exchange of notes between Potter and the defendant, Potter was proceeded against as an insolvent, in Massachusetts; that Shaw and Swain had been appointed therein trustees of his estate, and he had assigned his property to them as such trustees; that these suits were in truth prosecuted for the benefit of said Shaw and Swain, and set up as a counter-claim in either action' the note made by Potter, and given to defendant in exchange for the note sued in such action, and prayed that the note made by Potter might be set-off against the corresponding note made by the defendant and delivered in exchange therefor, and that the note made by the defendant should be surrendered to him, and the complaint be dismissed, with costs.
    
      F. Tillou, for defendant and appellant,
    made and argued the following points:—
    I. The plaintiffs held the note as collateral security only, with other collaterals, to secure a loan by them to Thomas Potter. On payment of Potter’s indebtedness to them, all the surplus col-laterals reverted to Potter as the party beneficially interested in them.
    II. The plaintiffs have been paid all Potter’s indebtedness to them, except $183.23. All beyond that amount is prosecuted for the benefit of Potter, who is the party beneficially interested, and whom the plaintiffs represent as his agent; and the note set up in the answer is a good set-off beyond the $183.23 and interest, and beyond this the plaintiffs are in precisely the same position that Potter would be were he the plaintiff. (Barbour on Set-off, p. 71, and authorities cited; id. p. 115 to 129, and authorities; 2 R. S. 4th Ed. 354, § 12, sub. 7; Coppin v. Craig, 7 Taunton, 243; Hawkins v. Whittin, 10 Barn. & Cress. 217; Dixon v. Cass, 1 Barn. & Adolph. 343.) (a.) The plaintiffs, nor Potter’s assignee in insolvency, can claim any better or superior equities than Potter himself could.
    III. The question of the insolvency of Potter, under the laws of Massachusetts, or any proceedings thereunder, is immaterial and cannot arise in this case, to the prejudice of Stebbins’ defence or set-off. (Hoyt v. Thompson, 1 Selden, 320; Hoyt v. Thompson, pr. Paige, J., p. 350, 351; Barbour on Set-off, p. 115 to 129.) (a.) The defendant objected to the testimony of such insolvency.
    IV. The statutory insolvent proceedings against Potter, in Massachusetts, whereby his property was assigned to a commissioner in bankruptcy, under the insolvent laws of Massachusetts, did not operate to transfer the debt due by the appellant Stebbins, a resident of this state, as maker of the note in suit, or so as to prejudice or affect his right of set-off or counter-claim, or other defence as against Potter. And the foreign assignees of Potter stand in precisely the same position as against Stebbins, that Potter himself would, if there had been no insolvent proceedings had against him. (Hoyt v. Thompson, 1 Selden, p. 320; Hoyt v. Thompson, pr. Paige, J., p. 350 and 351, and authorities cited; Abraham v. Plestero, 3 Wend. 538; Johnson v. Hunt, 23 Wend. 89; Willett, president v. Waite, 12 Howard Sp. T. R. p. 34.)
    V. So long as Stebbins held the note of Potter before his insolvency or bankruptcy, it can be set-off against the note in suit. (Barbour on Set-off, 115 to 129; ex parte Hall Co. Bank Laws, 553; Root v. Taylor, 20 John. 137; Smith v. Brinckerhoff, 8 Barbour, 519, affirmed; 2 Selden, 388; Hancock v. Entwistle, 3 Term. R. 435; Coppin v. Craig, 7 Taunton, 243; Collier v. Jones, 10 Barn. & Cress. 777; Dixon v. Evans, 6 Term R. p. 57.) (a.) That Stebbins did so hold the note.
    YI. The judgment was against law, and should be reversed, with costs.
    YH. The stay of proceedings under the order should be extended, so as to preserve the rights of the appellant, in case he should deem it advisable to appeal bom the furtller judgment of this court.
    
      West & Clover, for respondents.
   By the Court. Bosworth, J.

The note, on which the first action was brought, matured on the 18th.of October, 1854. That on which the second action was brought, matured on the 18th of November, 1854. The first action was commenced on the 3d of November, and the second on the 25th of November, 1854.

On the 23d of August, 1854, the plaintiffs discounted for Thomas Potter his note of that date, for $8000, payable ten days after its date, on the deposit of the two notes in suit, with others, as collateral security. When the second action was commenced, the amount due to the plaintiffs, on the $8000 note, exceeded the aggregate of the two notes in suit.

Thomas Potter was a citizen of Massachusetts. On the 10th of October, 1854, before either of the two notes in suit had become due, Potter being insolvent, an assignment of his property was made to John H. Shaw and Alanson Swain, by a commissioner of insolvency, under the insolvent laws of the state of Massachusetts. The effect of such an assignment, according to those laws, is not stated in the case, nor are the laws themselves referred to. The fact that such an assignment was made is alleged in the defendant’s answer, and was admitted on the trial. It was also admitted that the defendant proved, before the commissioners in insolvency, the notes made by Potter and given to the defendant in exchange for the two in suit. The admissibility of proof of these facts was objected to by the defendant, but not the nature or sufficiency of the proof.

The assignment must be deemed effectual to transfer to the assignees, Shaw & Swain, all the right, title, and interest of Potter, to the notes in suit. That gave them a right to claim of the plaintiffs the surplus of the collaterals over and above the amount necessary to satisfy the $8000 note.

If the present defendant had instituted an action on the 10th of October, 1854, against Potter and the plaintiffs, before the assignment to Shaw and Swain, to compel a set-off of one set of notes against the other, it would have been of no avail. The plaintiff would have had a right to have the amount of the two notes then applied towards the payment of the $8000 note. Neither the notes made by the defendant, nor those made by Potter, were due when that assignment was made. The note of llOSOylnr, made by Potter, had been discounted for the defendant, and from that time until he took it up, on the day of its maturity, he was not the owner of it. The notes made by the defendant cannot be set-off against those made by Potter, under the Revised Statutes, in relation to set-offs, because neither of the notes was due at the time of Potter’s assignment in insolvency.

Courts of equity follow the law in regard to matters of set-off, unless there is some intervening natural equity going beyond the statutes of set-off, which constitute the general basis of set-off at law. (Howe, et al. v. Shephard, 2 Sum. 412; Gordon v. Lewis, et al. ib. 633-634.)

It is also a general rule, that one of two persons indebted to each other, may file a bill to compel a set-off, if the debt owing to himself is due, though the one owing by himself is not due, if the other party is insolvent; but he cannot do so before the debt owing to himself is due. (Keep v. Lord, 2 Duer, 78; Bradley v. Angel, 3 Coms. 475.)

But that rule is applicable only to the parties themselves, when no rights of third parties have intervened. That is not this case.

If Potter had owned the notes in suit when they matured, and had then been insolvent, it may be true that the present defendant could have maintained an action to compel a set-off of the one set against the other. But this case does not present any such question. There is no allegation in the answer, that there was any expectation or agreement that one note should be set-off against the other, or that Potter should pay at maturity the notes made by Stebbins. The inference, from the allegations of the answer, as well as from the facts found by the court, is that it was expected each party would pay the notes made by himself, and that the notes of the one were the consideration given for those oí the other.

I think it quite apparent, that the legal and equitable rights of the defendant upon the facts, as they existed at the time of the trial, depend upon the effect of the insolvent proceedings in Massachusetts, and upon the effect, also, of the act of the defendant, in proving before the Commissioners in Insolvency, the two notes made by Potter.

Shaw and Swain are necessary parties to any proceedings which may be had to determine those rights.

The utmost relief to which the defendant is entitled, is exemption from liability to the plaintiffs, on paying to them $196^-, and their costs in both actions, with interest, and the residue of the judgments into court to abide its further order. That relief the court, at Special Term, intended to secure, by the order dated one day prior to the judgment. Such further order will be made when the relating rights of the defendant and of Shaw & Swain to such residue have been determined by an action to which they are all parties, or otherwise. The judgment in the first action should be modified so as to secure to the defendant an opportunity to claim the relief to which he may show himself entitled, by adding to it these words, viz., “And it is further adjudged, that this judgment may be satisfied, and, also, all liability of the defendant to the plaintiffs by reason thereof, on payment, by the defendant to the plaintiffs, or to their attorneys, within thirty days, of the two sums of $196r¡7¡7 and of $136-^-, with the interest thereon, and the costs of this appeal and the residue of said judgment, with inter est thereon, into the United States Life Insurance and Trust Company, to the credit of this action, to abide the further order of the court, upon a final determination of the rights of the defendant, and of John H. Shaw and Alanson Swain, assignees of Thomas Potter, under insolvent proceedings in the state of Massachusetts, or of their successors in office, in respect to such residue.

“ It is further adjudged that, in order to determine the right to such moneys, the defendant may apply to this court, at Special Term, by petition, for an order that they be paid to him, on due proof of service of a copy of said petition, and of notice of the time of presenting the same upon the said plaintiff, and the said Potter, and the said Shaw and Swain, or the successor in office of said Shaw and Swain, such service to be made at least forty days before the day designated for presenting the said petition; a copy of this judgment to be served on each of said persons, together with the said petition and notice.”

In the second action, the sum to be paid to the plaintiffs, or their attorneys, is $115-^-, with interest, and the costs of the appeal. The residue of the judgment, with interest, to be deposited. And the judgment in the second action will be modified accordingly, by adding to it the provisions directed to be added to the judgment in the first action.

In other respects, the judgments must be affirmed, with costs.  