
    
      Ritchie and Wales v. Moore. The Same v. the Same.
    Decided February 4th, 1817.
    
    
      [7 Am. Dec. 688.]
    1. Bill of Exchange — Blank Endorsements — Rights of Holder — Possession as Evidence. — The holder oí' a Bill of Exchange, with several endorsements in blank, has a right to strike out the names of the endorsers subsequent to the first, and to write over the name of the first endorser as assigned to himself; or the Bill, without such assignment, will be considered as his property, by his having it in his power to make it.
    a. Same — Protest—Effect on Negotiability. — A Bill of Exchange does not lose its negotiable character by being- protested; but, after protest, maybe assigned, or transferred without assignment.
    3. Promissory Note — Action by Assignee — Set-Off. In an action by the assignee against the maker of a Promissory Note, the defendant cannot set off against it a Bill of Exchange, for which the assignor is responsible, unless it appear that such Bill was his property, before he received notice of the assignment.
    4. Partnership — Action against — Set-Off—Private Debt. —In an action against a mercantile Company, a set-off of a Debt, due to an individual partner cannot be allowed.
    Moore, assignee of J. G. Chalmers and Company brought two actions of Debt, in the Superior Couit of Prince George County, against Ritchie and Wales, on two Promissory Notes, executed by them, negotiable and payable at the office of Discount and Deposit of the Bank of Virginia in Petersburg; one dated August 20lh, 1811, for $500, payable 90 days after date; the other dated August 25th, 1811, for 1000, payable 120 days after date; both which Notes, after they came to maturity, (being assigned to Moore) were protested for non-payment. Nil debent was pleaded to each action; and issue joined thereon. The two Suits were, by consent, tried together.
    At the trial the defendants offered to set off, against the plaintiff’s demands, the amount of two Bills of Exchange drawn by the same J. G. Chalmers and Company in favour of Ritchie individually, on Wm. D. Wilson and Company of New-York; one dated June 11th, 1811, for $750, at 120 days; the other dated August 19th, 1811, for $1000 at 90 days; both returned protested for non-acceptance; one endorsed by the said Ritchie and Cox and Looker, the other by the same and by William Cox and Gideon Lee, also; which ^endorsements, (except those of Ritchie) were obliterated by Ritchie and Wales.  It was admitted that the partnership of Ritchie and Wales had been dissolved, before the trial, but since the institution of the suit; and the Counsel for Ritchie and Wales was employed by them, as co-partners, to represent and defend the partnership, and not either partner individually. Thereupon the plaintiff by his Counsel moved the Court to exclude the said set-off from going in evidence to the Jury; which the Court did accordingly; and to that opinion there was an exception.
    Verdicts and Judgments for the plaintiffs; from which the defendants appealed, to this Court.
    *Leigh for the Appellants.
    Premising that the negotiable Notes, on which Moore’s actions were founded, never having been discounted at Bank, were not, as the Law stood at the time of the transaction, placed on the footing of foreign Bills of Exchange, but were liable, like all other Promissory Notes, to set-off in the hands of the assignee; I shall, in the first place, consider this case as if it were certáin, in point of fact, that the Bills offered as a set-off were the property of Ritchie individually, and not of the partnership of Ritchie and Wales; and as if it were settled in point of law that the law of' set-off in Virginia is precisely the same, as the law of set-off in England.
    Under the English Statutes of set-off, it is settled, 1st, that the Debt sued for and the Debt intended to be set-off, must be mutual and due in the same right; and, 2ndly, that a joint Debt cannot be set-off against a separate demand, nor a separate Debt against a joint one. 
    
    The object of the first branch of the Rule is to protect the Interest of third persons, not parties to the cause; and it is never extended beyond that object, as will appear from an examination of the cases, to which it has been applied. Eor example; an Executor or Administrator cannot set off a debt due to him in his own right; nor, if sued for his own debt, can he set off a debt due to him in his representative character; and vice versa ; because the plain language of the Stat. of 2 Geo. 2, cap. 22, g, 13, disallows such set-off; and because Creditors and Legatees or Distributees have an interest in the assets, and the Executor or Administrator shall not have the aid of a Court of Justice to make a direct appropriation of them to his own use. 1 Binney 64, Crammond v. The Bank of the U. S. puts the Rule, as applied to Executors, expressly on the ground on which I place it, —the intervention of the interest of Creditors. So, in Doe v. Darnton, 3 East. 149, where a Judgment by A. v. B. and C. was not allowed to be set off against another Judgment recovered v. A. by the assignees of B. under an Insolvent Debtor’s Act, because the interests of third persons intervened, in whose favour there were peculiar trusts by the Statute, but for the interest of third persons, the set-off would no doubt have been allowed. Now the effect of the set-off in this case, (instead of injuring the interest of *third .persons,) is a benefit to Wales, the only third person interested, who is a party to the cause, asking that benefit. I should think it impossible, that a rule designed to protect from harm third persons, not parties in the causes, should be extended to exclude from benefit third persons, who are parties in tne cause, actually insisting upon such benefit.
    As to the 2d branch of the Rule, “that a joint Debt cannot be set off against a separate demand, nor a separate Debt against a joint one,” I have known instances of what I conceive to be mistaken applications of it, by decisions that, where the suit is brought for a Debt, due the plaintiff from the defendant individually, the defendant cannot set-off, against that demand, a Debt, from the plaintiff to him and a third person, though the defendant be authorized to receive such joint Debt and grant a discharge ; or that if the plaintiff sue two defendants for a Debt due from them jointly, the defendants cannot set off a Debt due from the plaintiff to one of the defendants, though both be equally bound for the whole debt: whereas the true application of the rule is clearly this, that if two plaintiff's sue for a Debt, due them jointly, the defendant cannot set off a Debt, due him from one of the plaintiffs; for if one plaintiff sue for a Debt due him individually, the defendant cannot set off a Debt, due him from the plaintiff and another person jointly: and according to this last interpretation are all the authorities on this branch of the rule, 
    
    It is settled under the English Statutes, that a man, who is sued on his own Bond, cannot set off a Debt, due him in right of his wife; because the wife’s choses in action are not the husband’s property, ’till reduced into possession; and he shall not be allowed thus to appropriate them, and cut off her title to them in the event of her surviving him and their being not reduced into possession, during his lifetime; especially as she is in such a situation as to be unable to assert her rights. But a Debt due to a defendant, as surviving partner, may be set off against a demand upon him in his own right; and, e converso, a Debt, due from a plaintiff as surviving partner, may be set against his demand in his own right : and the reason is, because, in the first place, the surviving partner is the sole owner of the partnership property and the only person, entitled to receive; in the last case the surviving partner is the only ^person, bound to pay; and, in both cases, the surviving partner represents his deceased partner, whose interests are therefore represented in the cause; so that the interests of no third person, who is not a party in the cause, are concerned. So, where the nominal plaintiff is Trustee for a beneficiary plaintiff, the defendant may set off, against the demand, a Debt due the defendant from the beneficiary plaintiff. This was held in Bottomley v. Brooke (mentioned and approved by Ashurst J. in 1 Term Rep. 623,) and in Winchester v. Hackley, 2 Cranch. 342. And the plain reason is, because the only third person, whose interests are concerned in the question of set-off, is substantially a party to the cause; and the rule requiring mutuality of debts, in order that they may be set off against each other, need not be applied for the protection of a third person in such a situation.
    But there is a wide difference between our Statute of set-off and the English; as may be seen by comparing the two Statutes,  In our Act of Assembly, there is not a word about mutuality of debts, which by the British Statute is expressly required. The former, therefore, allows much greater latitude than the latter.
    In fact, however, the Bills of Exchange, offered to be set off in the present case, were the property of the partnership of Ritchie & Wales; for, though made payable to Ritchie individually, they were endorsed by him, and held and offered in set-off by them, as their joint property; and they had a right to strike out the subsequent endorsements, (being in blank,) and make themselves endorsees of the payee and first endorser.
    Wickham for the Appellee,
    contended that a note negotiable and payable at Bank is not subject to any set-off, whether the words “without set-off,” (which are usually added from more abundant caution,) are inserted or not. The very act of making it so negotiable and payable must have this effect, from the nature of the transaction. By so doing, the party expressly waives the set-off; and every man may renounce a benefit, to which he is entitled.
    But if this were not the case, debts in different rights cannot be set off against each other. Mr. Reigh says, the present case does not come within the reason of the rule: but it is demanding *too much to say that, wherever the reason has ceased, the rule must cease. In many cases, positive rules must be adhered to, though the reason on which they were founded has long ago ceased. If the hardship of the case is sufficient ground for allowing the set-off, what becomes of the doctrine concerning equitable discounts, which may be allowed in a Court of Equity and cannot in a Court of Raw? In the case of an executor, suing for a debt due to him in his own right, a debt to the defendant from the testator may be set off in equity, (if the assets appear unquestionably sufficient,) but not at law.
    The cases of Scott v. Trents,  Armi-stead v. Butler, and Tucker v. Oxley & Hancock,  prove the Rule. Our own decisions upon our Statute of set-off, (which is not the same with the English Statute,) are of higher authority upon this point, than the English cases. Those of Bottom-ley v. Brook, and Rudge v. Birch,  if not overruled in England, (as the counsel, arguendo, in 7 East. 153, Scholey v. Mearas, asserted without being contra-dieted,) are certainly contrary to the authorities in this country. In Winchester v. Hackley, 2 Cranch. 342, the case did not turn upon the law of set-off at all; but the payments were allowed as made to Richard S. Hackley, & Co., for Richard S. Hackley, they having the collection of the debt, with the consent of Winchester.
    If a surviving partner sues for a debt due to the partnership, a claim of the debtor, against him individually, may be set off, because he sues in his own name. Upon the form of the action, this is admissible, though injustice may be done by it; the only remedy to prevent such injustice being in equity.
    The set-off in this case is inadmissible for another reason. It is a Rule, that no set-off on the ground of a claim upon the original proprietor of the note, accruing after notice of the assignment, ought to be allowed against the assignee. How. the Notes were assigned to Moore, and protested; which protest gave Ritchie and Wales notice of the assignment to him; and this may have been before the Bills of Exchange became their *property; for, when the Bills were protested, they were the property of Cox and Looker; and there is no evidence of their being transferred to Ritchie and Wales before the .protest of the Notes. I contend, too, that, after the bills were protested, they lost their negotiable character, and could not be assigned.
    Call in reply. The set-off is allowable under the express words of our Acts of Assembly,  which enable the Courts of Law to do what Courts of Equity had done before; that is, to allow every equitable discount in all cases; in the same manner, as in England, on the ground of the general equita.ble jurisdiction of the Court over the suitors in it, judgments, obtained reciprocally in the same Court, will be set against each other, without regard to mutuality of debts,  But our case would even be brought within the English Statutes of set-off. In Cook’s Bankrupt Law, p. 577, there is a case in all respects like this; and the decision in Hankey and others v. Smith and others, 3 Term Rep. 507, is strongly in our favour.
    Another reason for allowing the set-off is, there was an actual assignment from Ritchie to the company of Ritchie and Wales. The company . then, being the owners of the Bills, had a right to apply them as a set-off. Chalmers and Co. were creditors of Ritchie and Wales; but Ritchie was a creditor of Chalmers and Co. Ritchie and Wales consented to set off one debt against the other. Is not this just? And ought it not to be allowed, as no body can be injured by it?
    Again; where a Bill of Exchange is endorsed in blank, it is payable to bearer, and any holder of it may maintain an action, as assignee of any person, whose name is endorsed,  Ritchie and Wales had therefore a right to take up the Bills, and avail’ themselves of the endorsement by Ritchie; striking out all the other endorsements. 
    
    The notes in question, too, were actually given in payment for these Bills. This may be fairly presumed from all the circumstances of the case; for merchants always stipulate, in articles of partnership, that neither of them will do business separately. The Bills, therefore, though drawn payable to Ritchie, were probably intended for the benefit of the company of Ritchie and Wales.
    *A11 negotiable notes discounted at the Bank of Virginia, were by its charter put on the same footing as Bills of Exchange; but not until actually discounted.  Now the notes in this case were not actually discounted, but resembled that in Lee v. Love, 1 Call 497.  The first Bank laws were intended, in this respect, for the benefit of the Bank only; otherwise, all notes would have been liable to be turned into Bills of Exchange.
    That Ritchie and Wales obtained possession of the Bills after the protest makes no difference; for the rule is not that, after protest, the Bill is not assignable; but that, in such case, the assignee takes it subject to any equity, which existed between the drawer and the payee.
    Leigh. Mr. Wickham says, that a note’s being made negotiable at the Bank is a declaration to all the world, that it is not subject to set-off; but this is not the case, unless the words “without set-off’’ were added. Where these are not added, the credit of the merchant is never affected by the note’s being protested, if there was a good set-off against it.
    Wickham. A fair interpretation of our Act of Assembly is that the discount must be not only legal, but just; that the party claiming it must have equity, as well as law, on his side. So that the Act narrows the ground of the English Statute. My client, Moore, took the Notes with a reliance that they might be discounted at Bank, and were not subject to set-off. It would therefore be rank injustice to him, if the set-off were allowed, and he should lose the money. The case cited from Cooke’s Bankrupt Law does not apply at all; being founded on the principle, that the Bankrupt’s affairs are to be finally adjusted. Even debts payable in futuro from a Bankrupt are to be set against debts already due; but the law is otherwise in the case of a man not a Bankrupt.
    *Call. The case I cited from 3 Term Rep. 507, has nothing to do with the Bankrupt law._
    
      There is no more hardship in allowing the set-off against the assignee in this casa, than in that of Norton v. Rose, 2 Wash. 233 — 2S5.
    
      
       Bili of Exchange — Blank Endorsement — Rights of Holder — Possession as Evidence. — For the proposition laid down in the first headnote, the principal case is cited in Spence v. Robinson, 35 W. Va. 316, 13 S. 10. Rep. 1006; Spencer Bank v. Simmons, 43 W. Ya. 83, 27 S. E. Rep. 300. ■
    
    
      
      Same — Protest — Effect on Negotiability. — See monographic note on “Bills, Notes and Checks” appended to Archer v. Ward, 9 Gratt. 622.
    
    
      
      Assignment — Set-Off.—It is a principle of law, too well settled to admit of doubt or argument now, that a set-off as between original parties, acanired after the assignment for a bona Me purpose, of the subject in controversy and notice thereof, cannot be set off against a holder for value. Exchange Bank v. Knox, 19 Gratt. 747, citing principal case. To the same effect, the principal case is cited in Farmers’ Bank v. Willis, 7 W. Va. 50.
    
    
      
       Partnership — Set-Off—Separate against Partnership Demand, — Joint and separate demands cannot be set off against each other; nor can partnership and separate demands be set off against each other. Porter v. Nekervis, 4 Rand. 359, In this case, Judge Carr, speaking for the court, said (p. 363): ‘‘Numerous cases might be cited from the English books, from the decisions of onr sister states, and from the federal court, concurring una voce, in declaring that joint and separate demands, cannot be set off against each other; and the decisions in onr own court, have been uniform and strong to the same point. Scott v. Trent, 1 Wash. 77; Armi-stead v. Butler, 1 Hen. & M. 176; BitchU and Wales v. Moore, 5 Munf. 3S8." And, in Choen v. Guthrie, 15 W. Va. 102, it is said; “It is too well settled to admit of controversy, that at common law a joint .and separate demand cannot be set off against each other. See Porter v. Nekervis, 4 Rand. 363; Scott V. Trent, 1 Wash. 79; Armistead v. Butlers, 1 Hen. & M.476; Bitchie and Wales v. Moore. 5 Munf. 388." To the same effect, the principal case is cited in Gilliat y. Lynch, 2Leigh 505; Christian v. Miller,? Leigh 82; Green v. Buckner, 6 Leigh 84.
    
    
      
       Note. The protest of one of the Bills bore date at New-York, October 18th; that of the other at the same place, November 23d, 1811. The dates of the protests of the Notes, at Petersburg, were November 21st, and December 26th, in the same year. — Note in Original Edition.
    
    
      
       See Charter of the Bank of Virginia, 2 R. C. p. 66: Norton v. Rose, 2 Wash. 233.
    
    
      
       Bac. Abr. (Wilson’s ed.) Title Set-off, Letter C. p. 136.
    
    
      
       Brown v. Garland, 1 Wash. 221.
    
    
      
       Scott v. Trents, 1 Wash. 77—79: Armistead v. Butler. 1 H. & M. 17(5.
    
    
      
       Slipper and others v. Stidstone, 5 Term Rep. 493.
    
    
      
       French v. Andrade. 6 Term Rep. 582.
    
    
      
       See the English Stat. in 6 Bac. Abr. Title Set-off. Letter A. p. 135. (Wilson’s Edition;) the Virginian Statute in 2 R. C. p. 117.
    
    
      
       1 Wash. 77.
    
    
      
       1 H. &M. 176.
    
    
      
       5 Cranch. 84.
    
    
      
       1 Term Rep. 622.
    
    
      
       Note. In that case, Richard S. Hackley transferred a debt due him .from Winchester to R. S. Hackley & Company, who brought suit thereon in Hackley’s name; and though the legal right in the debt was in R. S. Hackley, and the equitable right only in R. S. Hackley, & Co. the defendant was allowed to discount, against the demand, payments made to the beneficiary plaintiffs, R. S. Hack-ley, & Co. — Note in Original Edition.
    
    
      
       1 R. C. ch. 29, § 4, p. 36, 37; 2 R. C. ch. 89, p. 117.
    
    
      
       Mitchell v. Oldfield, 4 Term Rep. 123.
    
    
      
       Peacock v. Rhodes, Dougl. 633.
    
    
      
       Smith and. others v. Olarke, Peak’s Nisi P. Rep. 22B; Chi tty on Bills 104, and 261.
    
    
      
       2 R. C. p. 66.
    
    
      
       Note. By the Charter of the Parmer’s Bank of Virginia, “all notes or bills negotiable at the said Bank, or any of its offices of Discount and Deposit. are placed on the same footing as foreign bills of exchange, except so far as relates to damages.” —Note in Original Edition.
    
    
      
       Note. In Lee v. Love, the assignment on the Note was special; and not a blank endorsement, as in this case. — Note in Original Edition.
    
   February 4th, 1817, JUDGE ROANE pronounced the following opinion of the Court.

These are two actions, brought by the Appellee, as assignee of Chalmers and Co., of two promissory Notes, against the Appellants. The Notes having been protested, actions were brought thereupon, and were, by consent, tried together, on the respective pleas of “nil debent.” Verdicts and judgments were rendered for the Appellee in both cases.

At the trial, the Appellants offered to set off, against the two Notes aforesaid, the contents of two Bills of Exchange drawn by Chalmers and Co. in favour of Ritchie, individually, which were returned protested for non-payment; on each of which bills there were two subsequent endorsements, which had been obliterated by Ritchie and Wales. The partnership of Ritchie and Wales had been dissolved before the trial, but since the institution of the suit; and the counsel was employed to defend the company, and not cither party individually. The Court, on the motion of the plaintiff, excluded the said set-off from going to the Jury; on which there was an exception, and an appeal.

The partnership, though dissolved before the trial, yet had existence for the purpose of defending the suit: and the Bills in question, being exhibited by the Appellants at the trial, are to be considered as their property, and not ihe property of Ritchie only. They were well entitled, therefore, not only to strike out the names of the subsequent endorsers, but to write over the name of Ritchie an assignment to themselves ; or the Bills will, without such assignment, be considered as their properly, by their holding them and having it in their -power to make it.

As against Chalmers and Co., therefore, they would have had a right to discount them at the trial, (whensoever they may have been acquired;) such being ihe settled law of this country. But this action is brought by their assignee ; and the law is, *'in case of assignments, that the assignee shall allow all just discounts, not only against himself, but also against the assig-nor before notice of the assignment was given to the defendant.

Although these Bills arc to be taken as being the property of the Appellants, as at the time of the trial, (for the reasons already assigned,) they are not to be so considered in relation to the time of the defendants’ receiving notice of the assignment, which in this case was, (at least,) that of the Institution of the suit; at which time, it does not appear that these Bills were the property of the Appellants, or even of Ritchie himself, but may have been the property of one of the subsequent endorsees.

This view of the case is decisive of the question, unless, in this action against a company we are authorized to allow a set-off of a debt due to an individual partner. The law is too strongly settled in the negative, and has been too often recognized by this Court, to authorize us to do it, admitting that, as an original question, it ought to have been otherwise settled, which the Court is by no means prepared to admit. On these grounds the judgment of the Superior Court is to be affirmed.  