
    Urban W. Meador vs. Geo. C. Rhyne.
    
      Judgments — Set-off—Equity.
    The Court will not order one judgment set-off against another where it appears that one of the judgments is owned by a third person, and that Ms equitable ownership was known to the party making the motion when the cause of action was given.
    The practice of ordering one judgment set-off against another, is not founded on the law of discounts, but springs from the general jurisdiction of the Court over its suitors ; and in exercising it, the Court will always regard the equitable rights of persons not parties to the suit.
    BEFORE WARDLAW, J., AT FAIRFIELD FALL TERM, 1858.
    The report of his Honor, the presiding Judge, is as follows:
    “1856, Sept. 1, Meador made a sealed note for $160, payable one day thereafter, to Geo. G. Bhyne ór bearer.
    “This note was credited by a payment of $22, wbicb Nov. 5, 1856, Meador paid to Bhyne.
    “ 1857, March 9, Geo. 0. Bbyne made a promissory note for $2000, payable on demand to U. W. Meador: and the same day confessed judgment tbereon. Judgment was entered and fi.fa. lodged, instanter.
    
    “An indorsement ■ on the declaration, signed by both parties, sets forth that the confession was made to indemnify Meador as surety to Bhyne on three notes, and further to indemnify him on partnership transactions between them: a valid lien being intended' to subsist until Bhyne shall account.
    “ Of the three notes, one was a bond for $700 with interest payable annually, dated Jan. 10, 1856, on which judgment was entered Nov. 7, 1857, against both of these parties and .one Kerr: the other two notes were described by the names of tbe pajees. The affidavit of Meador shows that, on the partnership account, at least $700 was due to him.
    “ 1857, October, a suit on the sealed note of $160 was brought, Geo. 0. Rhyne vs. IJ. W. Meador.
    
      “ 1858, April — Judgment was obtained thereon, and a rule was obtained by Meador requiring Rhyne to show cause at this term, why the judgment, Rhyne vs. Meador, should not be satisfied by a set-off, pro tanto, of the judgment, Meador vs. Rhyne.
    “At this term, affidavits of Geo. G. Rhyne, his brother, and other persons, were read, in answer to the rule, showing that the note of $160 was taken in payment of a buggy, which belonged to Rhyne’s brother, was entrusted to Rhyne for sale, and was sold by Rhyne to Meador: that the note and the $22 paid upon it were delivered by Rhyne to his brother before the first of January, 1857, and that the suit on the note was, for want of a written assignment, brought in the name of Geo. 0. Rhyne for the benefit of his brother; but that Geo. 0. Rhyne never had any beneficial interest in the note,' and has had neither possession nor contol of it since January, 1857.
    “I discharged the rule.”
    Meador appealed. Because the action being in the name of Geo. C. Rhyne plaintiff, and Geo. G. Rhyne being indebted to Meador at the time of the commencement of this suit, the indebtedness of Rhyne to Meador, if it had not been reduced to judgment, would have been a valid discount against the present action, even if a third person were the real owner; and defendant should not be placed in a worse situation, because his demand is in judgment, than if it had remained a chose in action, especially when it appears that Rhyne is insolvent and has run away from the State; under which showing, it is submitted that the rule should have been made absolute and the set-off ordered;
    
      
      Boylston, for appellant.
    It will be observed that all the material showing made on behalf of plaintiff is by ex parte affidavit, which defendant has never seen nor had an opportunity of replying to; the material showing of defendant is by record. But assume the affidavits to be true. They show that plaintiff was agent of his brother, and that the note was purposely made payable to plaintiff, because the North Carolina brother supposed if he was made payee, the note would only draw six per cent, interest. This, he alleges as the meaning of the transaction — and'h'e therefore incurred the risk of discount, for a supposed larger amount of interest. He must abide the disadvantages. If this had not been so, still he must look to his agent, plaintiff, and not to defendant ; Kodges vs. Connor, 1 Spear’s, 126. Under the Act of 1798, if there had been an assignment, still the note would have been subject to discounts of defendant against obligee; and there was no intimation whatever, until November, 1858, that any other person but plaintiff had any interest jn the suit. There is not even the memorandum that the suit is brought “ for another.” Defendant’s affidavit shows that on the partnership accounts alone, defendant, after all credits, is still indebted to him over $700. Now, if instead of a judgment, March 18, 1857, plaintiff had given a note for $700, would not that note have been a good discount against the present action commenced seven months after? And if so, when heJ did give a note for $2000, can it diminish defendant’s right of discount, that it has been converted-into judgment? It would seem from the present condition of the case, that defendant has lost, instead of secured, rights,’ by his diligence in converting his demand into judgment. If defendant had sued the present claimant on any demand, at any time until now, his possession of the note for $160, would not have availed him as a discount, (assuming all his present allegations to be true,) because there has been no legal assignment up to the present time, and whatever his equities, unless there was a legal assignment to him by G. C. E. before action brought, he could not have used this note in discount to the supposed action. The holder by delivery, without assignment, of a sealed note, cannot set it up in discount against a legal demand of the maker, Gilchrist vs. Leonard, 2 Bail., 185; Bishop vs. Tuclcer, 4 Eich., 188. Defendant regularly appeared, and if a judgment had been matter of discount, it is not perceived how plaintiff could ever have recovered. The proposed set-off was defendant’s only remedy; Duncan ads. Bloomstoclc, 2 McO., 319. The decision seems to be, that equities are to be looked to, because defendant is unfortunate enough to have a judgment, whereas legal rights would have been respected, if he still held his $2000 note. The claimant’s recourse, if the set-off should be ordered, is against G. 0. E.; and it is his fault or misfortune, as the case may be, that he occupies that position,
    
      Gaston, contra,
    cited ToTbert vs. Harrison, 1. Bail., 599; Williams vs. Evans, 2 McO., 205.
   The opinion of the Court was delivered by

WITHERS, J.

To what appears in the brief it is proper to add, that before this plaintiff executed the note of George 0. Ehyne, upon which the latter obtained the judgment, this plaintiff would now have extinguished by a set-off, he knew that the property he bought from George 0., and which was the consideration of the note, belonged to J. N., the brother of George 0.

There arises out of this fact such an equity in the money secured by the note in favor of J. N. Ehyne, known to Meador at its inception, as must be influential in adjudging this question of set-off of judgments, though it might have been quite unavailing, if the question had arisen on the law of discount.

The argument in this Court in behalf of Meador is founded upon an analogy derived, it is contended, from our law of discount; and the incongruity is urged, that, in denying this motion, Meador is placed in a worse situation by having converted his demand against George C. Rhyne into judgment, than he would have been if he had held it to be offered in discount, when sued upon the note in favor of him.

This condition of things may well exist without settling the question now before us. The Courts of England do not exercise the power to order the set-off of judgments by virtue of the statutes of set-off, Mitchell vs. Oldfield, 3 T. R. 123; nor do we exercise the like power upon the footing of our law in relation to discount; vide, Low vs. Duncan, 3 Strob. 195. “ The' power springs (it is said in the last cited case) from the general jurisdiction of the Court over the suitors in it, and the equitable cognizance which it takes of their respective rights and liabilities.” And with this the English view certainly agrees. The law of discount itself was passed, as its preamble recites, “for the sake of justice and to prevent a multiplicity of suits” — and such considerations, being of an equitable nature, have persuaded this Court to notice the equitable claims of those who are not parties by the rules of law — as may be found illustrated by many examples in our books; among them being Newman vs. Crocker, 1 Bay, 245, in 1792; and Tibbetts and Weaver, 5 Strob. 144, in 1850. If the equities of third persons are noticed in the administration of the law of discount, as those two cases so strongly illustrate, the more readily should they be noticed in the matter of setting off judgments. There is, perhaps, less room for the introduction of equitable considerations in the law of set-off in England, than there is in the application of our law of discount; and the Act of 1798, in favor of assignees of bonds, &c. Tet in Read vs. Dupper, 6 D. & E. 361, Lord Kenyon: said, that in strictness of law, a chose in action is not assignable ; but still, according to the rules of equity and honest dealing, if the assignee give notice to the debtor of such assignment, be shall not afterwards be suffered to avail himself of a payment to the principal in fraud of such a notice. This is altogether agreeable to our doctrine as exemplified in Newman and Oroclcer, and Tibbetts and Weaver.

To show how the subject now before us is treated in England, it will suffice to refer to two cases: Doe v. Darnton, 3 East, 149; Randle vs. Fuller, 6 D. & E. 456. The first refused to set-off Darnton’s judgment against one recovered against him by two others, because one of the two had, under the insolvent laws, gone into the hands of assignees, and thus had introduced the claims and interests of other persons, creditors represented by the assignees; and Lord Ellen-borough took occasion to express a strong disinclination to extend the power of setting^off debts, on general grounds of equity, beyond the line which the Legislature had thought proper to mark out. The other case refused to sanction a set-off of judgments, accomplished by the parties out of Court, in disregard of the lien of the attorney for costs, which lien was known, and the claim of it, to the party chargeable therewith.

, Now, in the present case, Meador, who would have set-off the judgment against him in favor of Geo. 0. Rhyne, knew it was founded (so say the affidavits, the only evidence we have,) on a note belonging, in the- equitable sense, to J. N. Rhyne, and knew, when he signed the note, that it was given for property belonging to J. N. R. It is further stated, that J. N. R. had possession of the note, though not assigned in law, before Meador took his confession of judgment against Geo. C. Rhyne. Now here was created an interest which, a Law Court would notice so far, that it would regard George C. as nominal plaintiff, and would not allow him to discontine an action to the prejudice of the equitable owner, and would protect his claim in case of a rule upon the Sheriff, against any equal equity at least, and if be bad notice, would not sanction bis payment to tbe payee.

Sucb considerations, fortified by authorities cited, conduct us to tbe conclusion, that tbe Circuit Court was right in refusing tbe motion for set-off; and tbe judgment of tbe same is, therefore, affirmed, and tbe motion here dismissed.

O’Neall, Waedlaw, WhitNee, Glovee and Muíteo, JJi, concurred.

Motion dismissed.  