[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 477 The vice chancellor and the supreme court have adjudged that the complainants have no claim against the estate of the decedent, Justus Hall, on account of the old debts of Hall Bradley and J. Hall Co., or either of them. There is nothing in the pleadings or proofs to impugn this decision. I shall assume it to be correct upon this question, which is one of fact merely.
The set-off claimed by the complainants, of the three notes made by Hall, mentioned in the pleadings, was undoubtedly the occasion of filing the bill, and presents the only important question in the cause. One of these notes matured on the 28th of April, 1842, the second on the 28th of April, 1843, the third on the 28th of April, 1844, in the aggregate amounting to $2500. In October, 1841, the executors of Hall commenced a suit at law against the complainants, for a balance of account due to the estate of their testator, for goods sold to them upon a credit of six months. And the complainants insist in their bill upon the right in equity to set off these notes against the demand of the executors, upon the ground that their debtor is dead and his estate insolvent.
The proposition is, in effect, to change the contract of the parties, in some of its most important provisions, in order to meet a supposed equity arising from matters ex post facto.
If we except a class of decisions depending upon the language and construction given by the English courts to their bankrupt act, it is not claimed by the complainants that there is any adjudged case in this country or England, that carries the doctrine of equitable set-off to this extent; but it has been held in this state that A. having a demand against B. which isdue, and B. one against A. not due, A. may in equity compel a set-off *Page 478 if B. is insolvent, notwithstanding, Lindsay v. Jackson, (2Paige, 581, and cases cited.) The principle thus settled, it is insisted, will embrace the present case.
If this reasoning is just, it would prove that the courts had gone too far already, in varying the agreement of parties, and would be to my mind a strong argument against extending the doctrine to new cases. But there is no analogy between the case cited and the present. Where a debt is due from an insolvent debtor, the right of the creditor to payment is absolute. Natural equity and the law unite, in binding the debtor to a fulfillment of his obligation. If the latter holds a demand against his creditor not due, he has no right to retain it, as an investment. The law by sequestration and sale would compel him at once, to apply the proceeds in discharge of the debt due from him. Equity by compelling a set-off, under such circumstances, with the consent of the person entitled to the credit, and where third persons are not injured, follows the law. It creates no new obligation, and deprives the insolvent of no right, or privilege, which he could justly exercise. This distinction is recognized in the case cited. By allowing a set-off in this case, the executors would be deprived of a legal right, secured to their testator by contract, and the complainants would obtain payment of their debt before it became due, and to the prejudice of other creditors of the decedent.
By the agreement and understanding of Hall and the complainants, the price of the goods purchased by the latter was to constitute a fund applicable to the payment of all debts of Hall without distinction. The complainants assumed, therefore, the risk of the death, and insolvency of the testator, and have no equity, natural or otherwise, to claim a preference, in opposition to their contract, and to the prejudice of other creditors.
The judgment of the supreme court should be affirmed. *Page 479