Flanders v. Chamberlain

By the. Court,

The Churl in delivering its opinion ón.the motion to dissolve the injunction, of,signed as reasons why the motion should be granted :

1. That the complainant covenanted in the mortgage to pay the debt mentioned therein.. The law implies that it is to be paid in money, and this was the plain intention of the parties.

2. That though in suits which arc actually pending in a court of equity the defendant may offset a claim or demand, yet where persons have mutual demands or claims against each other, and one refuse to accept a tender of offset, equity will not interfere to enforce such tender and demand of offset.

If these views of the case are correct, it is clear that the bill should be dismissed, for there is nothing in the proofs to' take the case out of and beyond the operation of tlic rules of equity indicated by the Court.

I shall therefore consider, first, the views of the Court as announced in the decision upon the demurrer.

By the provisions of § 3480, G. L., it is provided that in suits in equity “ for the payment or recovery of money, set-offs shall be allowed in the same manner and with the like effect as in actions at law.”

The complainant insists that the object of the bill is “ to substitute for the legal contract, the mortgage, or true state of affairs between the partieswhile the defendant insists that the bill seeks to “ set off one legal debt against another legal debt,” and that a court of equity cannot be properly called upon for this purpose.

The case of D. & M. R. R. Co. vs. Gregg, 12 Mich., 45, is claimed by the • defendant to be so&ewhat analogous to the case at bar. In that-case the complainant had purchased real estate and gave back a mortgage to secure the purchase money. The deed contained covenants against incumbrances. At the time of the conveyance there were two mortgages upon the premises. Proceedings were instituted to foreclose the mortgage given by the railroad company. The company, in view of the covenants in their deed, sought to have the amounts of the former mortgages deducted from their indebtedness. This claim was disallowed, and a decree entered *139against the company. After the entry ot this decree the company paid off the prior mortgages, and then filed a bill to have the sums so paid, set off and deducted from the amount of the decree. The Court entertained the bill and granted the relief prayed for. It is true that it appeared in this case that the grantor was insolvent, which, under the circumstances, would be ground for the interference of equity; but an examination of the case shows that the Court did not put it upon that ground, but only referred to the fact of insolvency as.an additional reason for the exorcise of equity jurisdiction. The ground for the decision was, simply, that 'the railroad company might indemnify itself out of the purchase money it was still owing, through the intervention of equity, instead cf bringing a suit at law against the grantor on his covenant against incumbrances. The mortgages were a lien upon the land, and if not paid would, by foreclosure, operate to divest the railroad company of title, and take from it a title which the grantor had covenanted to defend. The agreement of the parties was, that the grantee should have an unincumbered title. To aid in carrying out this agreemeut, a court of equity might properly exercise jurisdiction. If no conveyance had been made, but simply a-contract to convey, equity would compel a specific performance of the contract. As equity will interpose' to enforce agreements, so it will give relief where a party, to protect his own rights, does that which another in good conscience was bound to do for him.

Where a party executes an ordinary warranty deed of lands and takes a mortgage back, to secure some portion of the purchase money, the covenants in the deed are, in one sense, the consideration for the money paid, and for the mortgage and accompanying obligations. .Hence if it turns out that there is a prior incumbrance on the land, and the purchaser pays the same, the consideration as between grantor and grantee is affected to the extent of such incumbrance. To illustrate : The value of the premises, free from all incumbrance is one thousand dollars. Upon the representations of the grantor that the premises were unincumbered, the grantee undertakes to pay therefor one thousand dollars. It subsequently appears that there was an incumbrance of five hundred dollars upon the premises. It is the business of the grantor to procure a discharge of this in*140cumbrance. If he does not, there is, to that extent, a failure of consideration as between him and hie grantee, and if the grantee is put to expense on that account, it is quite clear that when the grantor seeks to recover upon his mortgage, a court of equity would say, “ You procured this mortgage upon certain representations. Those representations were not true. It has cost the mortgagor five hundred dollars to procure such an interest as you covenanted to convey to him. You -shall now make him good by endorsing upon your decree that sum.”

The reason why, in the case in 12 Michigan, the complainant was allowed to file its bill to procure a set-off against the decree, was, that it was not, until then, in a condition to insist upon sueh set-off, not having paid off the prior mortgages until after the entry of the decree referred to. It was, as I infer from the language of the second paragraph, at page 46, of that case, upon a showing of these facts by petition, that an order was entered permitting the co.mplainaut.who had, upon the proceeding to foreclose its mortgage.endeavored to have the prior mortgage set off and deducted from its mortgage, to file its bill.

In the case at bar, I am unable to discover any relation, connection or dependence between the accounts and claims of the parties. In the absence of such relation or dependence, I am at a loss to'perceive how a court ot equity can be called upon to interfere. u Courts of equity do not take jurisdiction to compel offsets of unconnected debts ” The bill does not allege that the debts and credits were mutual and dependent, nor does the proof show sueh to be the case. With this view, it is unnecessary to consider the othe^ questions involved.

Let an order be entered dismissing the bill.