Warner v. Sullivan

Sharpe, J. This action was brought by plaintiff on January 5, 1928, to recover on three promissory notes, drawn payable to him and signed by the defendant. They all bore date August 28, 1920. One was for $750, payable September 1, 1921, another for $740, payable September 1, 1922, and the third for $700, payable September 1,1923. When the note due September 1, 1921, was offered in evidence, objection, was made, on the ground that it was barred by the statute of limitations. Notice of this defense had been duly given. .The notes were received in evidence, and plaintiff then rested. Defendant then submitted proof that the notes were given as a consideration for a fishing outfit, bought by defendant from plaintiff, the purchase price of which was $4,200, and sought to prove that the nets were not as represented; that certain parts of the outfit were not delivered to him, and that the plaintiff owned but a one-half interest in a gas boat which was in-eluded in the sale, and sought to recoup his damages by reason thereof as against plaintiff’s claim. The trial was interrupted, and discussion had as to whether defendant’s claims in this respect were not also barred by the statute of limitations. After argument of counsel, the trial court so held, and directed the jury to find a verdict for the amount of the other two notes, amounting, with interest, to the sum of $2,081. A judgment was entered there *471 for, of which, defendant seeks review by writ of error. Recoupment is a creature of the common law. It presents to the court an equitable reason why the amount payable to the plaintiff should be reduced, and the plaintiff will not be permitted to insist upon the statute of limitations as a bar to such a defense when he is seeking to enforce payment of that which is due him under the contract out of which the defendant’s claim for recoupment arises. This is the first time we have been called upon to pass upon this question, but it has been many times decided by other courts. In 37 C. J. pp. 804, 805, the rule is thus stated: “The defense of reduction or recoupment which arises out of the same transaction as the note or claim survives as long as the cause of action upon the note or claim exists, although an affirmative action upon the subject of it may be barred by the statute of limitations.” Many cases are cited in the note thereto in support thereof. The authorities are reviewed at length in a note to Huggins v. Smith, 141 Ark. 87 (216 S. W. 1), in 16 A. L. R. 339 et seq. The annotator says: “The defense of recoupment exists as long as the plaintiff’s cause of action exists and may be asserted, though the claim as an independent cause of action is barred by limitations. ’ ’ The cases cited and quoted from fully sustain this statement. The note due plaintiff on September 1, 1921, and defendant’s right to recoup damages arising out of the contract were both barred by the statute of limitations at the time this action was begun. Plaintiff *472 may not recover on this note. Neither may defendant assert his claim for recoupment to the amount of it. On the record presented, after plaintiff has made proof of the amount due upon the other two notes, defendant may make proof of his damages by way of recoupment. The amount due upon the first note must then be deducted therefrom. The balance thereof, as found by the court or jury, will then be applied upon the amount due plaintiff. Should it equal such amount, plaintiff can have no recovery. Should it exceed such amount, defendant may not recover therefor, as his right to assert such claim is barred by the statute. He may have consideration of it only in satisfaction or diminution of the amount due plaintiff. The statute (3 Comp. Laws 1915, § 12477), permitting a recovery by defendant by way of recoupment in excess of the amount due plaintiff, is not applicable, as defendant’s right to recoup is barred and his claim therefor considered only to the extent to which it reduces or equals the amount for which plaintiff is entitled to recover. The judgment is reversed, with costs to defendant, and a new trial ordered. Wiest, C. J., and Butzel, Clark, McDonald, Potter, Pead, and North, JJ., concurred.