Meyers v. Jay-Bee Realty Corp.

Bushnell, J. This is an appeal from an order granting plaintiff’s motion to strike those portions of defendant’s answer, entitled, “affirmative defense” and “recoupment.” Although not shown in the printed record, the files of this court contain plaintiff’s motion to dismiss this appeal because of defendant’s failure to secure leave and the subsequent denial of that motion. Plaintiff declared on a promissory note for $3,243.20, dated 1939, claiming that the entire principal was due and payable and that defendant had *524 not paid the note or the interest thereon. Although the declaration states that a copy of the note is attached as an exhibit, it is not included in the record. The note as set up in appellee’s brief does not bear any date except the year mentioned, and concludes with the following statement: “This note is secured by a chattel mortgage made by the maker in favor of the payee hereof dated . . . 193. . .” Plaintiff also declared on the common counts claiming an indebtedness of $5,000. Defendant in its answer admitted the execution of the note, alleged payment of $202.70 thereon, but denied that plaintiff was entitled to a judgment in any amount whatsoever. Plaintiff having also declared upon the common counts, defendant answered these with a general denial. Defendant then added to its answer an “affirmative defense” and a plea of * ‘ recoupment. ’ ’ In the “affirmative defense,” defendant averred that in October of 1939 plaintiff agreed to cancel and rescind a “certain chattel mortgage agreement between them,” and “remove his air-conditioning equipment” from defendant’s premises and install, before the reopening of defendant’s hotel in the summer of 1940, proper equipment which would function to defendant’s satisfaction; that defendant would be under no obligation to make any payment to plaintiff until 30 days after the new installation and approval thereof, all of which plaintiff failed to perform, and, therefore, defendant is entitled to a judgment of no cause of action. Defendant’s “affirmative defense” does not aver a connection between the claimed agreement to cancel and rescind “a certain chattel mortgage agreement” and the note sued upon. The transaction as *525 therein stated appeared to the trial judge to be wholly foreign to the subject matter of plaintiff’s ac'tion and the “affirmative defense” was stricken as irrelevant and immaterial. The plea of “recoupment” refers to a conditional sales contract made on June 9,1939, wherein defendant agreed to purchase from plaintiff and Tonn & Blank Company, alleged agents of plaintiff, an air-conditioning system, described in this plea in detail, for which defendant agreed to pay $3,868.20 as follows: $625 as down payment and the balance of $3,243.20 in 16 monthly instalments of $202.70 each. The plea avers cancellation of the conditional sales agreement and the execution of a chattel mortgage covering the air-conditioning equipment; sets up the failure of the equipment to operate satisfactorily, and plaintiff’s undertaking and efforts to remedy the defects. Defendant asserts in this plea an implied warranty of fitness for a particular purpose, a breach thereof, and claims resulting damages of $10,000. Defendant also, claims damages by way of recoupment in the sum of $827.70 for moneys paid plaintiff with interest thereon. Defendant’s plea of “recoupment” likewise fails to show any connection between the sale of the air conditioning system with an alleged warranty of fitness, and the note sued upon. Therefore, this plea as worded was also stricken as irrelevant and immaterial. This plea of recoupment is inconsistent with defendant’s denial of plaintiff’s right of action. Defendant cannot be heard to deny plaintiff’s cause of action and at the same time claim a recoupment arising out of the transaction upon which plaintiff’s suit is based. Morehouse v. Baker, 48 Mich. 335. However, plaintiff made no claim that defendant set up inconsistent defenses without pleading the same *526 in the alternative. See Court Rule No. 17, § 6 (1933), and Robertson v. United Fuel & Supply Co., 218 Mich. 271. The trial judge in a written opinion analyzed the answer and concluded that, in the absence of the instruments mentioned therein, and because of the inconsistent nature of defendant’s claims, it could not be held the “recoupment” arose out of the same contract or transaction against which the recoupment was pleaded, and, therefore, the damages claimed could not be said to have arisen out of a breach of the transaction represented by the note. If defendant can show that the note sued upon was given in consideration of plaintiff’s sale of the air-conditioning system and that plaintiff warranted its fitness, then a plea of recoupment based upon a breach of that warranty would be proper in a suit brought on the note by plaintiff. Defendant must allege and prove that the sale, note and warranty all pertain to the same transaction. The fact that the note and chattel mortgage were substituted for the original conditional sales agreement does not of itself prevent recoupment as between these parties. Defendant should be permitted, under 3 Comp. Laws 1929, §14144 (Stat. Ann. §27.838), to amend its answer, and the cause should be remanded for this purpose. In addition to the statute, see Court Rule No. 72 (1933); Craig v. Wright, 271 Mich. 166, 171; and Blake v. American Trust Co., 293 Mich. 618, 622. The order of the trial judge is vacated and the cause is remanded with leave to amend the answer in accordance with this opinion and within the discretion of the trial judge, upon such terms as he shall deem just. Costs to appellee. Chandler, C. J., and Starr, Butzel, and Sharpe, JJ., concurred with. Bushnell, J.