Alpaugh v. Battles

Sherman, J. The order appealed from dismisses the counterclaim in appellant’s amended answer. The summons named as defendants Battles and four others, asserted to have been his copartners in the transactions set forth in the complaint. Battles alone was served and he alone has appeared and served an answer. The amended complaint sets forth three separate causes of action against all of the named defendants as partners trading under the firm name of “ Battles & Company.” The first cause of action is based on contract; the second on alleged fraudulent representations [322] by defendants inducing plaintiff to enter into that contract; and the third on an alleged fraudulent conspiracy relating to the subject-matter of the same contract. It is contended that, as the answer interposed by Battles is merely his individual pleading, he is not entitled to plead herein a counterclaim which asks an affirmative judgment and which belongs to the firm of which he is but a member. In substance,, the counterclaim alleges that the contract mentioned in the complaint was entered into after plaintiff had approached defendants for the purpose of selling to them certain rights and interests, including a dam site, which he represented as suitable for water power development in connection with the delivery and sale of electric power, and that he made other representations in connection therewith, all of which were false and fraudulent and upon which defendant and his copartners relied to their damage, having in reliance thereon executed the contract referred to in the complaint. Judgment for $50,000 against plaintiff is asked by appellant “ in behalf of himself and each of the other defendants above named * * * as copartners, trading under the firm name and style of Battles & Company.” Unquestionably, this may not be regarded as a counterclaim asserted by the individual defendant solely in his own behalf. Any affirmative judgment which may be recovered upon it would run in favor of all of the members of the partnership firm of Battles & Company, and be consistent with the prayer for relief. The pleading here attacked presents a cause of action which is owned by Battles and his partners jointly. The sole question is whether Battles can maintain it. A like counterclaim was upheld by this court in Fox Chase Knitting Mills, Inc., v. Handal (232 App. Div. 498), where only two of four named defendant partners were served and appeared in the action, and the individual answer of the two defendants interposed a counterclaim which belonged to the partnership. In reversing the order in that case which had dismissed the counterclaim, this court said (p. 499): “ The answering defendants having been sued by the plaintiff as members of a partnership had a right to set up any claim which the firm had against the plaintiff and which the firm could assert by way of set-off or counterclaim.” The case of Thompson v. Kessel (30 N. Y. 383, 391) points to the same result. Respondent contends that defendants, other than the answering defendant, are not actual parties and, therefore, may not recover a judgment on the counterclaim, since they have not been served nor appeared in this action. That would be true if the complaint had not asserted a claim against all of them upon an alleged joint [323] liability, and had not sought a final judgment to be enforced out of partnership assets, for breach of the contract alleged in the complaint. Upon a recovery by plaintiff upon his first cause of action such a result would be achieved, although but one of the partners has been served. (Civ. Prac. Act, §§ 1197-1201; Kittredge v. Grannis, 244 N. Y. 182, 193; Kittredge v. Langley, 252 id. 405, 409.) We do not agree with the further contention advanced by respondent that the counterclaim does not conform with the provisions of section 266 of the Civil Practice Act, in that it does not arise directly out of the transaction and subject-matter pleaded in the complaint. The controversy, reflected in both pleadings, revolves around or grows out of and is directly connected with the contract referred to in the complaint; the determination of the counterclaim necessarily involves the determination of plaintiff’s claim, for, if sustained, it will diminish or may extinguish plaintiff’s recovery. The conclusion which we have reached, that one partner may assert a counterclaim in his individual answer on behalf of all the members of his firm, has been explicitly held in Federal jurisdictions. (Seaman v. Slater, 49 Fed. 37; Baltimore United Oil Co. v. Barber & Langdon, 2 Mackey [D. C.], 4; York Mfg. Co. v. Rothwell, 119 Fed. 144.) Respondent relies on the cases of Burns v. Lopez (256 N. Y. 123) and Hopkins v. Lane (87 id. 501), which do not, in our judgment, sustain his position. In neither did plaintiff assert a cause of action against a partnership. In each of them plaintiff brought suit upon an individual debt of defendant. In neither did defendant attempt to set up a counterclaim arising out of and directly connected with the subject-matter of the complaint. Moreover, in Burns v. Lopez (supra) defendant merely sought to apply the amount owed by him to plaintiff in reduction of plaintiff’s indebtedness to the partnership of which defendant was a member, and his partners having assented thereto, it was held sufficient as an equitable setoff. The order appealed from, dismissing the counterclaim herein, should be reversed, with ten dollars costs and disbursements to the appellant, and the motion denied, with ten dollars costs, with leave to the plaintiff to reply within twenty days from service of order upon payment of said costs. Finch, P. J., O’Malley and Townley, JJ., concur; Merrell, J., dissents and votes for affirmance.