Bates v. Rosekrans

By the court, Hogeboom, Justice. The defendant, upon the trial, made two objections to the plaintiff’s recovery : 1. That the answer contained counter-claims, to which there was no reply, and therefore that the defendant was entitled to judgment. 2. That the pleadings in connection with the plaintiff’s admission, as sworn to in his first verified complaint, showed that the demand prosecuted had been paid. I. As to the alleged counter-claims. They are alleged to he contained in the 4th and 5th answers. (1.) The fourth answer in substance alleges that after the maturity of the note prosecuted, and while the plaintiff was the holder thereof, Bigham, one of the joint and several makers of said note, assigned all his estate to the plaintiff for the benefit of creditors, and preferred him as to all demands against said Bigham, including the note in question, and that plaintiff accepted and received said assignment in full satisfaction and discharge of said note; that the assigned estate was of greater value than the amount of plaintiff’s demands against said Bigham, including said note ; that plaintiff disposed of a portion of said estate to pay and satisfy all said demands, including the note in question, and still retains in his hands and has converted to his use a sufficient part of said assigned estate to pay and satisfy same ; that defendant was a surety of said Big-ham on said note, which was known to plaintiff at the time of the assignment, and that said assignment was made and received with a view of discharging defendant from said note, and without defendant’s knowledge, and in consideration thereof plaintiff agreed to discharge Bigham from said note. The defendant claims that this answer presents a counterclaim entitling him to the following affirmative relief, viz : — 101 — 1. To demand the surrender and cancellation of the note as paid. 2. To demand from the plaintiff, as trustee, an account of the fund and an appropriation of it to the payment of the note. 3. To demand a specific performance of the contract between Bigham and plaintiff. 4. To demand that upon payment of plaintiff’s claim, defendant be subrogated to all the rights and securities of the plaintiff against Bigham. 5. To demand that the plaintiff first resort to the fund in his hands for the payment of the note, and an injunction restraining the collection of the note of defendant. 6. To demand that the assigned assets be marshaled so as to pay this debt and protect defendant. Assuming for the present that this answer might enable defendant to claim these various remedies or modes of relief, it is also obvious that the answer substantially sets up the defence of payment and satisfaction of the note : 1. By accepting an assignment of property sufficient for that purpose, for the express object and upon the express understanding so to apply it. 2. By receiving a fund dedicated to such a purpose, disposing of a part expressly for that purpose, and converting to his own use a sufficient portion of the residue to effect that object. 3. By receiving the assignment thus made with the view of discharging defendant from the note, and without defendant’s knowledge agreeing to discharge Bigham therefrom. Here, then, in the view most favorable to defendant, was an answer susceptible of being construed to contain two defences—one oí payment, the other requiring an account; the one requiring a reply, and the other not, in order to form an issue thereon. In which way was it to be construed ? — 102 — 1. I still think, notwithstanding some judicial intimations to the contrary, that the old common law rule prevails in regard to matters of substance, to construe the pleading most strongly against the pleader, and hence that the plaintiff might well conclude that the answer was designed to set up only the defence of payment. (Burrall agt. DeGroot, 5 Duer, 379.) 2. I think all the alleged counter-claims are liable to the objection that they are not apparently set up as such; that they are set up by way of defence; that they do not claim affirmative relief; and hence are not to be presumed to have desired it. I do not coincide in the view that in all cases nothing but a statement of facts is to be incorporated in a pleading. A complaint is often unintelligible without a statement of the relief asked ; and sometimes it is equivocal upon its statement of facts, whether it is in contract or in tort, and the fact is determined by the nature of the relief sought. So also an answer may be equally equivocal, or susceptible of a two-fold construction. It may be uncertain whether it intends to set up a simple defence or a counter-claim, that is, an affirmative cause of action; whether it merely aims to defeat the plaintiff’s claim, or to obtain affirmative relief against the plaintiff. This must, I think, in general be determined by the fact whether it seeks this affirmative relief or not, upon the face of the answer in express terms. Take one of the illustrations presented- by the defendant’s answer and argument. It is said upon such an answer, the defendant might claim to have the note as being paid, delivered up and cancelled. This is so with some qualification. But by parity of reasoning, every defence of payment to a note might be similarly construed, as equally entitling the defendant to such affirmative relief. But in the absence of any allegations in the answer that the plaintiff sought to use it in an illegal or inequitable way; in the absence of allegations that it had not reached maturity, or — 103 — that the party was threatening to dispose of it; in the absence of any expressed wish in the answer to have it surrendered and cancelled, or the plaintiff enjoined from assigning it; would not any court conclude that the defence of payment was all that the party intended to rely upon, and that a judgment to that effect would insure to him ample protection ? So also in an action of ejectment the defendant may interpose a legal or an equitable defence, and the equitable matter may either be set up simply for the purposes of a defence, or for the purpose of obtaining affirmative relief. This was at first doubted, (Dewey agt. Hoag, 15 Barb., 365,) but it is no longer an open question. (Crary agt. Goodman, 2 Kern., 266; Dobson agt. Pearce, 2 Kern., 156; Philips agt. Gorham, 11 N. Y. R., 275.) Now in such a case, how is the plaintiff to know whether the matter set up in the answer is intended merely to defeat the plaintiff’s recovery, or to obtain affirmative relief? for example: a conveyance of the legal title founded upon the equitable right, unless if the latter is desired, a prayer or demand for such relief be incorporated in the answer. Inasmuch as a counter-claim is in effect a new cause of action by the defendant against the plaintiff, (Mayor of New York agt. Parker Vein Steam Ship Co., 21 How., 291; McKenzie agt. Farrell, 4 Bosw., 202; Gleason agt. More, 2 Duer, 642; Xenia Branch Bank agt. Lee, 7 Abb., 376,) it seems quite' as proper that it should define the nature of the relief sought, as that a complaint should name the judgment asked for. And the more so, as the answer in this case sets up the matter contained therein expressly by way of defence—the words being “ for a further defence”—• and not apparently by way of counter-claim; no cross-demand being named as such in terms or in substance in any way, nor any affirmative relief sought. Under these circumstances I cannot doubt that the pleader intended the matters thus interposed, to be set up — 104 — merely as a defence, and that the judge at the circuit was right in giving that construction to it. (2.) The matters set up in the 5th answer are subject to similar criticism. That answer is in substance that the note arose out of the partnership transactions of Bigham and Rosekrans, and was given to the plaintiff, to his knowledge, for the benefit of the partnership; that afterwards Bigham assigned to the plaintiff all his interest in the partnership and the property and estate thereof, and in consideration thereof the plaintiff, then being the holder of said note, agreed with Bigham to pay Bigham’s share of the partnership debts, and any balance due from him to the partnership, and to cancel said note; that said Bigham’s share of the debts of the partnership, and also the balance owing by him to the partnership, were each greater than the amount of said note; that the plaintiff has received under said partnership, and holds, property of said partnership of greater value than the amount of said note, but has not paid any part of the partnership debts, and refuses to apply the partnership property to such payment. On this state of* facts the defendant claims that he is entitled to various kinds of equitable relief: 1. To an account of the partnership property, and the application of his interest in it against the note. 2. To a judgment that the note is merged and should be cancelled. 3. To a specific performance of the plaintiff’s agreement to cancel the note. 4. To a decree declaring that the plaintiff is subrogated to Bigham’s rights and answerable to his obligations, and carrying out the results of that doctrine in the decree itself.' It must be conceded that this answer approaches nearer to the idea of a counter-claim, or cross-demand, because it contains various averments of facts, upon which a prayer for equitable relief might well be founded ; but the objection remains that no such relief is sought in express terms — 105 — or by necessary implication, and that the matters are set up only by way of defence—the language of the answer being, “ and the defendant for a further defence avers,” &c., and are, upon a reasonable construction of the answer, susceptible of that interpretation. It is in substance an allegation that the plaintiff, in consideration of the assignment to him of Bigham’s share of the partnership property, by which he received more than the amount of the note, agreed to pay Bigham’s share of the partnership debts and to cancel said note, then held by him. This agreement to cancel, if made, as it appears to be, upon sufficient consideration, was as between the parties an actual cancellation or extinguishment of the note, and may be so treated. This is substantially the defence of payment or satisfaction. Moreover, the defendant in his argument claims that the effect of the averments in the answer is to place the plaintiff in the shoes of Bigham—in the position substantially of a joint maker of the note with the defendant, and thereby to merge the note in the new relations of the parties—to preclude an action upon it by the plaintiff, and to turn him over to his remedy, if any he has, under the partnership relations of the parties. This is in effect the defence of merger or extinguishment, and requires no reply to put it in issue. Susceptible as this answer is of this construction; finding in it no express allegations of counter-claim, or prayer for affirmative relief, but on the contrary an allegation that the matters are insisted on by way of defence; finding also in the Code (§ 149) a distinction observed between a defence and a counter-claim, I feel bound to presume that the matters were intended by way of defence only. The language of the Code on this point is : “ The answer of the defendant must contain, 1. A denial, &o. 2. A statement of any new matter constituting a defence or counter-claim.” (Code, § 149.) So also, “ the defendant may set forth by answer as many defences and counter-claims as he may — 106 — have.” (Code, § 150.) So also, “ the plaintiff may demur to one or more of such defences or counter-claims.” (Code, § 153.) II. It is further claimed that by the evidence in the case it was established that the principal of the note in suit, executed by both Bingham and Bosekrans, was paid by a subsequent note executed by the defendant alone to the same payees, on the 14th of January, 1852, for the same principal sum, which was indorsed by the payees and received by the plaintiff in payment. The proof relied on for this purpose was the introduction in evidence of the plaintiff’s first amended complaint in this action, (not the one forming a part of the issue on the trial,) verified by the oath of the plaintiff, in which the plaintiff alleged that at about the maturity of the note in suit, of September 11, 1851, the defendant, in consideration thereof, and “ to provide for the payment of the principal of the same,” executed and delivered to the plaintiff another note of a similar amount (of principal,) dated January 4, 1852, and payable at a future day, to the order of Bates & Griffin, and by them, before maturity,' indorsed to the plaintiff. I think this did not amount to a payment. 1. The allegation is, that the note of 1852 was given to provide for the payment of the note of 1851; by which I understand the pleader to mean, not a present payment, but a provision for future payment, by the giving of the note, and to have the effect of an actual payment if paid at maturity. This future payment was not made, the allegation being that both notes are unpaid. Nor was the defendant prejudiced by the plaintiff retaining both notes, as the last note was surrendered by the plaintiff to the defendant at the trial—the defendant receiving the same with the declaration that he did not thereby avoid or waive the defence of payment. 2. Nor was it a payment in law or in legal effect. The taking of the note of the defendant alone was not in law a — 107 — satisfaction of a joint and several note of the defendant and a third person; certainly not, unless expressly agreed to be taken in absolute payment. No benefit accrues to the plaintiff thereby, and no new consideration intervenes. The point is settled upon authority. (Cole agt. Sackett, 1 Hill, 516; Waydell agt. Luer, 5 Hill, 448; Elwood agt. Diefendorf, 5 Barb., 398-408; Van Eps agt. Dillaye, 6 Barb., 244; Hawley agt. Foote, 19 Wend., 516; Frisbie agt. Larned, 21 Wend., 450-452.) Some of the cases go so far as to hold that such a note is not payment, though expressly agreed to be received as such. (Cole agt. Sackett, 1 Hill, 516; Waydell agt. Luer, 5 Hill, 448; Elwood agt. Diefenendorf, 5 Barb., 398-408.) There was no error in the disposition of this cause at the circuit, and the judgment of that court must be affirmed.