Sprout v. Crowley

Lyoh, J. It is claimed on behalf of the plaintiffs, that the alleged indebtedness of the plaintiffs to'the defendant, arises out of partnership transactions, and until an account is stated, and the balance ascertained, the same is not proper subject matter of a counter-claim, and that, therefore, the demurrer to the counter-claim was properly sustained. It is essential to a valid counter-claim that it exist in favor of a defendant, and against a plaintiff, between whom a several judgment might be had in the action, and arising out of the following causes of action: 1. A cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim, or connected with the subject of the action. 2. In an action arising on contract, any other cause of action arising also on contract and existing at the commencement of the action. R. S. chap. 125, sec. 11. 8. When the plaintiff is a non-resident of tMs state, such Counter-claim may arise out of any cause of action whatever, existing at the time of the commencement of the action, and [191] arising within this state; provided, that no claim assigned to the defendant shall be pleaded as a counter-claim in any action to which this subdivision is applicable. Laws of 1868. Ch. 4. The counter-claim under consideration cannot be sustained under the first sub-division of the statute, because it is not alleged that it arose out of, or is connected with, the subject of the action. Neither can it be sustained under the third subdivision, because it does not appear that the cause of action stated in it arose within this state. The pleading contains no averment that the contract, which is the basis of such counterclaim, was made, or that the alleged expenses or services were incurred or rendered within this state. Eor this reason it is unnecessary to consider the .question, which was very fully and ably argued by the respective counsel, of the constitutionality of the law of 1868. If, therefore, this is a valid counter-claim, it is such by virtue of the second sub-division above mentioned. It cannot be sustained under the latter sub-division unless, at the time the action was commenced, there was a debt due from the plaintiffs to the defendant. Whether this essential element of a valid counter-claim is alleged in the pleading demurred to, is the material question to be considered and determined. That the contract set out in the answer created a partnership between the parties in respect to the joint adventure, must be conceded. It contains all of the essential elements of a partnership agreement, and it is quite clear that in the absence of fraud, or of an express agreement, or of any other circumstances, which would render a particular case exceptional, the law is, that one partner has no claim against his co-partner, individually, on account of partnership transactions, although a final settlement of the affairs of the firm would show a balance in favor of the former. Until such final settlement, the general rule is that the firm and not the individual partner is the debtor; and in such case it cannot be said correctly that there is a debt due from one partner to the other. Ives v. Miller, 19 Barb. S. C., 196, and cases cited. [192] But where there is an express agreement by one partner to repay to the other his share of advances, made by the latter on account of the partnership business, the amount of such share becomes thereby the debt of the partner who has thus agreed to pay the same, which may be recovered in an action brought directly therefor, without any regard to the partnership relation existing between the parties or the state of their firm accounts This being the case, it follows that if an action on contract be brought by the debtor partner against the other, the debt against the plaintiff, thus created by such express promise, is the subject matter of a valid counter-claim, if due, and may be pleaded as such. The case of Ives v. Miller, supra, recognizes the correctness of this doctrine, and the cases which assert the same doctrine are quite numerous. The following are some of them: Townsend v. Goewey, 19 Wend., 424; Bumpass v. Webb, 1 Stewart (Ala.,) 19; Elgie v. Webster. 5 M. & W., 518; Coffee v. Bryan, 10 J. B. Moore, 341; Foster v. Allanson, 2 Term R., 475; Venning v. Leckie, 13 East., 7; Collamer v. Foster, 26 Vt., 754; Williams v. Henshaw, 11 Pick., 79. It is substantially averred in the counter-claim demurred to, that there was an express agreement between the parties that the defendant should furnish the materials for, and manufacture the derricks, and sell or attempt to sell the same; and that the plaintiffs should repay to him one-half of all the expenses which he might incur in and about the manufacture and sale thereof. It is true that this is not the precise language of the pleading, but applying to it the liberal rule of construction required by the eo,de, (R. S., ch. 125, sec. 21,) such must be held to be its meaning and effect. We are of the opinion that the pleading in question states a valid cause of action arising on contract, and which existed in favor of the defendant and against the plaintiffs at the commencement of the action, and that the same is, therefore, a valid counter-claim, and properly pleaded as such. [193] Tbe order of tbe circuit court sustaining tbe demurrer to sucb counter-claim must be reversed and tbe cause remanded with directions to that court to overrule sucb demurrer. By the Court.— It is so ordered.