Emerson-Brantingham Co. v. Brennan

Bruce, J. (after stating the facts as above). The main question to be determined is whether the trial court erred in sustaining the demurrer to the answer. It is perfectly clear to us that the defense, if properly pleaded, could be interposed as against the plaintiff. Although the note was a negotiable instrument in form, it was assigned to the plaintiff, and not negotiated. Section 7396 of the Compiled Laws of 1913, provides that “in the case of an assignment of a thing in action, the action by the assignee shall be without prejudice to any set-off or other defense existing at the time or before notice of the assignment; but this section shall not apply to a negotiable promissory note or bill of exchange transferred in good faith and upon good consideration before due.” Section 6943 provides that “in the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect to all parties prior to the holder.” It was admitted by the demurrer that the note had been made payable to Eobert W. Madeford, but was not indorsed by him when transferred to the plaintiff. It was therefore to that extent non-negotiable, and the plaintiff took it subject to all of the defenses which could have been interposed if the suit had been brought by the original payee. It is not necessary even to go to cases for authority. “In order that one may be a holder in due course it must have been negotiated to him.” Section 6937 Compiled Laws of 1913. “An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferree the holder thereof. If payable to bearer it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder completed by delivery.” (Comp. Laws 1913, § 6915.) “In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable.” Comp. Laws 1913, § 6943. Nor is there any merit in the contention that the claim or amount for which the defendant seeks to recoup is not liquidated. No matter Nvhat is or may have been the rule in cases of set-off, the damages in [102] recoupment are not required to be liquidated. 34 Cyc. 643; Hatchett v. Gibson, 13 Ala. 587; Sedgw. Damages (1st ed.) 461. The term “recoup,” says the supreme court of New York in Ives v. Van Epps, 22 Wend. 155, is synonymous with defalk or discount. It “is now uniformly applied where a man brings an action for breach of a contract between himself and the defendant; and the latter can show that some stipulation in the same contract was made by the plaintiff, which he has violated, the defendant may, if he choose, instead of suing in his turn, recoup his damages arising from the breach committed by the plaintiff whether they be liquidated or not.” Not only is this the general law, but § 6913, Comp. Laws 1913, expressly provides that “absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.” Nor is there any merit in the contention that the plea was vulnerable to a demurrer because it did not state “on what terms the agent Made-ford was to purchase the property for the defendant, the value of the property at the time of the purchase, the value at the time of its sale, the compensation to be paid the said Madeford, or any other of the necessary elements of damages to be allowed in order to leave the defendant open to proof of any damages.” The Code provides that pleadings are to be liberally construed, and the answer clearly admits of the construction that no compensation for damages were agreed to be paid, but that such services were to be a part of the consideration of the note. While as far as the value of the land and the price that defendant was to pay for' it are concerned, these were evidentiary matters merely. The. answer alleged that the amount of the consideration had failed to the extent of $1,000, and this was sufficient at any rate against a demurrer. See Guild v. More, 32 N. D. 432, 155 N. W. 48. Nor is it necessary for us to determine whether the claim of the defendant was a proper subject of counterclaim or set-off. In no part of the answer, indeed, was a set-off pleaded. Paragraph 4 was clearly merely a plea in recoupment, and though the general term “counterclaim” was used in paragraph 3, since no prayer for affirmative relief was asked and the plea merely alleged that the consideration [103] had failed to the amount of $1,000, a defense merely was pleaded, or what would more properly be termed facts in mitigation of damages. Failure of consideration, it is true, must be specially pleaded, but here there was a special plea. It follows from the above that the trial court erred in sustaining the demurrer to the defendant’s amended answer. The judgment of the District Court is, therefore, reversed, and the cause remanded for further proceedings according to law.