Merchants Bank v. Acme Lumber & Mfg. Co.

SIMPSON, J. This action was brought by the appellee against tbe appellant, the complaint containing the common counts on account, account stated, and for goods wares and merchandise sold to the defendant. Pleas 7 and 10 [which will be set out by the reporter) allege that tbe suit is instituted to recover for certain lumber furnished to defendant and one Ambrose, but they do not say how, whether as partners, or as principal and surety; but the other averments of the pleas indicate that Ambrose was engaged in constructing a building for defendant under a contract by which Ambrose was to furnish all material and complete' the building by a certain date, for a definite sum, and was subject to certain forfeitures if he failed to complete the building within the time specified. The gravamen of the pleas is that the plaintiff, with full knowledge of the contract between Ambrose and defendant, failed to furnish the lumber as it agreed to do, but so delayed, and furnished such indifferent material, that Ambrose lost a considerable amount, which is set out. Demurrers were sustained to these pleas, and this action of the court is the subject of the first assignment of error insisted on. Whatever was the exact relation between the defendant and Ambrose, it is clear that, if the defendant had made himself liable to the plaintiff at all, it was to pay the money for Ambrose. So the question arises: Can a party who has bound himself to pay money for another, when sued on the obligation, recoup the damages which the other party could, if he were sued? Set-off and re [441] coupment are by no means the same defense. the former is statutory, and allows the defendant to set off distinct and separate demands wbicb be bas against the plaintiff. It is, in fact, a cross-action, and if it exceeds the amount of the claim against the defendant, be may recover judgment against the plaintiff for the overplus. the latter is not statutory, but a principle of the common law, by which the defendant may reduce the plaintiff’s claim, even to the extent of cutting it out entirely, by showing that, by reason of the plaintiff not complying with the obligation resting on him by virtue of the contract or transaction sued on, loss or injury bas occurred to the defendant. By pleading set-off, the defendant says to the plaintiff: It is true I owe you as you claim; but you owe me certain amounts, by independent obligations, so it is not just that you should insist on collecting from me, while I have a claim on wbicb I could immediately sue you and recover. By pleading recoupment, the defendant says: Taking the contract between us, with all its reciprocal obligations, I owe you either much less than you claim or nothing at all. — Waterman on Set-Off, etc. (2d Ed.) p. 478, § 458; Id. p. 480, § 464; Washington v. Timberlake, 74 Ala. 260, 263; Lawton v. Ricketts, 104 Ala. 431, 435, 16 South. 59; Grisham v. Bodman, 111 Ala. 194, 201-203, 20 South. 514. It is true that our statute bas assimilated recoupment to set-off, in so far as to allow a judgment for tbe defendant, if his claim or demand exceeds that of tbe plaintiff; but that does not obliterate tbe distinction between tbe two. Code 1907, § 5865. From tbe nature of tbe defense, it would seem that tbe surety or other person who is liable to pay tbe debt of another should be allowed to set up this, like any other defense which is open to tbe principal. The question, however, is not altogether free from difficulty, owing mainly to tbe fact that tbe debtor [442] has the privilege of either pleading recoupment or bringing a separate action for his damages. The courts of Illinois hold that “a. surety may recoup for any damages arising out of the same subject-matter, to the same extent as the principal might if he were sued alone.” — Meyer & Stratman v. Stookey, 3 Ill. App. 336; Waterman v. Clark et al., 76 Ill. 428. To the same effect, see McHardy v. Wadsworth, 8 Mich. 349, 353, 354; Soroggin et al. v. Holland, 16 Mo. 419, 426. In a case where one partner gave his individual note for property purchased by the firm, and was sued on the note, the Supreme Court of Colorado held that the other partner could be made a party to the suit, in order to permit the firm to recoup. — Strang v. Murphy, 1 Colo. App. 357, 29 Pac. 298. On the other hand, the New York Court of Appeals has held that a “breach of warranty of quality of chattels cannot be set up by way of defense, recoupment, or counter-claim by the accommodation indorser of a note given for the price of the chattels, in an action against him thereon,” and the reason given is that the principal has the right of election, either to recoup or to bring his separate action for the damages, and no one else can make that election for him. — Gillespie v. Torrance, 25 N. Y. 306, 82 Am. Dec. 355, 358, and cases cited in note. The same court holds that, when the principal and surety are sued together, the principal may recoup, and it will inure to the benefit of the surety, though the latter could not, if sued alone, avail himself of the defense. — Springer v. Dwyer, 50 N. Y. 19, 22. In the pleas now under consideration it is alleged that the plea of recoupment is interposed by consent of Ambrose. That being the case, it seems to obviate the only objection that has been urged; the principal himself having made the election. Hence the pleas are good, and the court erred in sustaining the demurrer to them. [443] Under the repeated decisions of this court, it was error to allow the witness Richardson to testify as to why he stopped sending lumber to the defendant. — Baldwin v. Walker, 91 Ala. 428, 8 South. 364; Burks v. Bragg, 89 Ala. 204, 7 South. 156; Young v. Arntze, 86 Ala. 116, 5 South. 253. This was not rendered error without injury by the introduction subsequently of the letter of September 2, 1905, as that letter does not say anything about ceasing to send lumber. There was no error, as the pleadings stood, in refusing to allow the witness Ambrose to testify as to his damage by reason of the plaintiff’s failure to furnish lumber according to contract, as the only pleas raising that issue had been demurred out, though it would have been otherwise with those pleas in. There was no error in the refusal to give charge No. 1 requested by the defendant. The theory of the plaintiff was that the lumber was furnished to Ambrose on the promise of the defendant to pay for it, and that the credit was given to the defendant, and not to Ambrose. If this be true (and there is evidence tending to establish it), then the fact that the goods were furnished to Ambrose would not affect the defendant’s liability. It is true that the complaint is not as clear as it might be to cover this liability; but it may be covered by the general allegations of account. The statute of frauds is not pleaded in this case, nor is there any plea specially denying the authority of Elliott to make the contract for the bank; but it is insisted by appellant that plaintiff should not be allowed to recover, because, without special proof of authority in any other officer, a corporation can be bound only by the act of its governing body. Elliott was shown to be the assistant cashier, in charge of the bank, and all the transactions were with him, representing the bank. The [444] building of a bank building is a part of the legitimate business of a bank, and it is shown by the evidence that the bank has taken possession of the building. This is sufficient to raise the presumption of Elliott’s authority. —Ala. Nat. Bank v. O’Neal, 128 Ala. 192, 196, 29 South. 688. The judgment of the court is reversed, and the cause remanded. Reversed and remanded. Dowdell, C. J., and McClellan and Mayfield, J., concur.