Scott v. Town of Menasha

Winslow, J. It seems apparent that the counterclaim states a cause of action in equity. The jurisdiction of courts of equity to entertain an action to compel cancellation and delivery of negotiable instruments apparently valid, but in fact invalid, while in the hands of holders with notice before maturity, is well settled. 3 Pom. Eq. Jur. § 1317. In fact, it was not contended, either in the brief or upon the oral argument, that the first ground of demurrer was well taken. We shall, therefore, spend no time on that point. The question whether the facts are pleadable as a counterclaim presents more difficulty, but we think it must be answered in the affirmative. It being established that the facts stated would show a cause of action in equity for the cancellation of the void bonds in plaintiff’s hands, the principal question under this head is whether this cause of action comes within the provisions of subd. 1, sec. 2656, E. S., i. e., whether it is “ a cause of action arising out of the contract or transaction, set forth in the complaint as the foun [75] dation of the plaintiff’s claim, or connected with the subject of the action.” It may well be urged that the bond itself is the contract which is the foundation of plaintiff’s claim; but whether it be held that the bond or the coupon alone is the foundation of his claim, within the meaning of the law, it would seem quite evident that a cause of action which attacks both the bond and coupons as void because of fraud and total want of consideration in their issuance, must be a cause of action arising out of the contract which is the foundation of plaintiff’s claim. The bond and coupons are simultaneously executed, the coupon being simply an incident to the bond, and are based upon the same consideration, and are the result of the same negotiations. It seems to us that this cause of action fulfils both clauses of the section under consideration. It arises out o.f the contract which is the foundation of the plaintiff’s claim, and it is connected with the subject of the action. It was argued that this counterclaim does not come within the rule stated in Dietrich v. Koch, 85 Wis. 618, viz., “ a claim which, if established, will deféat or in some way qualify the judgment to which a plaintiff is otherwise entitled.” This is untenable, because, if the bonds are invalid by reason of the facts stated in the counterclaim, the coupons sued on are also invalid, and both bonds and coupons are alleged to be held by the plaintiff with notice of their invalidity. So, if defendants prove their counterclaim as alleged, they will defeat the judgment to which plaintiff is otherwise entitled. Because they propose to go further, and obtain some affirmative relief, is no objection to the counterclaim. Wilson v. Hooser, 76 Wis. 387. By the Court.— Order reversed, and cause remanded for further proceedings according to law.