Rib Falles Lumber Co. v. Lesh & Mathews Lumber Co.

SiebecKeu, J. The court ruled to exclude all the evidence ■of the defendant to sustain its answer, upon the ground that it had no license to do business in this state, and hence, under the provisions of sec. 17705, Stats. (1898), as amended, is precluded from asserting a right to any relief in this action. The court was of the opinion that the matters alleged by the defendant in answer to the plaintiff’s complaint consisted •of new matter which was in its nature and substance an independent cause of action or counterclaim in its favor and hence mot enforceable, since the right so asserted arises out of this contract, which is wholly void' as to the defendant by reason ■of its default in not filing a copy of its charter or articles of incorporation with the secretary of state as required by sec. 17705, Stats. (1898). No claim is made that it can, under these circumstances, demand relief by way of counter•claim to plaintiff’s alleged cause of action. This is in accord with the decision in Ashland L. Co. v. Detroit S. Co. 114 Wis. 66, 89 N. W. 904. It is however contended that the answer alleges a defense which, if éstablished, will in whole or in part defeat plaintiff’s right to recover upon the cause of action alleged in the complaint. If the answer alleges such a defense to plaintiff’s •claim, then the defendant is entitled to be heard in the case to [367] protect itself against any demand of tbe plaintiff not warranted by law. Tbe right to defend when sued is well established and recognized. As stated in Windsor v. McVeigh, 93 U. S. 274, 277: “Wherever one is assailed in his person or his property, "there he may defend, for the liability and the right are inseparable. This is a principle of natural justice, recognized as such by the common intelligence and conscience of all nations.” The principle is so well recognized that citation of authority is unnecessary. The question then is, Does the answer present a defense to plaintiffs cause of action? It is necessary to ascertain the ■exact state of the pleadings to determine the controversy thus presented. The complaint charges that the plaintiff is entitled to recover a balance due on the purchase price for lumber it has delivered to the defendant pursuant to an alleged ■contract and that the defendant refuses to pay the same. The material portions of this contract are stated in the foregoing statement of the case. The answer denies that the plaintiff has fully performed all of the agreements of the contract and -alleges that the plaintiff failed to deliver all the lumber embraced in the contract. It is admitted that the plaintiff delivered the quantities of lumber specified in the complaint, but it is alleged “that the lumber so delivered was of a poorer -quality and grade than that agreed to be delivered by the plaintiff in and by said contract,” because the portion delivered by it as part of the 1-908 output of its mills as covered by the contract in question had been depleted and damaged by the plaintiff by wrongfully removing therefrom 210,000 feet -of the best parts of these grades and qualities, and hence, in violation of the contract of sale, the plaintiff delivered to the defendant only the poorer and inferior part of the grades of the stock manufactured in its mills, and thereby reduced the value of the part delivered to the defendant to an amount [368] much less than the contract price and less than such grade was-worth before such wrongful separation and depletion of the stock. The contract between the parties includes all the stock of the kinds specified which were to be manufactured by the plaintiff during the sawing season of 1908 and was to be paid for at the stipulated prices for the different kinds of wood, all to be graded as No. 2 common or better and No. 3 common, pursuant to the National Hardwood Association rules. It is alleged that under such grading referred to in the contract the No. 2 common and better lumber consists of grades classed as firsts and seconds and as Nos. 1 and 2 common, that the upper of such grades are of much higher market value than the lower and much higher than the average or flat price fixed in the contract for the entire stock, and that the 210,000 feet so abstracted were the best and most valuable portion of the manufactured stock, of which only the inferior part has been delivered! If these allegations are established it would show that the plaintiff has not fulfilled the stipulations of the contract under which it claims to have delivered the lumber shipped, in that it so manipulated the lumber as to deprive the defendant of the best portions of this stock, which it had agreed to deliver as part of the stock shipped to the defendant. It also appears from these allegations that the price demanded by the plaintiff for the inferior material so delivered is the contract price for the stock including the superior and more valuable portion of this whole stock, so alleged to have been wrongfully converted and sold to other persons, and it is alleged that the plaintiff has thereby rendered itself unable to perform the very terms of the agreement relied on to recover in this action. In the light of the plaintiff’s claim the new defensive matter alleged by the defendant goes in denial of the plaintiff’s cause of action and operates to defeat, either in whole or in part, its right to recover. The facts so alleged are a denial [369] of plaintiff’s right to recover the amount alleged to be due under the stipulations of the contract which the plaintiff seeks to enforce. It is asserted by the respondent that the defendant admits having received, pursuant to the contract, the amount of lumber alleged to have been delivered, and therefore that the plaintiff is entitled to recover the full contract price, because the contract is apportionable and obligates the defendant to pay for the portion delivered as a condition precedent to any obligation on its part to make further delivery. The allegations of the answer cannot be so interpreted. The allegations of the answer are clearly a denial of the claim that deliveries were made in compliance with the contract, and the defendant avers that the plaintiff fraudulently defaulted in this respect by so manipulating the output of its mills as to depreciate the grades of the stock it claims to have delivered, thus breaching the very terms of the contract it seeks to enforce against the defendant. Under these circumstances it is the defendant’s right to have the amount of the plaintiff’s recovery limited to the actual value of the lumber delivered. The wrongful conduct of the plaintiff operates, under the equities of the law, to defeat its claim under the contract by diminishing the amount due for the material delivered under it, and its recovery of the contract price is to be decreased by the loss occasioned by its wrongful conduct in failing to execute the contract. This defense operates to defeat plaintiff’s recovery and therefore is not to be treated as a counterclaim or cross-complaint within see. 2656, Stats. (1898), defining counterclaim, as applied in Heckman v. Swartz, 55 Wis. 173, 12 N. W. 439, and similar cases. The declaration that the statutory counterclaim “embraces both recoupment and set-off” must be applied in the sense in which it is employed in the statute and these cases, namely, a cross-demand of the defendant against the award to which the plaintiff is entitled upon the cause of action alleged by him; and the term “counterclaim” must be used as referring to a cause of action of the [370] defendant constituting a defense for affirmative relief and not as a defense wbicb goes only to defeat tbe plaintiff’s cause of action. Any apparent conflict in views on tbe subject is due to tbe fact that “recoupment” bas been variously used as a term to define a defense wbicb goes only to diminisb tbe plaintiff’s claim for damages and to designate a defense by way of a counterclaim for affirmative relief in reduction of tbe damages to wbicb tbe plaintiff is actually entitled upon bis cause of action. We consider that tbe facts alleged in tbe answer constitute a defense wbicb will defeat, in whole or in part, tbe amount of plaintiff’s alleged cause of action, and bence is strictly new matter constituting a defense. Washburn v. Dosch, 68 Wis. 436, 32 N. W. 551; Manning v. School Dist. 124 Wis. 84, 102 N. W. 356. Appellant concedes that it bas no right, under tbe circumstances of the case, to enforce any affirmative relief upon tbe independent cause of action arising out of this transaction, and bence this question need not be considered. Ashland L. Co. v. Detroit S. Co. 114 Wis. 66, 89 N. W. 904. Upon tbe facts alleged it must be held that tbe court erred in excluding tbe evidence offered to sustain tbe defense alleged in defendant’s answer. Tbe allegations charging that tbe plaintiff disabled itself from delivering tbe lumber as manufactured by depleting tbe stock of tbe best and most valuable portion and by otherwise disposing of such superior parts of such classes and grades, thus diminishing tbe value of that delivered below tbe price fixed in tbe contract, entitled tbe defendant to show by what amount tbe value bad been diminished, in order to ascertain what amount, if any, tbe plaintiff was entitled to recover on its cause of action. By the Court. — Tbe judgment appealed from is reversed and tbe cause remanded for a new trial KeRWiw, J., dissents.