Steck v. Colorado Fuel & Iron Co. , 142 N.Y. 236 ( 1894 )

This appeal involves the question of the power of the court under the State Constitution and laws to order a compulsory reference of the action. The action is on contract and is referable in its nature. But having regard alone to the cause of action set forth in the complaint, it was not the subject of a compulsory reference for the reason that no long account was involved. The action was to recover four months salary alleged to be due and unpaid to the plaintiff under a contract of employment at an annual salary of six thousand dollars. The defendant answered denying the complaint, and in addition pleaded several defenses by way of counterclaim arising on matters of account, and the answer concluded by prayer for judgment that the plaintiff account for the moneys mentioned in the second and third counterclaims, and that the defendant recover the sum which might be found due from the plaintiff to the defendant on such accounting. The plaintiff replied denying the counterclaims, and then, upon the pleadings and proceedings and upon affidavit, moved for an order of reference, on the ground, in substance, that, upon the facts disclosed, it appeared that the trial of the issue on the third counterclaim in the answer would involve the examination of a long account. The motion was opposed by the defendant, but was granted, and an order of reference was made, from which the defendant appealed to the General Term of the first department, which affirmed the order, and from the order of affirmance this appeal is taken. It was competent for the judge who granted the order to find, upon the facts presented, that the trial of the issue on the third counterclaim would involve the examination of a long account, and that on the trial none of the issues would require the decision of any difficult questions of law, and this finding, having been affirmed by the General Term, is not reviewable here.

The appeal, therefore, presents the question whether a compulsory reference may be directed in an action on contract to recover stipulated payments, upon it being made to appear that, although no long account will be involved in maintaining the plaintiff's cause of action, nevertheless such account will be involved and will be litigated on the issue raised by the counterclaim in the answer. The question presented in another form is whether a cause of action, referable in its nature, but which cannot be referred of itself alone, because not involving the examination of a long account, may be referred against the protest of either party, if a counterclaim, also arising upon contract, is interposed, which will involve the examination of a long account.

If the power to order a compulsory reference in this case depends alone on section 1013 of the Code of Civil Procedure, there can be no doubt that the court had jurisdiction to make the order. The language of the section is explicit and unambiguous. It authorizes a compulsory reference where the trial of an action will involve an examination of a long account "on either side," and there are no difficult questions of law. It needs no gloss or argument to show that the case in hand is within the express language of the section. There is a long account on the side of the defendant, arising on its counterclaim, and the legal questions involved are of the simplest character. The words "on either side" in section 1013 are not new as applied to compulsory references. Compulsory references were first authorized by the colonial statute of 1768. (Van Schaick's Laws, vol. 2, p. 517.) The act is entitled "An act for the better determination of personal actions depending on accounts." The first section authorizes a compulsory reference whenever it shall appear probable "in any case depending in the Supreme Court of Judicature of this colony (other than such as shall be brought by or against executors or administrators) that the trial of the same will require the examination of a long account either on the one side or the other." The law authorizing compulsory references has been re-enacted in the successive revisions of the laws since the organization of the state government, and in all of them the language of the colonial statute of 1768, that a reference may be ordered when it shall appear that the trial of an action will involve the examination of a long account "either on the one side or the other," has been in substance retained and continued, so that at no time since 1768 have these words not been incorporated in the law relating to compulsory references. (Laws of 1788, ch. 46; Laws of 1801, ch. 90; Laws of 1808, ch. 1; 1 Rev. Laws 1813, ch. 56; 1 Rev. St. 384, sec. 39.)

But the claim is made that, notwithstanding the broad and unqualified language of the statute, the constitutional right of trial by jury stands in the way of a compulsory reference of actions on contract, where the plaintiff's debt or demand is put in issue by the answer, and the necessity for the examination of a long account only arises upon a set-off or counterclaim interposed by the defendant. It is insisted that the words "on either side" in the statutes regulating compulsory reference are, by the operation of the Constitution, to be construed with this implied limitation. The Constitution of 1777 ordained that "trial by jury in all cases in which it hath heretofore been used in the colony of New York shall be established and remain inviolate forever," and the same provision in substance is to be found in each of the subsequent State Constitutions. Under the Dutch rule all actions were triable by the court, and trial by jury was unknown. The question whether actions were referable never arose. There was no need of references except for the information of the court. The argument is that the right of a defendant during the colonial period to interpose a set-off, depended upon and was limited by the Statute of Set-off enacted by the colony of New York in 1714 (Van Schaick's Laws, p. 95), and which continued in force until the Revolution, and that that statute confined the right of set-off to cases where the defendant admitted on the record the plaintiff's claim, and did not authorize a defendant to put the plaintiff's claim in issue and at the same time to interpose a set-off. It is insisted, therefore, that the words "either on the one side or on the other" in the act of 1768, authorizing compulsory references, must be construed as referring only to cases where a long account was connected with the plaintiff's claim or arose on the defendant's set-off interposed in connection with an admission of the demand of the plaintiff. The conclusion is, therefore, deduced that the power of compulsory reference at the time of the adoption of the Constitution of 1777, not having been extended to cases of set-off, connected with a denial of the plaintiff's claim, the right of trial by jury in such a case then existed and was forever preserved by the Constitution. This argument and conclusion, even if founded upon correct premises, is very technical and unsatisfactory in its results, but it also proceeds, as I think, upon a misapprehension of the true meaning of the constitutional provision. But the argument puts upon the statute of 1714 a construction contrary to the practical construction uniformly applied by the courts to statutes of like character. The clause in the statute of 1714 (Van Schaick's Laws, p. 93), authorizing set-offs, that "if the defendant cannot gainsay the deed, bargain or assumption upon which he is sued, it shall be lawful for such defendant to plead payment of all or any part of the debt or sum demanded, giving notice in writing with the said plea upon what he will insist upon at the trial for his discharge, and give any bond, bill, receipt, account or bargain so given notice of in evidence," is claimed to limit the right of set-off under the statute to cases where the defendant admits and does not put in issue the plaintiff's demand. But the words "cannot gainsay the deed, bargain or assumption upon which he is sued," and the subsequent words, were inserted simply to declare a rule of pleading and to enable a defendant who had no defense to the plaintiff's claim, to prove, under a plea of payment, a set-off, of which notice had been given, and these words were not intended to confine the right of set-off to cases where the defendant affirmatively admits the plaintiff's demand. There are no negative words. Proof of disconnected demands would not support the plea of payment except by statute. If there might originally have been a question as to the construction of the statute in this respect, the construction put by the courts upon similar words have removed any doubt. The Statute of Set-off of 1714 and the act of 1768, authorizing compulsory references, were, in substance, re-enacted and incorporated into the "Act for the amendment of the law and the better advancement of justice," of February 27, 1788, chapter 46 (2 Greenleaf's Laws, 102); also in the act of the same title, chapter 90 of the Laws of 1801 (1 Webster's Laws, p. 347); also in the Laws of 1813 (1 Rev. Laws, ch. 56, p. 513). In each of these statutes the section relating to set-offs contains the same words found in the statute of 1714, "if the defendant or defendants cannot gainsay the deed, bargain or assumption upon which he, she or they is or are sued, it shall be lawful," etc. Numerous cases are found in the reports of this state, commencing from an early period after the formation of the state government, arising under these statutes, where, in connection with the general issue, the defendant gave notice of set-off. The set-off was in some cases allowed and in some cases disallowed, but in none of them was it suggested by court or counsel that the defendant, in order to avail himself of the right of set-off, must admit the plaintiff's demand. On the contrary, not only was the plaintiff's claim put in issue in all these cases, but in some of them it was litigated on the trial. (Gordon v. Bowne, 2 Jo. 150; Burgess v. Tucker, 5 id. 105; O'Callaghan v. Sawyer, Id. 118; Tuttle v. Bebee, 8 id. 152; Root v. Taylor, 20 id. 137; Bridge v. Johnson, 5 Wend. 342.) These cases refute the claim that, prior to the Revised Statutes, a defendant could not contest by his pleading, and upon the trial, the plaintiff's claim, and at the same time insist upon a set-off in case he failed to establish his defense to the plaintiff's cause of action. It cannot be supposed that the judges and lawyers of that time were unacquainted with the practice of the colonial courts, or that they overlooked so easy an answer to the defense of set-off as that furnished by the words "if the defendant cannot gainsay the deed, bargain or assumption upon which he is sued," if they have the construction now claimed for them. It is noticeable that in the case of Root v. Taylor, Ch. J. SPENCER quotes the statute of 1813, and included in the quotation are the words, "if the defendant cannot gainsay," etc., and in that case, which was assumpsit for goods sold and delivered, the defendant had pleaded the general issue with notice of set-off. The rule that a defendant may at the same time deny the plaintiff's claim and give notice of set-off, and thereby put the defendant to proof of his demand, prevailed in England under the English Statutes of Set-off. (2 Geo. II, ch. 22, sec. 13, and 8 Geo. II, ch. 24, sec. 4.) Harington v.Macmorris (5 Taunt. 228) was an action for money had and received, money lent, etc. The defendant pleaded the general issue with notice of set-off, the particulars of which were furnished. The jury found against the set-off. The plaintiff relied for the proof of his claim on the admission of the notice of set-off, and had a verdict. The verdict was set aside on the ground that the admission in the notice of set-off was not available to the plaintiff to establish his demand. Lord MANSFIELD said: "It is every day's practice that the defendant's language in one plea cannot be used to disprove another plea, as in the familiar instance I have given of trespass, and justification pleaded, when the justification would certainly, if admissible, prove the act in case the reason of justification fails. Therefore, the particulars of the set-off must be incorporated with the notice of set-off and cannot be given in evidence to prove the plaintiff's demand on the issue of non-assumpsit." The quotation from BLACKSTONE (vol. 3, p. 304) is quite consistent with the opinion of Lord MANSFIELD. The commentator is there speaking of the rule relating to tender and the payment of money into court to mitigate damages and costs, and he says in substance, that, under a plea of set-off (which, standing alone, necessarily admits the plaintiff's claim), it is necessary, if the set-off does not equal the plaintiff's debt, that the defendant should pay the balance into court to have the benefit of tender in mitigation of further costs, etc. The rule that the general issue with notice of special matter, puts in issue the plaintiff's cause of action, is elementary. (1 Chit. Pleadings, 478; Vaughan v. Havens, 8 Jo. 109.) It has been frequently applied by other courts in this country in case of set-off. (Price v. Combs, 12 N.J.L. 189; Morgan v. Boone, 1 J.J. Marsh. 585.) There are no records showing the practical construction placed by the colonial courts upon the statute of 1714 upon the point now in question, but the English Statutes of Set-off were enacted nearly fifty years before the organization of our state government under which the practice prevailed of permitting a defendant to deny the plaintiff's claim in connection with notice or plea of set-off. It is presumable that the same practice was followed in the colony, and the practice of the state courts, following the English practice under statutes similar to that of 1714, makes this presumption almost a certainty. The English decisions, says Chief Justice KENT in Gordon v. Bowne, on the construction of the English Statute of Set-off, "are perfectly in point as to the construction of our act," and Statutes of Set-off, from the time of their enactment, have been "liberally expounded to advance justice and prevent circuity of action." (THOMPSON, J., inTuttle v. Bebee, 8 Jo. 152.) The argument against the power to order a compulsory reference in this case based upon the assumption that when the Constitution of 1777 was adopted, no long account could be litigated arising on a set-off, except where the defendant admitted the plaintiff's claim, and that the act of 1768 authorizing compulsory references did not apply in a case like the present one, where the plaintiff's claim is denied, proceeds upon false premises and cannot be maintained.

But there is, I think, another conclusive answer to the objection based on the Constitution. The words in the Constitution of 1777, "trial by jury in all cases in which it hath heretofore been used in the colony of New York, shall be established and remain inviolable forever," were intended to preserve the right of jury trial in the classes of cases where trial by jury before as of right existed. In expounding this provision the principle which governed the colonial practice permitting compulsory references, is to be applied. Cases of the same class and governed by the same principle of public policy as those within the act of 1768, may be referred consistently with the constitutional provision, although the exact case in hand was not within the terms of that statute. The policy upon which the statute of 1768 was enacted is recited in the preamble, which, after referring to the disuse of the action of account and to the law of 1714 permitting discounts in support of the plea of payment, proceeds to declare: "So that by the change in the law and practice above mentioned, the suits of merchants and others upon long accounts are exposed to erroneous decisions and jurors perplexed and rendered more liable to attaints, and by the vast time necessarily consumed on such trials, other causes are delayed and the general course of justice greatly obstructed; it is enacted, therefore," etc. It cannot be supposed that the Constitution of 1777 intended to prevent a reference of cases of the same general class as those specified in the act of 1768, and as to which the same considerations of public policy applied, even although, by reason of the rules of pleading and procedure prevailing in the colony, a set-off in a particular case involving the examination of a long account was not permitted. The principle established by the colonial legislation was that action on contract involving litigations of long accounts "on either side" should be referred for trial to referees, to relieve jurors from perplexity and to prevent the obstruction of justice. This legislative power was not abrogated by the Constitution. It would be a narrow and injurious construction of the constitutional provision that unless you are able to point out the precise case under colonial laws, a compulsory reference cannot be had. The act of 1768 excepted from its operation suits "brought by or against executors or administrators." This exception was expressly abrogated in the act of 1788 and the subsequent statutes of the state. But this abrogation of the exception was inoperative and in violation of the Constitution, if you say that no compulsory reference can be authorized in any case not referable under the colonial laws, although the case is within the principle and policy upon which these laws were based. If the Constitution restricts, as is claimed, the power of compulsory reference to the exact cases specified in the colonial act of 1768, then I perceive no escape from the conclusion that whenever now an executor or administrator is a party to an action, it cannot be compulsorily referred, although the action may be on contract and involves a long account on either or both sides. The present case is an action on contract for debt. The set-off was also a matter of account. It was properly pleaded. The statute of set-off permits the defendant to contest the plaintiff's claim, and, at the same time, to insist upon a set-off. The trial of the set-off involves the examination of a long account. The statute permits a compulsory reference in such case, and no constitutional right, I am persuaded, stands in the way of its enforcement.

But it is said that the question involved in this case has been decided adversely to the power exercised, in three cases in this court, viz.: Townsend v. Hendricks (40 How. Pr. 143), Welsh v. Darragh (52 N.Y. 590) and Untermeyer v. Beinhauer (105 id. 521). This is a plain misapprehension. It is said in those cases that the referable character of an action is to be determined by the complaint. This was an accurate expression, having reference to the cases in which it was used and the sense intended. Bearing in mind two well-settled principles established by the decisions, first, that actions ex delicto were not the subject of compulsory reference, either in the colony of New York or afterwards (Johnson v. Parmely, 17 Jo. 129; Green v.Patchen, 13 Wend. 293; Dederick's Admrs. v. Richley, 19 id. 108); second, that set-offs are not allowed in actions for unliquidated damages, although arising on contract, "as for not delivering goods according to contract" (1 Chitty Pleadings, 572;Duncan v. Lyon, 3 Jo. Ch. 351; Hepburn v. Hoag, 6 Cow. 614), the principle upon which the decisions in this court proceeded in the cases referred to, is readily ascertained.Townsend v. Hendricks was an action for damages for false representations. The court, after referring to the pleadings, said: "The action must, therefore, be held to be one founded in tort, and not referable against the will of either party."Welsh v. Darragh was an action on a contract for the sale and delivery of merchandise sold by the plaintiff to the defendant. The defendant, among other things, set up in his answer fraud and deceit in the sale of certain other merchandise not included in the complaint. A reference having been ordered on the application of the plaintiff, the defendant appealed from the order. He resisted the reference on the ground that the issue of fraud raised by the answer was not referable, seeking to apply to the case the rule that actions of tort are not the subject of compulsory reference. This court affirmed the order of reference, and in its opinion first stated that the action being on contract the case was referable in its nature. The court then considered the claim of the defendant, that the issue of fraud raised by the answer prevented the order of reference, and, deciding against this construction, said: "If the action is a referable one, the answer cannot make it non-referable." Having disposed of these questions, it proceeded to consider whether, upon the facts, a long account was involved in the plaintiff's cause of action, and, reaching a conclusion that there was, affirmed the order. There is no hint in the opinion of the doctrine now contended for, that in an action upon contract a compulsory reference may not be ordered, where the examination of a long account will become necessary on the trial of a counterclaim arising on contract, unless the plaintiff's cause of action involves the examination of a long account, or the plaintiff's claim is admitted. Untermeyer v. Beinhauer was an action to recover unliquidated damages for the breach by a builder of a building contract, and the court held that such an action was never referable against the will of either party, saying: "It was simply an action for unliquidated damages for the breach of a contract and in no sense involved any account." Neither of these cases sustain or tend to sustain the contention here. The case ofKain v. Delano, decided by this court and reported in 11 Abbott's Practice (N.S.), 29, was an appeal from an order of reference made on the ground that the trial of an issue raised by a counterclaim would require the examination of a long account. The plaintiff's claim consisted of but a single item, and was denied by the answer, which also set up a counterclaim. This court reversed the order of reference on the ground that the fact upon which the order proceeded did not appear. It assumed that the order would have been justified if it had appeared that the issue on the counterclaim would require the examination of a long account. The rule here contended for is plain, simple and practical. It is consistent with the Constitution. It is in harmony with the public policy upon which statutes for compulsory references are based. The opposite rule violates the language of all statutes on the subject framed since colonial times. It is based on views so close and critical that they can be comprehended only with difficulty. It puts it in the power of a plaintiff by exaggerating his own claim, to prevent its admission by the defendant, and thereby defeat a reference of a long account arising on a counterclaim. If the order in this case is reversed, the court will, I think, reverse the practice which has prevailed in the courts of this state without question for more than a hundred years. It is the strongest confirmation of the view that the words "on either side" mean what they plainly import, that no suggestion can be found in any of the reports, so far as I can discover, of the limitation now contended for. If a practice prevailed in opposition to the natural import of the words, a trace of it would have been found. There would have been some judge or lawyer who would have queried how this could be. The distinction is between actions of a referable quality and such as are not referable by their very nature. In the one class the court may compel a reference, if on "either side" there is a long account; in the other, no reference can be compelled, however many items of damage there may be.

I think the order should be affirmed.

All concur with EARL, J., for reversal, except ANDREWS, Ch. J., FINCH and O'BRIEN, JJ., dissenting.

Orders reversed.