McCulloch v. Vibbard , 58 N.Y. Sup. Ct. 227 ( 1889 )

Van Brunt, P. J.

This was an action brought by the firm of Jay Cooke, McCulloch & Co., against the defendants, as members of the firm of Vibbard, Foote & Co., to recover certain moneys alleged to be due from the defendants to them, and for certain other relief. The complaint alleged that the plaintiffs, Hugh McCulloch, John H. Puleston, and Francis H. Evans, together with the individual members of the firm of Jay Cooke <£• Co., were copartners carrying on business in London under the firm name of Jay Cooke, McCulloch & Co.; that the members of the firm of Jay Cooke & Co. doing business in Hew York were adjudicated bankrupts under the provisions of the act of congress; and that the plaintiff Lewis was appointed trustee, under such act, of their property and assets, and at the time of the commencement of this action was still such trustee. The plaintiffs were the said Hugh McCulloch, John H. Puleston, Francis II. Evans, and Edwin M. Lewis. The individual members of the firm of Jay Cooke & Co. were not parties to the action, and no objection was taken by the pleadings to their absence; it being seemingly assumed that Lewis, as their assignee in bankruptcy, represented their interests in the firm of Jay Cooke, McCulloch & Co. The defendants Vibbard & Fiske answered, setting up a counter-claim against Jay Cooke, McCulloch & Co., and asking an affirmative judgment by way of counter-claim for the value of certain securities alleged to have been hypothecated and disposed of by said Jay Cooke, McCulloch & Co. It is not apparent from the answer against whom this judgment is demanded, but it is presumably against Jay Cooke, McCulloch & Co. The plaintiffs put in a reply denying the allegations setting up a counter-claim. The case, by consent, was referred, and, coming on to be heard before the referee, the plaintiff submitted to a nonsuit, and the defendants offered certain proofs to establish their counter-claim; such proof being objected to upon the ground that the proper parties were not before the court, and that no counter-claim could be established in this action as against any of the plaintiffs. At the end of the defendants’ case the referee sustained the objection, and dismissed the counter-claim for want of necessary parties to determine the merits, to-wit, by reason of the absence of the members of Jay Cooke & Co. From the judgment thereupon entered this appeal is taken.

Although at first the question to be determined upon this appeal seems to be involved in considerable difficulty and obscurity, yet, when we consider the difference between “offsets,” as they were formerly called, and counter-claims, and when we consider the nature of the cause of action set up by the defendants by way of counter-claim, a satisfactory solution of the questions involved seems to be easily reached. In order to sustain a counter-claim, it must be a cause of action which the defendants have a right to enforce against the plaintiff or plaintiffs. In an action brought by several plaintiffs, the defendants cannot set up as a counter-claim a cause of action which they have against one or two of such plaintiffs, but can only set up by way of counter-claim a cause of action which they have against all the plaintiffs. Heither, in case there is an individual plaintiff, can the defendant set up, as a counter-claim against this individual plaintiff, a cause of action which he has against this plaintiff, together with some other person who is not a party to the action.

Applying these principles to the case at bar, Vibbard, Foote & Co., the defendants, claim to have had a cause of action against Jay Cooke, Mc-Culloch & Co. Only three members of the many of the firm of Jay Cooke, McCulloch & Co., were plaintiffs in this action, and therefore it was an attempt upon the part of Vibbard, Foote & Co. to enforce a counter-claim against these three plaintiffs, when there wére various other persons who are not parties to the action who were jointly liable with them. This it is clear, under the rule which has been suggested, and which has been supported by the court of appeals in the cases of Cummings v. Morris, 25 N. Y. 625, and Waddell v. Darling, 51 N. Y. 331, cannot be done. It may be urged that the representative of the other members of the firm of Jay Cooke, McCullough & Co., namely, the assignee in bankruptcy of Jay Cooke & Co., is a party plaintiff, and represents the absent parties, and therefore there is no defect of parties. But as the assignee in bankruptcy cannot be sued, and as, it this was an action brought-by the defendants against Jay Cooke, McCulloch & Co., the assignee in bankruptcy would not be a proper party, his presence in no way removes or remedies the difficulty. The assignee in bankruptcy is the assignee of these individual parties, and represents their interests which have been assigned to him. He therefore is a proper party to an action to enforce rights which those individual members have in the cause of action which it is sought to maintain; and, as far as thé cause of action set up in the answer may be treated as an offset, the defendants have the right to maintain it against the assigneee, and to use the same for the purpose of an answer to the claim made by him against them. But it can have no further effect. There cannot be any affirmative judgment against the assignee. All that the claim in question set up by the defendants in their answer can be used for, is to offset the claim made by the assignee, and by the other members of the firm of Jay Cooke, McCulloch & Co. Here we see the distinction between the offset and the counter-claim. The offset may be used for the purpose of extinguishing the claim of the plaintiff, but it can afford no basis for an affirmative judgment. The counter-claim, upon the other hand, is a cause of action existing in favor of the defendants against the plaintiffs, and upon which an affirmative judgment can be rendered.

It has been suggested that because the plaintiffs in their reply did not raise the objection that there was a defect of parties, in that the individual members of the firm of Jay Cooke & Co. were not parties, that, therefore, it is waived. Such an allegation by the plaintiffs in their reply would have been of entirely no avail. The alleged counter-claim was properly set up as an offset. The fact that the individual members of the firm of Jay Cooke & Co. were not parties to the action did not affect its validity as an offset. It is only when it is urged as a counter-claim that the necessity for their presence appears; and therefore, it having been alleged in a manner in which it might be considered as an offset, there was not apparent upon the face of the answers any defect of parties which made the pleading defective. It would appear, therefore, that the ruling of the referee which was finally made, although at a pretty late date, considering the promptitude with which the objection was taken, was correct. The judgment should be affirmed, with costs.

Brady, J., concurs.