Smith v. French. , 141 N.C. 1 ( 1906 )

Defendant, having filed an answer admitting plaintiff's right to possession of the property, under the mortgage to secure the debt of $150, answered further and alleged that there had been seized and turned over to plaintiff, under the process in the cause, property to the value of $700, which had been converted and wasted by the plaintiff, and tendered an issue as to the value of the property seized, to the end that defendant might have payment for any excess over and above plaintiff's debt. The court declined to submit the issue, confined the verdict to an issue as to a demand by the plaintiff, and gave judgment as set out in plaintiff's appeal. Defendant excepted.

While the plaintiff in his complaint alleges absolute ownership of the property and demands possession of such owner, the answer and the testimony tend to show that he has not the unqualified ownership, but only a special interest in it, to wit, the right to take it in payment of his debt and to retain only what is necessary for that purpose, when dealt with according to the contract stipulation.

(6) When the debt matured, defendant's right to an account arose as to any excess which might be realized from the property over and above the amount required to satisfy plaintiff's demand, and there is no reason why such an accounting should not be had in the present suit. In this view of the case the answer of defendant might be considered not so much a counterclaim as a limitation on plaintiff's interest in the property; and where the right to account is alleged in the complaint or asserted in the answer, and the evidence establishes its existence, the response to the issue as to ownership should not be "yes," without more, but should be "yes, to secure the debt." And the additional facts required to adjust the rights of the parties may be determined in response to other issues by the jury or by reference, as the case may require. It is the policy of The Code that all matters in controversy should be settled in one action, as far as this may be done consistent with right and justice, and the course here suggested is sustained by authority. Taylor v. Hodges, 105 N.C. 345; Griffith v. Richmond,126 N.C. 377. Inasmuch, however, as the defendant's answer goes further and asks judgment for the excess, it may be necessary to treat the defendant's demand as a counterclaim, and, regarding it in this light, the Court is of opinion that the issue tendered by the defendant, or some proper issue determinative of the account on a correct basis, should have been submitted, and for the purpose stated, that he might have judgment for the excess, if any were found in his favor. If plaintiff, on obtaining possession of the property, sold it, and in doing so observed the methods required by the contract, and the property was bought in good faith by a third person, it would seem that the amount realized at the sale would be the basis for a correct accounting. Our statute on counterclaim is very broad in its scope and terms, is designed to enable parties litigant to settle well-nigh any and every phase of a given controversy in one and the same action, and should be liberally construed by the court in furtherance of this most desirable and beneficial purpose.

In the Revisal of 1905, sec. 481, a counterclaim is described and declared to be as follows: The counterclaim mentioned in (7) section 479 must be one existing in favor of a defendant and against a plaintiff between whom a several judgment might be had in the action, and arising out of one of the following causes of action:

1. A cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff's claim or connected with the subject of the action.

2. In an action arising on contract, any other cause of action arising also on contract, and existing at the commencement of the action. Code, sec. 244; C. C. P., sec. 101. Subject to the limitations expressed in this statute, a counterclaim includes well-nigh every kind of cross-demand existing in favor of defendant against the plaintiff in the same right, whether said demand be of a legal or an equitable nature. It is said to be broader in meaning than set-off, recoupment, or cross-action, and includes them all, and secures to defendant the full relief which a separate action at law, or a bill in chancery, or a cross-bill would have secured to him on the same state of facts. Green on Code Pleading and Practice, sec. 815, and our own decisions fully bear out this statement of the doctrine. Bitting v.Thaxton, 72 N.C. 541; Hurst v. Everett, 91 N.C. 399; Lee v. Eure, 93 N.C. 5;Wilson v. Hughes, 94 N.C. 182; Electric Co. v. Williams, 123 N.C. 51.

Under the old system of procedure the relief sought in defendant's answer was sometimes obtained in equity by way of cross-bill. 4 Enc. of Pl. and Pr., page 525.

It will be noted that the requirement restricting a counterclaim to one that exists at the time the action was commenced is only stated in reference to the second class of counterclaims described in the statute — those where, in an action on a contract, the breach of an entirely different and distinct contract is set up by defendant. This, for the very (8) just and obvious reason that when a plaintiff rightfully sues a defendant who owes him at the time the action is commenced, he shall not be put in the wrong and subjected to cost by allowing defendant to buy up claims sufficient or more than sufficient to offset his debt. But this limitation is not expressed with reference to counterclaims in the first subdivision of the statute. These must be existent and continue to exist between the same parties in the same right at the time they are offered and they must be then due, that is, not demands to become due in the future. And they must arise out of the same contract or transaction which is the foundation of plaintiff's claim, or they must be connected with the subject of the action — that is, generally speaking, the interest involved in the litigation, and very frequently this is the property itself.

As a matter of fact, in nearly every instance such a demand does exist when the action commences, but this is not the requirement of the statute, and if the counterclaim otherwise complies with the limitations of subdivision 1, and is not embraced in subdivision 2, it would seem to be sufficient if it matures at any time before answer filed and might be available if it matures at any time before the trial. There are several decisions in this State which seemingly conflict with this position, but a careful examination will, we think, disclose that they were either cases:

(a) Coming under the second subdivision of the statute, counterclaims by reason of separate and distinct contracts; or

(b) Cases which did not arise out of the transaction, the foundation of plaintiff's claim, or had no connection whatever with it; or

(c) Cases where no cause of action at all had accrued to defendant, either at the commencement of the action or at the time of trial. Thus, in Satterthwaite v. Ellis, 129 N.C. 67, to which we were referred by plaintiff's counsel, that was a cause of action to recover possession of property conveyed in a chattel mortgage before the debt was due. It was simply an action to recover possession of property, without (9) more, and where no right to a reckoning had arisen or then existed in defendant. Any claim, therefore, for the simple use of the property arose only from the seizure, which was rightful and had no connection with the present application of the property to the payment of the debt which was not then due, nor to a right to the surplus which had not then arisen. So, in Griffin v. Thomas, 128 N.C. 310, this being a counterclaim for a breach of warranty, might well come under the second subdivision, and in this case there had been no breach of warranty, either at the commencement of suit or the time of trial, and so no cause of action existed in favor of defendant at all.

In Phipps v. Wilson, 125 N.C. 106, which was claim and delivery for personal property, the answer denied plaintiff's title and set up wrongful seizure in the action as a counterclaim; here the plaintiff's demand, as stated in his complaint, was in direct contradiction of defendant's claim, and it was necessary that it should be passed upon before defendant's right could be established. It was therefore manifest error to give judgment on defendant's counterclaim for want of a reply, when plaintiff's complaint or demand was in itself a denial of the defendant's right. As stated by the Court in its opinion, such judgment was error, while the issues raised by complaint and answer were undetermined.

In Puffer v. Lucas, 112 N.C. 377, the claim of defendant was for breach of an executory contract, taking its rise subsequent to the commencement of the action, came within the second subdivision, and was directly prohibited by it as a valid counterclaim.

In Kramer v. Electric Co., 95 N.C. 277, an action to recover pay for services, in which an attachment was sued out and levied on defendant's property, defendant set up counterclaim for wrongfully suing out attachment. This was a collateral matter, having no connection whatever with the transaction out of which the plaintiff's demand (10) arose, and so did not constitute a counterclaim at all.

In Reynolds v. Smathers, 87 N.C. 24, there is an intimation that there is the difference in the two sections of the statute here pointed out, and in Ledbetter v. Quick, 90 N.C. 276, a more decided intimation that the very counterclaim set up here would have been available to defendant.

Even if the present opinion should be found to conflict with some former decision, it is only a question of procedure, not involving a rule of property, and we think it better that our present construction of the statute should be now declared the true one, as more in accord with the spirit and letter of our Code, which, as heretofore stated, designs and contemplates that all matters growing out of our connected with the same controversy should be adjusted in one and the same action.

A counterclaim connected with plaintiff's cause of action or with the subject of the same will nearly always take its rise before action brought, but we hold that neither the statute nor the reason of the thing require that such counterclaim should necessarily or entirely mature before action commenced, nor even before answer filed, if the provisions of The Code permit, and right and justice require that an amendment be allowed which will enable parties to end the same controversy in one and the same litigation.

There was error in refusing to submit the issue tendered by the defendant, or some proper issue on the question of an account.

New trial.

Cited: Slaughter v. Machine Co., 148 N.C. 473; Gavin v. Mathews,152 N.C. 196; Perry v. Ludwick, ib., 377; Smith v. French, ib., 754;Hilliard v. Newberry, 153 N.C. 110; Cheese Co. v. Pipkin, 155 N.C. 397;Ludwick v. Perry, 158 N.C. 114; Cook v. Cook, 159 N.C. 50; Whitlock v.Alexander, 160 N.C. 474; Weston v. Lumber Co., 162 N.C. 202; Carroll v.French, ib., 514; Williams v. Hutton, 164 N.C. 223; Yellowday v.Perkinson, 167 N.C. 147; Carpenter v. Hanes, ib., 560; McLean v.McDonald, 173 N.C. 431; Cooper v. Evans, 174 N.C. 413; Nance v. King,178 N.C. 577; Cooper v. Hair, ib., 658; Allen v. Salley, 179 N.C. 151.

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