Rosebrook v. Runals , 32 Wis. 415 ( 1873 )

Cole, J.

This was an action of replevin to recover the possession of certain chattels, which the plaintiff Rosebrook and one Duncan had mortgaged to Nichols & Shepard. The defendant, as agent of Nichols & Shepard, had taken possession of the property on default in the payment of two promissory notes executed by the mortgagors to the mortgagees, and which the chattel mortgage was given to secure. It is admitted that the plaintiff Mowers had become interested in the mortgaged property — probably by purchase from Duncan; but the terms and conditions of the sale do not appear from the evidence. On the trial, the defendant offered in evidence the chattel mortgage under which he had justified the taking of the possession of the property in his answer, and the unpaid notes which the mortgage was given to secure. After the defendant had rested his defense, the plaintiff Rosebrook was sworn as a witness, who testified that he and Duncan bought of Nichols & Shepard the threshing machine, which was a part of the mortgaged property sued for, and for which six promissory notes were given, all of which had been paid except the two offered in evidence by the defendant. He further testified that at the time of sale the vendors gave a written warranty of the machine to them ; and he proposed to show that there had been a breach of this contract of warranty, and “ that at the time of the commencement of this action, there was nothing due the said Nichols & Shepard on said notes, by reason of the breach of said warranty.” This evidence was excluded by the court on objection taken by the defendant. The exception arising upon this ruling is really the only question before us.

"Were this an action between the vendors and vendees of the threshing machine, we think the claim for a breach of the warranty might be shown to overcome or rebut the defense. It would he in the nature of a counterclaim set up by a defendant, and might perhaps be governed by analogous principles. This court has held in a number of cases that where there has been a failure of consideration, total or partial, or a breach of warranty, all or any of these facts may be relied on in defense by a party sued upon such contract, and that he need not necessarily resort to a cross action for redress. Thomas v. Thomas, 7 Wis., 476; Griffiths v. Parry, 16 id., 218; Peterson v. Johnson, 22 id., 21; Hubbard v. Galusha, 28 id., 898; Smith v. Carter, 25 id., 288. Therefore were this an action between Rosebrook and Duncan as plaintiffs and Nichols & Shepard as defendants, there might be no serious difficulty in working out and enforcing the rights and obligations of the parties growing out of the sale of the threshing machine with the written warranty offered in evidence. In the case supposed, if the plaintiffs could show that they had sustained damages by a breach of the warranty, exceeding the amount due upon the notes, the court might well adjudge upon these facts that the lien of the mortgage was gone. But this is not such an action. Here the attempt made is, that one plaintiff interested, and another plaintiff not apparently interested, in the claim for a breach of the warranty, should litigate that question in this action for the possession of the mortgaged property, while Duncan, one of the parties with whom the contract of warranty was made, is not before the court. It is not obvious upon what principle this can be done.

Of course, the cause of action arising from the breach of warranty is one in favor of Rosebrook and Duncan. The contract of warranty was made with them, and they are the proper parties to enforce it. Had they been sued upon the notes, they might have set up this cause of action by way of recoupment or counterclaim, or made it the ground of an independent action. But what concern has the plaintiff Mowers with the subject matter of that action ? It does not appear that it has ever been assigned to him, or that he has any interest whatever in it. And although the plaintiff Rosebrook may have sustained damage by reason of the breach of warranty, yet, so far as the case shows, this damage has been sustained jointly with another not a party to the action, and who will not be concluded by the judgment. It is not a claim in his favor alone, but one belonging to him and another person. How can he have the benefit of that cause of action in this proceeding ? ’

It is said the plaintiffs sought to show that there was nothing due upon the notes and mortgage b} reason of a total failure of a part of the machine; in other words, that the damage sustained by the breach of warranty was sufficient to extinguish the amount due on the notes. That is to say, the plaintiffs should recover possession of the chattels in controversy, not because the lien has been discharged, but for the reason that Nichols & Shepard are liable to pay Rosebrook and Duncan an amount of damages sufficient to discharge it. This is the logical result of the claim of the plaintiffs. And when stated in this form the unsoundness of the position becomes apparent.

It is true that if this claim, attempted to be set up against the mortgage, was one which went to the very existence of the lien itself — like payment, for instance — then the plaintiffs, by reason of ownership, might insist upon it, and have the benefit of it in this action. But that is not the case. Here the claim is, that there is nothing due on the chattel mortgage because of the breach of another contract, that of warranty, which the mortgagees entered into at the time this mortgage lien was created. The difficulty with the case is, that the real parties in interest, who have the right to insist upon this breach and to recover damages for it, are not before the court.

In this case it was proposed to show that there was a failure of the consideration of the notes by reason of the breach of warranty. But, as is very clearly shown by Mr. Justice SelDEK in Gillespie v. Torrance, 25 N. Y., 306, the right of a party to avail himself of a breach of warranty as to the quality of chattels sold, by way of defense, recoupment or counterclaim, does not rest upon a failure of the consideration of the contract on which the action is founded, but is the setting off of one distinct claim against another. He well remarks in the opinion, that a careful examination of the subject will lead to the conclusion that wherever recoupment strictly such is allowed, distinct causes of action are set off against each other. And that view of the law was adopted by this court in Hiner v. Newton, 30 Wis., 640, where it was held, in an action by the payee against the accommodation indorser of a note given for machinery to be manufactured for the maker, the defendant could not in law counterclaim for damages to the maker arising out of the defective construction of such machinery. The principle of the decision was, that damages for the breach of warranty constituted a counterclaim, and did not rest upon a failure of consideration, and that such damages belonged to the maker of the note or vendee of the chattel sold. That decision is a strong authority against the claim of the plaintiffs in the present action. In order to show that the mortgage debt has been paid, the plaintiffs seek to recoup or counterclaim for a breach of warranty which belongs to Bosebroolc and Duncan, and not to them. And, as already remarked, if Nichols & Shepard had brought an action upon these notes secured by the mortgage, against the makers, the latter would have had the right of election to set up their damages by way of recoupment or counterclaim in that suit, or to reserve it for a cross action. And because those damages did not belong to the plaintiffs, but to Bosebrook and a party not before the court, who alone, so far as appears, had the right to recover them by action, the court properly excluded the evidence offered. •

It follows that the judgment of the circuit court must be affirmed.

By the Court.— Judgment affirmed.