Ward v. Fellers

By the Court,

Martin, J.

At the common law, a defendant was in no instance allowed to recover a judgment for damages for a positive claim against a plaintiff. To obviate the rigor of this rule of law, and as well to avoid a multiplicity of actions as to enable parties where there were mutual cross demands unconnected with each other, and arising upon contract express or implied, which are liquidated or capable of being ascertained by calculation, and not resting in opinion only, to have the whole adjudicated upon in one action, the statutes of set-off wei’e enacted. Hence, set-off is the Compensation of one debt or demand for another, by virtue of which damages are recovered by the party in whose favor a balance shall be found, and the judgment is statutory. But at the common law before the adoption of the statutes of set-off, the defendant was entitled to show that the plaintiff had not sustained damages to the extent alleged, and thus to reduce, or altogether defeat, the plaintiff’s recovery. This right of the defendant was, however, in the earlier period of the law, of very limited application, and could only be resox’ted to when the defendant insisted upon a deduction from the plaintiff’s demand arising from payment in part or in whole, or former recovery, or some analogous fact. See Sedg. on Dam’s, 2 ed. ch. 17. It was denominated recoupment, and is defined by Jacobs, and by Cunningham, (law Die., Title Recouped) to be “the keeping back and stopping something which is due, and in our law we use it for to defalk or discount, as if a person hath a rent of ten pounds out of certain lands, and he disseises the tenant of the land in an assise brought by the disseisee, if he recovers the land and damages, the disseisee shall recoupe the rent due in the damages. So of a rent charge issuing out of lands paid by the said tenant to another, &c., he may recoupe the same. And an inn-keeper may keep back and detain his guest’s horse, &c., ’till he pay for his entertaiment; but a man that receives another’s cattle to pastxxre, it is said, may not do so, unless it be agreed at the first.” By this definition we can perceive within what very narrow limits this doctrine was originally restricted, and how closely the idea of retention or keeping back was involved in it. It is evident, says Mr. Sedgwick, (see Sedg. on Dam’s, 2 ed. 131,) that re-coupe, or recoupment, in its original sense, was a mere right of deduction from the amount of the plaintiff’s recovery, on the ground that his damages were not really as high as alleged.” This was allowed to avoid circuity of action, and was only permissible when the subject matter of reduction sprang immediately from the claim relied upon by the plaintiff. This defence is contradistinguishable from set-off in these three essential particulars. 1st. In being confined to matters arising out of, and connected with the transaction or contract upon which the suit is brought. 2d. In having no regard to whether or not such matters be liquidated or unliquidated. (Wheat vs. Dotson, 7 Ark. R. 699.) And 3d. That the judgment is not the subject of statutory regulation, but controlled by the rule of the common law.

This remedy was, in the earlier periods of the law, of very limited application, and it is said, it is in cases where fraud entered into, but did not equitably go to the entire prevention of a recovery by the plaintiff, that we find the first cases of the defence in question in the common law Courts of England. Whether this be strictly true or not, it is certain that so much uncertainty involved the remedy, and it was so trammeled by the technical rules of the law, that it was but little use — the defendant preferring his cross action or the relief afforded by equity — and the term itself became obsolete. Yet the principle was always retained under the form of a diminution of damages, upon the equitable ground of avoiding circuity of actions, and we constantly encounter it in the boohs, and most frequently involved in a question as to the sufficiency of pleadings. But within a few years not only has the term been revived, but the doctrine has also, and as the rigid rules of the common law Courts have yielded to the influence of social progress, and the expansion of the commercial relations of society and the new developments of trade, common justice as well as common sense and convenience have adapted it to prevent wants, infused into it new vigor, and rendered it a valuable remedy in the administration of justice, as at present understood and administered. In all cases where the demands of both parties spring out of the same contract or transaction, the defendant may recoupe, although the damages on both sides are unliquidated. See Bateman vs. Pierce, 3 Hill. 172. “ It was formerly,” says Bronson, J., in Bateman vs. Pierce, “ supposed that there could only be a recoupment where -some fraud was imputable to the plaintiff’ in relation to the contract on which the action was-founded; but it is now well settled that the doctrine is also’ applicable when the defendant imputes no fraud, and only complains that there has been a breach of the contract on the part of the plaintiff. As now generally administered in this country, it opens up the entire contract or transaction, so far as necessary to determine the plaintiff’s right to damages, and the amount, and the defendant’s cross claims.” See 15 Mass. 389; Story on Bail. § 315; Ib. § 349; 20 Wend. 51, 269; 3 Metc. 9; 14 Pick. 359; 6 Mass. 20; 3 Dana, 489; 20 Conn. 204; 1 Scam. 403; Stone vs. Yarwood in Sup. Ct. of Ill., cited in Monthly Law Rep. 456; and cases hereafter cited. In the language of the Court in Stone vs. Tar-wood, “ this doctrine of recoupment tends to promote justice and to prevent needless litigation. It avoids circuity of action and multiplicity of suits. It adjusts by one action adverse claims growing out of the same subject matter. Such claims can generally be much better settled in one proceeding than in several. It is not necessary that the opposing claims should be of the same character. A claim originating in contract may be set up against one originating in tort. It is sufficient that the counter claims arise out of the same subject matter, and that they are susceptible of adjustment in one action.” See also McAllister vs. Reab, 4 Wend. 482; 8 Ib. 109.

But while it is said that by the application of the doctrine of recoupment, circuity is avoided, and the rights of parties adjusted' in one and the same suit, it must be understood that-such adjustment is only by way of abatement or reduction, and that no other judgment can be rendered than such as is authorized by the rules of the common law. This necessarily follows from what has already been said, and a reference to a few of the many authorities which might be cited upon this subject will show that such is the universally received doctrine. In Stone m. Yarwood, ubi supra, it is said “the defendant’s claim is deducted from that of the plaintiff;' and the latter recovers the excess only. The defendant is not allowed to recover any balance. He uses his demand in mitigation of damages only. He may recoups to the extent of the plaintiff’s damages, but he cannot, as in the case of a set-off, recover any excess in his favor.” In Bateman vs. Pierce, ubi •supra, the Court say, “ for the purpose of avoiding circuity or multiplication of actions, and doing complete justice to both parties, they are allowed and compelled, if the defendant so elects, to adjust all their claims growing out of the .same contract in one action.” And in a subsequent portion of the same opinion, this language is explained and qualified as follows: “The defendant has the election whether he will set up his claim in answer to the plaintiff’s demand, or resort ■to a cross action; and whatever may be the amount of his damages, he can only set them up by way of abatement, either in whole or in part of the plantiff’s demand. He cannot, as in the case of a set-offj go beyond that, and have a balance certified in his favor.” In Still vs. Hale, (20 Wmd. 51,) which was an application to set aside the report of referees, the action was assumpsit to recover a balance due the plaintiff as master of a sloop belonging to the defendant, and used in navigating the Hudson river. The defendant sought to prove, in bar of a recovery, or iñ reduction of the plaintiff’s claim, that in violation of his order, the plaintiff, at the close -of navigation, laid up the sloop at a particular landing in the river, and by so doing was guilty of such negligence that the ¡sloop was run into and sunk by the ice. This evidence was rejected by the referees, and the Court (Cowen, J.) say, “We. think the defence offered was admissible. It was not presented as a matter of set-off arising, in an independent contract, but by way of recoupment of the plaintiff’s damages, by reason, that he himself has not complied with his cross obligations arising under the, same contract. The law implies an obligation on his side as parcel of the-contract in question, to exercise ordinary care in the defendant’s service; and damages for not fulfilling that obligation are properly admissible in abatement,” &c.

Ives vs. Van Eppes (22 Wend. 155) was action of covenant-on a sealed agreement by which the plaintiff contracted to complete a certain wall in a good, sufficient, and workman7 like manner, &c. Before the referees the defendant proposed to inquire into the character of the work done under the contract, in order to prove that it was of a quality inferior to what the contract required. This was not permitted, and a motion was made to set aside the report of the referees for that reason; the Court say “The offer came-under - the same category, r&eov/pmmt. Recoups is synonymous with defalk or discount. It is keeping back something which is due, because there is an equitable reason to withhold it; and is- now uniformly applied where a man brings an action for breach of contract between him and the defendant, and the latter- can show that some stipulation in the same contract was made by the plaintiff which he has violated;, the defendant may if he-choose, instead of suing in his turn, recoupe his damages arising from the breach committed by the plaintiff, whether they be liquidated or not. The law will cut off so much of the plaintiff’s claim as the cross damages may come to.” In Nichols vs. Dusenbury, (2 Comst. 283, 286,) Bronson, J. says of recoupment, “It'is in the nature of a cross action. The right of the- plaintiff to sue is admitted, but the defendant says he has been injured by a breach of another branch of the same contract on which the action is founded, and he claims, to stop, cut off or keep back so much of the plaintiff’s damages as will satisfy the damages which have been sustained by the defendant.” (See also Hinsdale vs. Weed, 5 Denio, 172; Toml. L. D., Recoupe; Wheat vs. Dotson, ubi supra.)

It appears from these, and indeed, from all the authorities, .as well as from principle, that- the force of the remedy by recoupment is spent in the discount or abatement of the plaintiff’s claim, either partially or wholly, as the case may be. The defendant has his election to pursue this remedy, and thus save the expense and delay of his cross action, or he may maintain such action for the default or failure of the plaintiff, and for his damages, as may best subserve his interests. The defence then not being compulsory, but one of choice, the defendant can hardly urge with propriety that a hardship is imposed irpon him by denying him a judgment for his excess of damages, when such is found to exist.

It was suggested upon the argument, that if the defendant should choose to recoupe his damages, instead of resorting to a cross action, he would be barred from recovering any excess or further damages in a second action, by reason of the former adjudication, and from this was argued the hardship of the rule, denying him a judgment in this case. This suggestion, if well founded, can have little force in opposition to settled rules of law, for the defence is at the defendant’s option. But I no where find it adjudged that such would be the result. It is true that in Britton vs. Turner, (6 N. H. 481,) Parker, J., says, “ there may be instances, however, where the damage occasioned is much greater than the value of the labor performed, and if the party elects to permit himself to be charged for the value of the labor, without interposing the damages in defence, he is entitled so to do, and may have an action to recover his damages for the nonperformance, whatever they may be; and he may commence such action at any time after the contract is broken, notwithstanding no suit has been instituted against him, but if he elects have the damages considered in the action against him, he must be understood as conceding that they are not' to be extended beyond the amount of what he has recovered, and he cannot afterwards sustain an action for further damages.”

In Fabricatte vs. Lannitz, (3 Sand. S. C. R. 744,) this Suggestion of Judge Parker, that the defendant cannot sustain an action for further damages, is approbated. Rut in neither case was the question before the Court, and the suggestions are only important as shewing the universality of the doctrine that the defendant, by recoupment can only reduce the plaintiff’s damages, and takes nothing in that action for his excess of damages.

But in Mendell vs. Steel, (8 M. & W. 854,) this question of the right to maintain an action for further damages was before the Court, and Parke, B,, after discussing to some extent the origin and present extent and application of this doctrine of diminution or reduction of damages by the defendant, uses this language: “It must, however, be considered that in all cases of goods sold and delivered with a warranty, and work and labor,, as well as the case of goods agreed to be supplied according to a contract, the rule which is found so convenient, is established; and that it is competent for the defendant in all of those, not to set-off by a proceeding in thé nature of a cross action, the amount of damages which he has sustained by a breach of the contract, but simply to defend himself, by showing how much less the subject matter of 'the action was worth by reason of the breach of contract, and to the extent that he obtains, or is capable of obtaining, an abatement of price on that account, he must be considered as having received satisfaction for the breach of contract, and is precluded from recovering in another action, but no more. All the plaintiff could by law be allowed in diminution o'f damages on the former trial, was a deduction from the agreed price, according to the difference at the time of delivery between the ship as she was, and what she ought to have been, according to the contract; but all claims for damages beyond that, on account of the subsequent necessity for more extensive repairs, could not have been allowed in the former action, and may now be recovered. Although, this authority does not cover the entire question suggested by the defendants’ counsel, it shows that the judgment in the former action is not considered as necessarily a ^complete and final adjudication of the whole subject matter of the defendants’ injury,, in all cases. Nor is there any hardship in the rule that when the defendants’ claim for damages is complete at the time he-seeks to recoupe them, he shall be considered as waiving all, of such claim against the plaintiff, except so much as will defeat the recovery. The defence by recoupment is voluntary-The remedy by cross action always subsists, and the defendant is presumed to know the extent of the loss and injury he has sustained. With both remedies before him, the exercise of an option, when the consequences are known and can be provided against, can never be regarded as imposing a hardship. If then, the defendant at 7ds election, can compel the whole matter to be adjudicated in one action, it can do no great injustice to say, that by such choice he concedes that he has no claim for damages, beyond those of the plaintiff, .and that he is content to defeat the plaintiffs’ recovery.

It was also urged at the bar, that “ if the question were to foe settled by the good sense of the thing, or by general principles of justice and equity, uncontrolled by the force of arbitrary rules and precedents, there could be no doubt as to the result. It would be at once said, let the whole matter be settled in one suit; let the litigation, the controversy, and the bootless accumulation of costs cease;” and it is insisted that acknowledged principles and adjudicated cases authorize -.this result. If the rule should be found to be, that a defendant, by an election to recoupe his damages, shall be deemed to have waived all claim to further damages than are necessary to defeat the plaintiff’s recovery, still, unless it can. be shown that a party has no right to remit damages, but is-compelled to insist upon the pound of flesh, we cannot see-wherein good sense, or the general principles of justice and equity are violated. By his election of a remedy by which he is held to such remission, the whole matter would be thereby settled, and the litigation and bootless accumulation of costs would cease. If, on the contrary, the opposite should be found to be the rule, the remedy by cross action would still remain,., unless, indeed, we are asked to abrogate the common law; and an action for the excess of damages or for further damages, would in no degree increase litigation or accumulate costs. But the adjudicated cases we have been unable to find; and acknowledged principles lead to quite the contrary result from that contended for. It is true, that the law abhors a multiplicity of actions, and seeks to adjust all differences arising out of the same cause of action in one suit. But the aid of statutory enactments was required to effectuate this purpose to a very great extent, and the authorities, as well as principles of law which authorize a resort to this mode of' defence, allow it only to defeat the plaintiff’s recovery, subservient to the universal rule of the common law before adverted to, that a defendant can in no case have a judgment for • a positive claim against the plaintiff in the action. That such a rule as is contended for by the counsel for the defendants • would be equitable, and would operate beneficially, may be conceded, but this is an argument to be addressed to the lawmaking, rather than the law-administering power. Were courts of justice to change or administer the law to suit their • ideas of good sense and of the general principles of justice and equity, regardless of well recognized and firmly estab- • lished principles of jurisprudence, much greater injustice and inequity would be done than by a firm adherence to well settled rules of law, even though occasional hardship might result to suitors.

The strong resemblance, and to some extent, analogy, between, the doctrine of set-off, and of recoupment as now administered in this country, furnishes a plausible reason for the position assumed by the defendant’s counsel, and indeed naturally suggests it. But the statutes of set-off being in derogation of the common- law cannot be made applicable to analagous remedies.

The instances and extent to which this right of recoupment may be exercised by the defendant, is to a considerable degree yet unsettled. In some of the States the remedy has been so liberally extended, that it is regarded as in the nature of a cross action under which nearly or quite all claims which might be made the subject of cross actions may be recouped, while in others, and in England, it is confined within much narrower limits. In this Court the question of its application has never arisen, nor is it before us in this case. We have only endeavored to establish the proposition that the' defendant by availing himself of the right to recoupe, does not entitle himself to a judgment for an. excess -of damages, if one be found to exist in his favor, and that such is the universal rule.

It must be certified to the Circuit Court for the County of Wayne as the opinion of this Court, that the defendants are not entitled to judgment against the plaintiffs for the excess of their damages, as found by the special verdict over the amount of the freight earned by the plaiutiffs.