McCulloch v. Vibbard — 21 N.Y. St. Rep. 51

Majority

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Hugh McCulloch et al., Resp’ts, v. Chauncey Vibbard et al., App’lts.

(Supreme Court, General Term, First Department,

Filed January 28, 1889.)

Headnote

1. Practice—Counterclaim against one plaintiff cannot be set up nr ACTION BROUGHT BY SEVERAL PLAINTIFFS.

■ In an action brought by several plaintiffs, a defendant cannot set up as a counterclaim a cause of action against one or two of such plaintiffs. Neither, in case there is an individual plaintiff, can a defendant set up as a counterclaim against him a cause of action which he has against this plaintiff, together with some other person who is not a party to the action. Macomber, J., dissents.

8. Same—Assignee in bankruptcy.

An affirmative judgment on a counterclaim cannot be rendered against an assignee in bankruptcy.

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■8. Same—When counterclaim might be considered as an offset, defect OF PARTIES NEED NOT BE PLEADED.

Where a counterclaim is alleged in an answer in a manner in which it might be considered as an offset, the plaintiff need not raise in his reply the objection that there is a defect of parties. Macomber, J., dissents.

Appeal from judgment dismissing the counter-claim of the defendants.

B. F. Tracy and H. Brodhead, for app’lts;. William Man, for resp’ts.

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. Pules-ton 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 film of Jay Cooke & Co., doing business in New 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 H. 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 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 plaintiffs submitted to a nonsuit; and the defendants offered certain proofs to establish their counter-claims, 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

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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 counterclaims, and wdien 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. Neither 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, McCulloch & Go. 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 were 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 id., 331), cannot be done.

It may be urged that the representative of the other members of the firm of Jay Cooke, McCulloch & 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, if this was an action brought by the defendants against Jay Cooke, McCulloch & Go., 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 indi

Dissent

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vidual 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 the cause of action set up in the answer may be treated as an offset, the defendants have the right to maintain it against the assignee, 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 onset 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 off-set. 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.

(dissenting).—I find myself unable to concur in the opinion of the presiding justice in this case. The answer set up, distinctly and unequivocally, a large counterclaim against the old firm of Jay Cooke, McCulloch and Company, composed of ten or a dozen persons, three of whom only are among the plaintiffs.

It was incumbent upon the plaintiffs to reply to this coun

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ter-claim which they accordingly did, but they did not, in such reply, allege that there was a defect of parties, in that all of the persons against whom the counterclaim was made were not before the court, nor any other reply in the nature of a plea in abatement. Notwithstanding this, however, the referee has overruled or dismissed the counterclaim upon the the ground that all of the old firm of Jay Cooke, McCulloch and Company were not among the plaintiffs.

In my judgment, this conclusion is clearly erroneous. The particular purpose of the Code of Civil Procedure in respect to counterclaims and the issues to be framed thereon, is adjusted as nearly as possible to the rights and duties of ■a defendant in pleading any defense to the plaintiff’s original cause of action. If the defendant set up a cause of action against the plaintiff by way of counterclaim, and the plaintiff does not reply thereto by interposing a plea in abatement, that is to say, that the defendant ought not to have or maintain his counterclaim because the proper parties are not before the court, the plaintiff must be governed by the same rules precisely as governs the defendant, who, under like circumstance, fails to interpose this objection to a right of recovery.

As the,, objection that the defendants have co-partners who ought to be called upon to respond jointly with them, is a defense which must be specially alleged, so the corresponding objection to a defense to a counterclaim must likewise be alleged, which was not done in this case.

The judgment should be reversed and a new trial granted, costs to abide the event.