§ 635. *759. Where Partnership may be sued in Firm Name. Illustrative Cases. A peculiar question has arisen in those States whose codes permit a partnership to be sued by its firm name. In such an action, a counter-claim in favor of all the persons actually composing the firm may be pleaded and proved, although it discloses the existence of partners who had not been mentioned as such in the petition or complaint. In an action upon an injunction bond executed by the plaintiff in an equity suit and sureties, the principal defendant was permitted by the Kentucky Court of Appeals to counter-claim damages sustained by himself individually from the wrongful acts of the plaintiff committed while the injunction was in force.2 As one of two or more joint debtors cannot rely upon a demand due to him separately, upon the same principle a defendant cannot interpose a counter-claim in favor of himself and another, or others jointly who are not parties to the suit.3 Bonds having been issued in the name of a town in aid of a railroad under color of statutory proceedings, the town brought an equitable suit against all the holders thereof to have the proceedings declared void, and the bonds themselves cancelled. One of the defendants individually set up as a counterclaim a debt to himself from the town for money loaned. This answer was overruled on the merits, the court holding that it did not fall within the definition of any species of counter-claim. The omission to rest the decision upon the obvious ground, if it

same effect, Briggs v. Briggs, 20 Barb. 477, 479; Gordon v. Swift, 46 Ind. 208, 209; Johnson v. Kent, 9 Ind. 252; Blankenship v. Rogers, 10 Ind. 333; Knour v. Dick, 14 Ind. 20; Utley v. Foy, 70 N. C. 303; Newell v. Salmons, 22 Barb. 647; Perry v. Chester, 12 Abb. Pr. N. s. 131, 133. If, however, the defendants are joint debtors, no such counter-claim is admissible. Pinckney v. Keyler, 4 E. D. Smith, 469; Slayback v. Jones, 9 Ind. 470; Roberts . Donovan, 70 Cal. 108; Mortimer v. Chambers, 63 Hun, 335; Coleman v. Elmore (Ore.), 31 Fed. Rep. 391 (action against partners).

[Murphy v. Colton (1896), 4 Okla. 181, 44 Pac. 208; Brodek v. Farnum (1895), 11 Wash. 565, 40 Pac. 189; Adams v. Baker (1898), 24 Nev. 162, 55 Pac. 362; Sweeney v. Bailey (1895), 7 S. D. 404, 64 N. W. 188.] 1 Bird v. McCoy, 22 Iowa, 549.

2 Tinsley v. Tinsley, 15 B. Mon. 454. Although the particular question under discussion was not alluded to by the court, its very silence must be taken as an admission that such a counter-claim in favor of one defendant was proper.

8 Stearns v. Martin,. 4 Cal. 227, 229; Hopkins v. Lane, 87 N. Y. 501; Proctor v. Cole, 104 Ind. 373; but see Seaman v. Slater, 49 Fed. Rep. 37 (when one of the owners of a vessel is sued for the entire amount of damages, resulting from the breach of a charter-party, and is to be compelled to pay the entire sum, he can set off the amount due upon the charterparty). Where the plaintiff brought suit against two defendants, and the action failed against one, it was held that a joint demand in favor of the defendants could not be set up as a counter-claim: Copeland v. Young, 21 S. C. 275.

existed, that a counter-claim in favor of one defendant was improper, was a plain though silent admission that this objection was untenable. In such an action a separate judgment is not only possible, but is, in fact, absolutely necessary.1

§ 636. *760. Construction Given to Language of Iowa Code in Musselman v. Galligher. As the Iowa code is unlike that of any other State in this respect, I quote somewhat freely from a case which gives a construction to its language, and explains its peculiar provisions. In an action against a husband and wife jointly, three counter-claims or cross-demands were pleaded as follows: (1) By both defendants jointly to recover damages caused by the plaintiff's malicious prosecution of the wife; (2) by the husband alone to recover damages caused by the malicious prosecution of his minor children; (3) by the husband alone to recover damages caused by the malicious prosecution of himself. The judgment of the court, giving a construction to the statute, and passing upon the validity of this counter-claim, will be found in the foot-note.2

1 Venice v. Breed, 65 Barb. 597, 605, therewith. A cross-demand,' however, 606. arises upon any independent cause of action, whether on contract or tort. But a 'cross-demand,' unlike a counter-claim, must exist in favor of all the defendants, if there are more than one, and against all the plaintiffs, if there are more than one. This is the plain reading of the statute; so that, when there are several defendants, a 'cross-demand' in favor of one only cannot be pleaded." Applying these principles, the answer in question was held to be wholly bad. The demands were certainly not set-offs, since they arose out of torts: they were not counterclaims, because they did not arise out of, nor were they connected with, the plaintiff's cause of action. If it is said they "cross-demands," they were inadmissible, because they were in favor of one defendant alone. The claim of damages for the tort to the wife was declared to be one in her own favor, if it existed at all; and the husband could not join with her in enforcing it, whether she brought an action on it as a plaintiff, or pleaded it as a "cross-demand" in an action against her. See also Corbett v. Hughes, 75 Iowa, 281.

2 Musselman v. Galligher, 32 Iowa, 383, 389. There are, first," set-off," which is an independent cause of action arising on contract or ascertained by the decision of the court, and can be pleaded only in an action on contract; secondly," counterclaim," which is a cause of action in favor of the defendants, or some of them, against the plaintiffs, or some of them, arising out of the contract or transaction set forth in the plaintiff's petition as the foundation of his claim, or connected with the subject of the action; thirdly, "cross-demand," which is a statement of any new matter constituting any cause of action in favor of the defendant, or all the defendants, if more than one, against the plaintiff, or all the plaintiffs, if more than one, and which the defendant or defendants might have brought when the suit was commenced, or which was then held, whether matured or not, if matured, when pleaded. "The 'cross-demand' is more comprehensive than either the set-off or the counterclaim. A set-off is only pleadable in an action on a contract, and must itself arise on contract. A counter-claim must arise out of the cause of action, or be connected

were

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§ 637. * 761. Rules Established in most of the States. By the decisions which have been reviewed in the foregoing paragraphs, certain specific rules are clearly established for all the States whose codes may be classed in either of the two general groups mentioned at the commencement of this section. First, when the defendants in an action are joint contractors, and are sued as such, no counter-claim can be made available which consists of a demand in favor of one or some of them. Secondly, when the defendants in an action are jointly and severally liable, although sued jointly, a counter-claim, consisting of a demand in favor of one or some of them, may, if otherwise without objection, be interposed. Thirdly, since it is possible, pursuant to express provisions of all the codes, for persons severally liable to be sued jointly under certain circumstances in a legal action, — that is, in an action brought to recover a common money judgment, counter-claim in favor of one or more of such defendants may be pleaded and proved. Fourthly, in all equitable suits wherein persons having different interests, and against whom different reliefs are demanded, may be, and constantly are, united as codefendants, a counter-claim existing in favor of one or more of such defendants may be interposed, free from any objection based entirely upon the situation of the parties. Fifthly, when two or more persons have a joint right of action, and unite as plaintiffs to enforce the same, a counter-claim cannot be admitted against one or some of them in favor of any or all the defendants. Sixthly, when two or more persons have separate rights of action, and they are properly united as plaintiffs in one action to enforce these rights, a counter-claim may be set up against one or more of them, as the case may be. Seventhly, if two or more plaintiffs should bring an action joint in form, and should allege and claim to recover upon a joint cause of action, even a contract, -- but in fact the joinder was improper because as to some, or perhaps all but one, there existed no right of action, a recovery could be had in favor of the one or more who established a cause of action, and the complaint be dismissed as to the others; and it would seem to follow as a necessary corollary that a counter-claim might be interposed against the one or more of the plaintiffs under such circumstances in whose favor a separate judgment could be rendered. Lastly, in equitable actions, counter-claim, in favor of one or some of the defendants, and against one or some of the

plaintiffs, must be permissible as a general rule, since in equity the common-law doctrine of joint right and liability does not generally prevail, and separate judgments, or judgments conferring separate relief, among the parties, are almost a matter of

course.

§ 638. *762. Counter-Claim may fail for Want of Necessary Parties, especially those of an Equitable Character. Illustrative Case. Counter-claims otherwise proper may be inadmissible or ineffectual for the want of the necessary parties before the court, since the same rules as to parties must apply to them as would be applied if the facts alleged and the relief demanded were stated in a complaint or petition as the basis of a separate action. This objection will more frequently present itself in counter-claims that are equitable in their nature. As the relief must be denied to the plaintiff in an equitable action unless he has brought all the necessary parties before the court, and may be denied unless he has brought in all the proper parties, and as the defendant pleading a counter-claim is in the same condition as an ordinary plaintiff, while the plaintiff against whom it is pleaded is in the position of an ordinary defendant, it follows, first, that the relief demanded by the counter-claim must be refused if all the necessary parties are not present; and, secondly, that it may be refused if any proper parties have been omitted. These propositions require no argument or citation in their support. They result inevitably from the fact that the counter-claim is in its nature a cross-action, governed by the same rules which control a suit when proceeding in the ordinary and direct manner. Several examples of legal actions in which the counter-claim has failed for want of the necessary parties have already been quoted; namely, those decisions in which counter-claims against the plaintiff in the action, and others jointly liable with him, or in favor of the defendant and others jointly interested with him have been overruled.1 A single additional authority will suffice to illustrate a principle which really needs no illustration. In an action to foreclose a mortgage, brought by an assignee thereof, the mortgagee not being a party to the record, the defendants alleged, as an equitable counter-claim, facts tending to show that the mortgage and the note secured by it were procured to be executed by the mortgagee's fraud, and that the plaintiff took with notice of 1 See supra, §§ * 754 et seq.

the fraud, and prayed that the note and mortgage might be cancelled, and the plaintiff enjoined from enforcing them. The court said: "It is evident that, if the allegations of this answer were in the form of a complaint in a separate action asking that the note and mortgage be surrendered and cancelled, the railroad [the mortgagee] would be a necessary party defendant. The defendant then could not set up the facts alleged in his answer as a counter-claim in this action, for the reason that a new party must be brought before the court." In a few States this difficulty is very properly met and obviated by express provisions of their codes, which authorize the addition of new parties in order that the relief demanded by the counter-claim or set-off may be granted.2

III. The Subject-Matter of Counter-Claims, or the Nature of the Causes of Action which may be pleaded as Counter- Claims.

§ 639. *763. Introductory. This general subdivision is naturally separated into three heads, which I shall proceed to examine in the order stated. A. Nature of the subject-matter generally, with special reference to the question whether the counter-claim may be an equitable cause of action and may result in the granting of equitable relief, or whether it must be restricted to legal causes of action and reliefs. B. The particular questions which arise under the first clause or branch of the statutory definition. C. Those which arise under the second clause or branch of the same provision.

A. Whether a Counter-Claim may be an Equitable Cause of Action, and the Means of Obtaining Equitable Relief; or whether it must be restricted to Legal Causes of Action and Reliefs.

§ 640. *764. An Equitable Counter-Claim may be interposed in an Equitable or Legal Action. From the decisions cited in the foot-note, the following doctrines and rules are clearly and firmly

1 McConihe. Hollister, 19 Wis. 269. See also Coursen v. Hamlin, 2 Duer, 513; Cummings v. Morris, 25 N. Y. 625. But see Du Pont v. Davis, 35 Wis. 631, 640, 641, which holds that an equitable counter-claim of reformation, and the like, may be sustained, and the relief granted, without the presence of parties collater

ally interested; as, for example, the grantor in the deed to be reformed. The case of Hicks v. Sheppard, 4 Lans. 335, which holds the contrary, was expressly disapproved. See also Pennoyer v. Allen, 50 Wis. 308.

2 See these sections quoted at large, supra, § 584, note.

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