§ 677. 801. Statement of Established Doctrine. Question of Doubt herein. It may be regarded as a doctrine established by the overwhelming weight of authority, that, whenever by the principles of the law, independent of the new procedure, a cause of action may be treated as arising either from tort or on contract, and the party holding the right may elect between the two kinds of remedial proceeding, and does in fact elect to sue on contract, the demand thus determined to be upon contract may be counter-claimed against a plaintiff's cause of action arising on another contract, or when itself set up by a plaintiff, it may be opposed by a counter-claim arising out of another contract.1 The only question of doubt in the practical application of this doctrine relates to the necessity of indicating the election in the pleading itself; or, in other words, whether the demand may not be thus used as a counter-claim, or against a counterclaim, even though the pleading contains no averments showing the election to have been actually made. While the courts have generally sustained this doctrine, they are not absolutely unanimous. The Supreme Court of Minnesota holds that the code has abolished this rule and the right of electing between the different forms of action ex contractu and ex delicto; or, rather, has destroyed all possibility of the advantage which could once have been derived under the circumstances above mentioned from such an election.2 This opinion is based upon a close

Rogers, 10 Ind. 333; Johnson v. Kent, 9 Ind. 252; Lovejoy v. Robinson, 8 Ind. 399; Woodward v. Laverty, 14 Iowa, 381; Cook v. Lovell, 11 Iowa, 81; Campbell v. Fox, 11 Iowa, 318; Eyre v. Cook, 10 Iowa, 586; Stadler v. Parmelee, 10 Iowa, 23; Donahue v. Prosser, 10 Iowa, 276; Reed v. Chubb, 9 Iowa, 178; Sample v. Griffith, 5 Iowa, 376; Davis v. Milburn, 3 Iowa, 163; Dorsey v. Reese, 14 B. Mon. 157; Lansdale v. Mitchell, 14 B. Mon. 350; Clark v. Finnell, 16 B. Mon. 337; Graham v. Tilford, Stanton's Code, 98; Thatcher v. Cannon, 6 Bush, 541; Eversole v. Moore, 3 Bush, 49; Haddix v. Wilson, 3 Bush, 523; Miller v. Gaither, 3 Bush, 152; Brown v. Phillips, 3 Bush, 656; Taylor v. Stowell, 4 Metc. (Ky.) 175; Shropshire v. Conrad, 2 id. 143; Geoghegan v. Ditto, 2 id. 433; Finnell v. Nesbitt, 16 B. Mon. 354; Naglee v. Palmer, 7 Cal. 543; Hobbs v. Duff, 23 Cal. 596; Russell v. Conway,

11 Cal. 93; Naglee v. Minturn, 8 Cal. 540; Marye v. Jones, 9 Cal. 335; Howard v. Shores, 20 Cal. 277; Collins v. Butler, 14 Cal. 223; Lubert v. Chauviteau, 3 Cal. 458; Ricketson v. Richardson, 19 Cal. 330; Corwin v. Ward, 35 Cal. 195.

[Central Nat. Bank v. Haseltine (1900), 155 Mo. 58, 55 S. W. 1015; Momsen v. Atkins (1900), 105 Wis. 557,81 N. W. 647.]

1 See Norden v. Jones, 33 Wis. 600, 604. See Ogilvie v. Lightstone, 1 Daly, 129; Starr Cash Car Co. v. Reinhardt (Com. Pl. 1892), 20 N. Y. Suppl. 872; Barnes v. McMullins, 78 Mo. 260; Green v. Conrad (Mo. 1893), 21 S. W. Rep. 839; Challiss v. Wylie, 35 Kan. 506; Smith v. McCar thy, 39 Kan. 308; Smith v. Young, 109 N. C. 224 (counter-claim not allowed, as plaintiff did not elect to waive the tort).

2 Folsom v. Carli, 6 Minn. 420. The rule in Indiana is the same: Richey v. Bly, 115 Ind. 232.

and logical adherence to the letter and to the spirit of the code, which require that the facts constituting the cause of action should be averred in a pleading, and abolish all forms of action.

§ 678. * 802. Illustrative Examples in Equitable Actions. In all the foregoing examples the actions were legal. Some illustrations will now be given of those that are equitable. Many species of equitable actions may arise on contract within the meaning of the statute, and equitable remedies may thus be obtained as counter-claims under the second branch of the definition. A suit was brought to compel the conveyance of land alleged to be held by the defendant in trust for the plaintiff. The defendant was a lawyer, and the plaintiff had been his client. As such attorney, he had agreed, it was said, to bid in the land at a public sale, and to hold it for the plaintiff: he did, in fact, purchase it in his own name, but retained it for himself, and refused to convey. In his answer to these allegations, the defendant, besides denials, pleaded, as a counter-claim, a debt due from the plaintiff for professional services in relation to this and other matters. Evidence to sustain this counterclaim was rejected at the trial, for the reason that the defendant had forfeited all claim to compensation on account of his fraudulent practices. The Superior Court of New York City, in reversing this decision, held, that, as the action was on contract, the counter-claim was admissible, and, even if the defendant had been guilty of wrong in one matter, his right to compensation in respect of other matters was not affected; also, that, on the facts as proved, he had committed no fraud or breach of his fiduciary duty in the instances charged against him.1 In an action to foreclose a purchase-money mortgage, it is well settled that the mortgagor may interpose a counter-claim for the damages sustained by him from the breach of covenants in the plaintiff's deed of conveyance. Both causes of action arise from contract, though from different contracts.2

§ 679. * 803. Counter-Claim of Money Demand on Independent Contract Interposed in Action to foreclose Mortgage. The counter

1 Currie v. Cowles, 6 Bosw. 452. See also Judah v. Vincennes Univ. Trs., 16 Ind. 56.

2 Eaton v. Talmadge, 22 Wis. 526, 528; Akerly v. Vilas, 21 Wis. 88, 109;

Hall v. Gale, 14 Wis. 54; Walker v. Wilson, 13 Wis. 522; Lowry v. Hurd, 7 Minn. 356, 363; Coy v. Downie, 14 Fla. 544, 562. See also § 792, note, ante; Merritt v. Gouley, 58 Hun, 372.

*

claim of a money demand on an independent and separate contract may be interposed in the action to foreclose any mortgage of land, purchase-money, or other, by the mortgagor or defendant personally liable for the mortgage-debt, and against whom a decree for a deficiency could be rendered: in respect to such defendants, both causes of action arise on contract, and the recovery on the counter-claim directly interferes with that on the complaint. In respect to other defendants who are not parties nor privies to the contract of mortgage, but whose liens, or encumbrances, or rights of property in the land are simply cut off by the decree, it may well be doubted whether the cause of action in the foreclosure suit can be said to arise on contract. This question was recently passed upon by the New York Court of Appeals; and the doctrine above stated was fully sustained, and made the basis of decision.1

IV. Some Miscellaneous Provisions in Relation to Counter-Claims. $ 680. * 804. Opportunity to interpose Counter-Claim not a Bar

to another Suit thereon. Provision of Code herein in few States.

As a counter-claim is always a separate and independent cause of action, which the defendant may enforce against the plaintiff, is he obliged to avail himself of it when sued? Or may he omit to set up the demand in his answer, and make it the subject of another action brought by himself? In other words, is the opportunity thus furnished by the codes to try and determine his own claim in the prior suit against himself a bar to his subsequently maintaining a second suit for the purpose of determining the issues which might have been so disposed of in the former one? In the absence of statutory prohibition, no such effect is produced by the provisions of the codes which authorize the counter-claim. The defendant has an election.2 He may set

1 Hunt v. Chapman, 51 N. Y. 555, 557. See also Charlton v. Tardy, 28 Ind. 452; Bathgate v. Haskin, 59 N. Y. 533, 539, 540; Richmond v. Lattin, 64 Cal. 273. In Oregon, a legal counter-claim to a suit in equity is not allowed, unless it be connected with the subject of the suit. See Ore. Code, § 393; Sears v. Martin (Ore. 1892), 29 Pac. Rep. 890; Burrage v. Bonanza G. & Q. Min. Co., 12 Ore. 169.

86 N. W. 59: J. sued defendant in 1898 on defendant's guaranty that a heating apparatus constructed in J.'s house by defendant would give satisfaction, and defendant pleaded in bar that in 1897 he sued J. in a justice's court for a balance due on the price of the apparatus, and that J. set up the breach of guaranty, and that, on appeal to the district court, J. had judgment. Held that since no counter-claim had been

2 [Jones v. Witousek (1901) 114 Ia. 14, pleaded, the judgment of the district court

up his cause of action as a counter-claim, and have both opposing demands adjudicated; or he may withhold it, and prosecute it in a separate action brought for that purpose. The codes of a few States expressly require the defendant's cross-right to be interposed as a counter-claim, if a proper one for that purpose; and, if he fails to do so, he cannot enforce it by a direct action.2

§ 681.

805. Form of Verdict, Finding, and Judgment. When the plaintiff's demand is proved and found by the jury or court, and the amount of the counter-claim as proved and found equals it, the verdict must be for the defendant, and a judgment rendered dismissing the action; if the counter-claim as found be less than the plaintiff's demand as found, a verdict should be given for the plaintiff for the excess of his recovery over that of the defendant; finally, if the counter-claim as found is greater than the plaintiff's demand as found, a verdict should be given for the defendant for the excess. If the plaintiff should fail entirely to prove his cause of action as alleged, the defendant would be entitled to a verdict for the whole amount of his counter-claim as established by his proofs. The foregoing rules presuppose that both demands are for the recovery of money, either debt or damages. If the plaintiff's cause of action, or the counter-claim, is for the recovery of some special relief, legal or equitable, the judgment rendered must be according to the circumstances of the case. As has been shown in the foregoing citations, there may be instances in which it would be impossible for the defendant to take anything by his counter-claim, unless the plaintiff's cause of action should be entirely defeated. There is a dictum in an Indiana case to the effect that, where the action is for the recovery of money, a pecuniary counter-claim, less in amount than the sum demanded by the plaintiff, is inadmissible, because, as was said, it was not complete bar or answer to the action.2 This dictum was founded upon an entire misconception of the object and uses of the counter-claim. It is not, in any true sense, a defence in bar of the plaintiff's cause of action. It may be pleaded when the plaintiff's claim and right to recover

Same as Kansas statute. Bates' St., 1904, § 5348; Oklahoma: Same as Kansas statute, St., 1893, § 3974; Utah: Same as California statute. Rev. St., 1898, § 2970; Wyoming: Same as Kansas statute. Rev. St., 1899, § 3546.]

1 Moore v. Caruthers, 17 B. Mon. 669, 681; Hay v. Short, 49 Mo. 139, 142; Hogan v. Shuart, 11 Mont. 498; Hitchcock v. Baughan, 44 Mo. App. 42. With respect to the recovery and judgment, see Grove v. Schweitzer, 36 Wis. 554; Westervelt v. Ackley, 62 N. Y. 505; 2 Hun, 258; Heine v. Meyer, 61 N. Y. 171; Derr v. Stubbs, 83 N. C. 539; Hall v. Clayton,

42 Iowa, 526; Inslee v. Hampton, 11 Hun, 156. When a counter-claim is pleaded the plaintiff cannot dismiss or discontinue the whole action without defendant's consent, so as to prevent the counter-claim from being tried. Purnell v. Vaughan, 80 N. C. 46; Amos v. Humboldt Loan Ass., 21 Kan. 474; Sale v. Bugher, 24 id. 432; Gwathney v. Cheatham, 21 Hun, 576; Tabor v. Mackkee, 58 Ind. 290; Whedbee v. Leggett, 92 N. C. 469; Francis v. Edwards, 77 N. C. 271.

2 McClintic's Adm. v. Cory, 22 Ind. 170, 173, per Worden J.