#### Medart Pulley Company, Appellant, v. Dubuque Turbine *&*Roller Mill Company, Appellee.

Sale of Machinery: delay in delivery: waiver of damages. 1 Where a contract is made to furnish certain machinery within a specified time and there is a failure to perform in time, subsequent acceptance is not in itself a waiver of the right to recoup the damage for delay in an action for the purchase price.

Same. Where plaintiff contracted to furnish machinery within a 2 certain time and failed to do so, hut defendant thereafter accepted the same and upon refusal of the plaintiff to allow any damage for the delay jiaid therefor, with a, knowledge that a third -party might claim damage for. failure to deliver in time, the defendant cannot in an action for the price of machinery subsequently purchased counterclaim for damages sustained by such delay.

*Appeal from Dubuque District Court.*— HoN. Fred O’DoN-NEL, Judge.

Tuesday, October 13, 1903.

The opinion states the *case.*

Reversed.

• Henderson, Hurd, *Lenehan & Kiesel*for appellant.

McCarthy, *Kenline <& Roedell*for appellee.

Weaver, J.

In the year 1K99 the defendant, having a contract for tbe erection of an electric light and power plant at Mauston, Wis., ordered certain materials and *245machinery from plaintiff, a company doing business in St. Louis. Plaintiff -undertook to fill the order within a certain limited period, but failed to do so until a considerably later date, by reason of which defendant claims to have been injured. This failure of 'plaintiff to perform its contract within the agreed time, and defendant’s claim for damage, .was the subject of considerable correspondence between the parties, defendant refusing to pay the remainder of the purchase price until a settlement of its claim could be bad. Finally, on March 20,1900, and after plaintiff had distinctly refused to make any allowance or payment of damages, defendant remitted to- plaintiff the entire balance of the bill, without making any deduction on account of its counterclaim for damages, the remittance being accompanied by a letter, as follows: “Medart Patent Pulley Co., St. Louis, Mo.- — -Gentlemen:- We have just succeeded in getting freight bills so that we could estimate the extra cost of freight on the machinery that was shipped to Mauston over what it would have cost to have delivered it from here, and the difference is only a few dollars, and we will say nothing about it. We have not yet got a settlement with the parties, and do not know whether they are going to keep back anything from us on account of the delay in shipping the shafting or not. They were in very ill humor, and indicated that they would do so at the time, but as they have not put in any claim, we shall pay your bill, and trust to your doing the fair thing by us if we should suffer any loss on account of the delay. We understand they have kept the base plates, so we sent you the amount in full. Respectfully yours, Dubuque Turbine & Roller Mill Co.” Thereafter, in July, 1900, defendant ordered other machinery and materials from Xilaintiff, and, failing to make payments therefor, this action was brought to recover the • agreed price. To this’ action the defendant appeared, admitted the indebtedness sued upon, and pleaded a counterclaim for damages based *246upon the'first transaction, the history of which is above given. In support of the counterclaim it alleges that at the time it made payment for said first purchase it was not yet known whether the party for whom the defendant ha> I erected the light and power plant atMauston, Wis., would insist upon any damages by reason of the delay in -the completion of such work, and that such facts did-not develop until some time in April, 1900$ when such claim was presented, and defendant company was compelled to pay, and did pay, in satisfaction thereof, the sum of $147.75. Plaintiff demurred to the counterclaim on the ground that from the statements contained in the pleading and in the correspondence thereto attached it appears that a complete settlement, ac'cord, and satisfaction has been had between the parties concerning the matters involved in such claim, and that, payment having been made with full knowledge of all the material facts in the case, defendant has thereby waived the right to demand damages. The demurrer being overruled, and plaintiff electing to stand thereon without further pleading, the court entered judgment allowing the counterclaim in [she sum of $147.75, and plaintiff appeals.

i. SAMofma-íaytacl'eHv-ery: waiver of damages, I. Under the admitted' circumstances, can the defendant, after voluntarily paying in full for the machinery and materials purchased upon the first order, make the delay in their delivery the basis of counterclaim or set-off to an action for the price of other machinery and materials subsequently ordered? Acceptance and use of goods after the date specified therefor in the order have been held to defeat a claim for damages on account of such delay. *Fraser v. Ross,*1 Penn. (Del. Super.) 348 (41 Atl. Rep. 204); *Toplitz v. King, B. Co.*46 N. Y. Supp. 418. The better doctrine, and the one most generally prevailing, is that while, such acceptance and use 'are evidence from which, with other *circumstances,'a,-*waiver of the claim may be found, yet, *247ordinarily speaking, the purchaser may accept the delayed delivery, and recoup the damages, if any, in an action by the vendor for the purchase price. *Hansen v.*Kirtley, 11 Iowa, 565; *Jeffrey & Co. v. Central*Co., (C. C.) 93 Fed. Rep. 408; *Ramsey v. Tally, 12*Ill. App. 463; *Ruff v. Rinaldo,*55 N. Y. 664; *Merrimack Co. v.*Quintard, 107 Mass. 127.

2 SAMB Under this rule, the defendant’s acceptance of the belated delivery was not in itself a waiver of its right to demand damages, and it could have rightfully insisted upon an allowance thereof in reduction of the contract price. Of this right it did not avail itself. In its correspondence with plaintiff, extending from November, 1899, to March, 1900, the matter of defendant’s claim for damages, accrued and prospective, on account'of plaintiff’s delay in filling the order, was a matter of disagreement and dispute. In the end defendant yielded the point, and paid the bill in full, simply expressing its reliance upon the plaintiff to “do the fair thing” in the event of its being required to suffer loss on account of the delay. The payment was voluntary, and was made with all the knowledge of the material facts. True, defendant did not yet know whether damages would be exacted by the party for whom the light and power plant was constructed, but it did know all the facts on which its liability for such damages was based. It is a familiar principle that money so paid, even though it b© upon an unjust or unfounded demand, cannot be recovered back. *Boston & S. Glass Co. v.*Boston, 4 Metc. (Mass.) 181; *Muscatine v. K. & N. L. P. Co.,*45 Iowa, 191; *Murphy v. Creighton,*45 Iowa, 179; *Baldwin v. Foss,*71 Iowa, 389

It is urged, however, that the case before us does not come within the rule of the authorities cited. The point made is that defendant’s counterclaim is in the nature of an affirmative cause of action, which had not fully developed when the payment was made, and cannot be pre-*248snmed to have been thereby settled or waived. As already suggested, every fact on which defendant’s liability to its customer was based was fully understood, and the money was paid over with express knowledge that such liability existed and might yet be enforced. Payment was made under no mistake as to the true situation, except, perhaps, in defendant’s estimate of plaintiff’s willingness to do what is denominated “the fair thing,” should damages be exacted by the Mauston company. Mistakes of that kind are not unusual, but do not ordinarily furnish ground of legal 'or equitable relief. Applying the rule above stated, it has been said the fact that the party may be under embarrassment as to the amount which he should withhold or might properly be claimed as rebate from the contract price does not affect the principle. It was his right to litigate the question with the creditor, and his election to pay the full amount rather than to resist the payment of any portion of it makes the payment a voluntary one. *Regan v.*Baldwin, 126 Mass. 487 (30 Am. Rep. 689).

This conclusion is rendered still clearer when we consider the nature of the damages asserted by the defendant. Its right to such damages rests upon the right of .recoupment as distinguished from “set-off,’* in the technical sense of that term, and from a statutory counterclaim based upon an independent cause of action. That the right to damages for delay in delivery of property sold is a right to recoup the same from the contract price, see *Schweickhart v.*Stuewe, 71 Wis. 1 (36 N. W. Rep. 605, 5 Am. St. Rep. 190). Recoupment is, as the word implies, the cutting out or reduction of a part of a creditor’s -demand, and is based upon some failure of the creditor to comply with the terms of the contract out of which the debt sued upon arises. See “Recoup,” Anderson’s Law Diet. It goes directly to the amount due the plaintiff. The defendant, asserting such right, does not admit his *249indebtedness to plaintiff, and seek to set off against it an indebtedness due from plaintiff to himself. He insists that plaintiff has in some material respect failed to perform his part of the contract on which the suit is based, and that by reason of such failure he has never become indebted to plaintiff to the full amount of the agreed price. His counter demand goes directly to the amount due the plaintiff, and, while perhaps not strictly a defense, it has often been spoken of as such, or, at least, as a partial defense. *McCullough v. Cox, 6*Barb. 386; *Still v.*Hal, 20 Wend. 51.

In *Lufburrow v.*Henderson, 30 Ga. 482, recoupment of damages in such cases *in*spoken of as being an “improvement upon the old doctrine of failure of consideration. It looks through the whole contract, treating it as an entirety, and treating the things done and stipulated to be done on each side as the consideration for the things done • and stipulated to be done on the other. When either party seeks redress for the breach of stipulations in his favor, it sums.up the grievances on each side instead of the plaintiff’s side only, strikes a balance, and gives the difference to the plaintiff, if it is in his favor.” When the plaintiff herein demanded payment of the first bill, its right to receive or enforce collection of the full amount depended upon its ability to prove performance of the contract on its part. If it had not so performed, it had not furnished the consideration upon which defendant had promised to pay, and was entitled to demand and receive, not the fall contract price, but the contract price reduced by the damages which its default had occasioned to the defendant. Its insistence upon the full contract price was, upon defendant’s th'eory at least, unjust and excessive. Defendant was fully aware of the injustice, and for a time refused payment, but in the end did pay and satisfy the demand upon plaintiff’s terms. As said by us in *Baldwin v. Foss, supra,*the party who would resist an *250unjust claim “must do s.o at the threshold. The parties treat with each other on equal terms, and if litigation is intended by the party of whom money is demanded it should precede payment. ” In *Reid v.*Field, *83*Va. *26*(1 S. E. Rep. 395), the seller of goods failed to make a delivery within the time specified. After this breachi of the contract the purchaser received the goods, and gave his promissory note for the agreed price. This was held a waiver of his claim for damages, and the same could not be made the basis of a counterclaim in an action upon the note. To the same effect, see *Minneapolis T. M. Co. v. Hutchins,*65 Minn. 89 (67 N. W. Rep. 807); *Roby v.*Reynolds, 65 Hun., 486 (20 N. Y. Supp. 386). In short, the party who questions or denies the justice of a demand upon him for the payment of money has his choice to make voluntary payment, and thus avoid further trouble and annoyance on that score, or to resist, and take the judgment of a court of competent jurisdiction upon the controversy. If he adopts the former course he is bound by it, and cannot thereafter have recourse to the latter. It follows from the foregoing discussion that the demurrer to the defendant’s counterclaim should have been sustained.

II. On plaintiff’s motion the trial court struck from defendant’s answer the allegation that at the time of paying the contract price upon the first order for machinery and materials defendant “did not know how much, if anyr damages the Mauston Electric Light & Power Company might claim or be able to establish against the defendant,’7 etc. From this order defendant has appealed, but we think it unnecessary for us to consider the question thus raised. In disposing of the principal appeal we have treated the answer as containing the allegation ordered stricken out, and if there was any error in the ruling it was without prejudice.

The judgment of the district court is reversed, and cause remanded for further proceedings in harmony with, this opinion. —ReveRSed.