#### Piotrowski, Appellant, vs. Czerwinski and others, Respondents.

*February 17*

March *9, 1909.*

*Setoff: Equitable counterclaim against claim of nonresident insolvent.*

1. A court of equity will permit an equitable setoff when justice requires it, even in a case not coming within the .statute of set-offs.

2. In an action upon promissory notes, of which the plaintiff was not a *bona fide*holder, it appeared that the payee, who was the real party in interest, was a nonresident,” was insolvent, and was indebted to the several defendants, residents of this state, in sums exceeding the amount of the notes sued on, and that if they could not set off such debts due from him they must lose them altogether. *Held,*that the court properly allowed such debts to be set off as equitable counterclaims in the action.

*397[3. Whether, the indebtedness of defendants on the notes being joint, and the indebtedness of the payee being to them severally, the latter would constitute, legal counterclaims, is not determined.]

4. Any one of the defendants in such case might set off his entire claim against that of the plaintiff in order to reduce the amount, he might be called upon to pay upon an execution.

6. The offsetting of such claims would bar defendants from thereafter maintaining an action against the payee of the notes in suit upon the claim so offset.

Appeal from a judgment of the circuit court for Milwaukee county: WaeeeN D. Tabeawt, Circuit Judge.

Affirmed-

Tbe court found tbat on October 4, 1904, the defendants executed and delivered to Ignate Kowalski their promissory note for $275, which became due January 2, 1905, and that on the same date they executed another note for a like sum, which became due March 2, 1905, and that the consideration for which said notes were given to said' Kowalski was an indebtedness due him from the Polish Publishing Company, a corporation in which the defendants were interested, and that said defendants were not jointly indebted to said Kowalski at the time said notes were given; that at the time the notes, were executed all of the parties resided at Milwaukee, Wisconsin, but that about a month thereafter said Kowalski removed to the city of Chicago, and ever since has been and still is a resident of the state of Illinois; that the plaintiff is an attorney at law residing in Chicago, ánd that he purchásed the note first maturing after it became due, and purchased the second of said notes before the same became due, but took the same with full knowledge and notice of all equities existing-between said Kowalski and the defendants; that said Ko-walski commenced an action on the note due January 2, 1905,. and that the same was dismissed because of his failure to comply with an order requiring him to file security for costs, and judgment for costs amounting to $32.20 was recovered against him in said action; that prior to the date of the execution and delivery of said notes said Kowalski was indebted to the de*398fendant *Stanley E. Gzerwinslei*in tbe sum of $102.23, together with interest tbereon, and to tbe defendant *Albert II. Gzerwinslei*in tbe sum of $171.15, with interest, and to the defendant *Max Dominski*in tbe sum of $311, and to tbe defendant *John Qawin*in tbe sum of $112.95; tbat said Ko-walski is now, and ever since tbe maturing of eacb of said notes bas been, insolvent; tbat tbe plaintiff is not and was not a *bona fide*bolder of either of said notes, and tbat said Ko-walski is tbe real and sole owner of tbe same; tbat plaintiff is only interested therein as attorney for Kowalski; tbat plaintiff paid not more than tbe sum of $100 for tbe note first maturing, and not to exceed $150 on tbe second of said notes.

As conclusions of law tbe court found tbat tbe sums due to tbe several defendants from said Kowalski constituted equitable countei’claims of said defendants against any sum found to be due upon tbe notes in suit, and tbat tbe defendants were entitled to judgment dismissing tbe complaint.

No bill of exceptions was settled in tibe case, so tbat tbe findings of tbe court are verities. Tbe error assigned is tbat tbe findings of fact do not support tbe conclusions of law and the judgment entered tbereon.

Eor tbe appellant there was a brief by *Marhham & Schoell-Icopf,*and oral argument by *Henry Schoellkopf.*

Eor tbe respondents there was a brief by *Ghurchill, Bennett & Olmrchill,*and oral argument by W. *H. Ghurchill.*

Barnes, J.

Under tbe findings made by tbe court this action might well have been dismissed under tbe provisions of sec. 2605, Stats. (1898), because not brought by tbe real party in interest and becarxse it was not shown tbat tbe plaintiff came within any of tbe exceptions confabbed in tbe statute.

Tbe contention of tbe appellant is tbat tbe findings do not support -tbe judgment. Erom them it appears tbat Kowalski is a nonresident; tbat be is insolvent; tbat be honestly owes the defendants sums exceeding tbe amount of tbe notes sued *399on; and that if they cannot set off the indebtedness due from him against the plaintiff they must lose it altogether.

Subd. 3, sec. 2656, provides that, where a plaintiff is a nonresident of the state, any cause of action arising within the state and existing at the commencement of the action may be pleaded as a counterclaim, with one exception not material here. Sec. 2606 provides that, in case of an assignment of a thing in action, the action of the assignee shall be without prejudice to any setoff or other defense existing at the time or before notice of the assignment. The section does not apply to a negotiable promissory note .transferred in good faith before due. Sec. 4258 provides the cases in which a demand by one party may be set off as a defense in whole or in part to the demands of the other. If the action or counterclaim be founded upon a contract, such setoff must be founded on contract, express or implied, and must be due to the party in 'his own right, and must have existed at the time of the commencement of the action and must have then belonged to the party claiming to set off the same.

Subd. 5 of the section reads:

> “If the action or counterclaim be founded upon a contract, other than a negotiable promissory note or bill of exchange-, which has been assigned to the party a demand existing against such party or any assignor of such contract, at the time of his assignment thereof and belonging to the opposite party, in good faith before notice of such assignment, may be set off to the amount otherwise recoverable upon such contract if the demand be such as might have been set off against the party or assignor while the contract belonged to him.”

Sec. 4264 provides that setoff-shall be pleaded as a counterclaim.

If the indebtedness from Kowalski to the defendants was ;a joint indebtedness due them, there could be no question about the right of the defendants to set the same'up as a counterclaim in this action. There is authority which holds that, •under statutes permitting setoffs and counterclaims to be *400pleaded, any defendant may plead any proper matter tbat is-tbe subject of setoff or counterclaim in reduction of damages--which the plaintiff might otherwise be entitled to recover,, where the action is brought on a joint and several liability-against several defendants. Pomeroy, Code Rem. (3d ed.) §§ 755, 761; *Wilson v. Exchange Bank,*122 Ga. 495, 50 S. E. 357; *Austin v. Feland,*8 Mo. 309; *Leach v. Lambeth,*14 Ark. 668. And in *Powell v. Hogue,*8 B. Mon. 443, it is-held, under like statutes, that one of several defendants sued upon a joint note may set off a demand due to himself from, the plaintiff against the demand due upon the joint note. Im the case at bar the trial court held that the matter set up in. the answers of the defendants constituted equitable counterclaims, and offset the amounts due thereon against the-amounts due upon the notes. The indebtedness of the defendants being joint, the trial court was evidently of the opinion that the causes of action set forth in the answers of the defendants did not constitute legal counterclaims.

The judgment rendered by the circuit court was correct. The payee named in the notes was a nonresident and was insolvent. Assuming that the defendants could not counterclaim at law, it was within the province of a court of equity, and it was entirely proper for it, to afford the relief granted-against the insolvent debtor. *Smith v. Dickinson,*100 Wis. 574, 578, 76 N. W. 766; *Pendleton v. Beyer,*94 Wis. 31, 68 N. W. 415; *Seligmann v. Heller Bros. C. Co.*69 Wis. 410, 34 N. W. 232.

> *“A*court of equity will permit such equitable setoff whenever justice requires it, even in a case not coming within the-statute of setoffs.” *Jones v. Piening,*85 Wis. 264, 268, 55 N. W. 413.

It was also within tire right of any of the defendants to-set off his entire claim against that, of the plaintiff in order to reduce the amount he might be called upon to pay in the event of execution being issued upon the judgment. The-*401offsetting of such claims against the plaintiff in this action would bar the defendants from thereafter beginning any action against Kowalski upon the claim so offset.

*By ihe Court.*— Judgment affirmed.