Court Opinion

ID: 8806759
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:50:03.803422+00
Date Added: 2024-06-11T17:04:07.977672
License: Public Domain

On Petition of Plaintiffs in Error for a Rehearing.
PER CURIAM.
We have concluded that the judgment in this action on the notes should be modified, so as to affirm the money judgment in favor of the plaintiff below, and to dismiss (but not upon the merits, as was done below) the counterclaim interposed. This counterclaim is substantially the action for deceit. That it did not constitute-a defense was sufficiently set forth in our previous opinion.
[9] Whether the same allegations of fact can be used as a counterclaim is a question that depends upon the construction of section 501, Code Civ. Proc. N. Y. The cause of action is on the contract evidenced by the notes in suit; the counterclaim is in tort, and therefore-the question is whether such tort causé of action arises out of the-transaction set forth in the complaint or is “connected with the subject of the action.” Underlying and governing this question of procedure is the legal fact that this action of deceit presupposes and recognizes a contract valid and enforceable. If there was not such a contract, this particular action of deceit could not exist, and no effort is- or can be made in this proceeding to set aside, invalidate, or nullify either the contract evidenced by the notes or the contract out of which the notes arose. That this countercláim did not, in the language of the-statute, arise out of the contract or transaction set forth in the complaint, is too plain for argument; whether it is “connected with the-subject of the action” is a question which we resolve in favor of plaintiff below. The question is often difficult, but, as was said in Carpenter v. Manhattan, etc., Co., 93 N. Y. 556, “the counterclaim must have such relation to and connection with the subject of the action that it will be just and equitable that” the controversy be settled, in one action. If a more rigid or formal test be looked for, the best is that of reciprocity. Adams v. Schwartz, 137 App. Div. 235, 122 NY. Supp. 41, and cases cited.
Making application of this test, could the payees of the notes, when-sued in deceit, set up the notes as a proper counterclaim? Certainly not. The action of the lower court in dismissing the counterclaim on the merits naturally -followed from its disposition of the action of deceit ; the writ of error herein complained of what was done. We sustain the writ only in so far as the counterclaim was dismissed on the merits, modifying the judgment below by striking out those words. The judgment is otherwise affirmed.