Court Opinion

ID: 7113620
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:29:21.523209+00
Date Added: 2024-06-11T16:13:19.416754
License: Public Domain

Deemer, J.
(dissenting). — In order to reach a proper conclusion in this case, it seems to me that the issues as presented by the pleadings should be carefully considered. The action is upon an ordinary promissory note given by defendant to plaintiff on February 1, 1898, due on demand. The defendant in answer admitted the note, but denied any indebtedness thereon, and asserted that the note had been fully paid and satisfied. The second division of his answer, which contained the prayer,' read in this wise: “Further answering plaintiff’s petition, and by way of counterclaim, the defendant states: That he did work and labor for the plaintiff at plaintiff’s special instance and request; that a correct account of such work and labor was always kept by this defendant, a copy of'which account for work and labor is hereto attached, made a part thereof and marked ‘Exhibit A’; that said account is still the property of this defendant; that no part of the same has ever been paid; that the charges made for the items of work done and material furnished as evidenced by said bill of particulars are reasonable; and that said work and labor per*60formed, and materials furnished to said plaintiff by this defendant were and are worth the amounts charged therefor in said Exhibit A.- Wherefore defendant asks that, he have judgment on his counterclaim against said plaintiff, and that the amount be ascertained that is due this defendant over and above the amount of the note sued on, and that the charges as they appear in defendant’s bill of particulars be deducted from "the note as held by the plaintiff, as of the date of the items, and for all other legal and equitable relief in the premises, and that an accounting be had between plaintiff and defendant.” Attached to this answer was an ordinary statement of running account, commencing with the year 1891, and running down to the year 1906. This account was never balanced at any time, and the only divisions made in it were signified, if at all, by years. The account was never closed, nor were footings made at the end of each year, or at any other time. Plaintiff, in reply to this answer, admitted that the account was correct, and the defendant was entitled to have the same credited-on his note as of the date of the filing of the reply. The reply continued in this wise: “That the said account is a continuous open account, and the defendant is not entitled to interest thereon only for six months after the date of the last item thereof, at 6 percent interest. That the defendant is not entitled to an accounting as such and is not entitled to equitable relief herein. Wherefore the plaintiff prays judgment as in his original petition herein on file.” On these issues a jury was waived, and the case was tried to the court as a law action; the only evidence adduced being the introduction of plaintiff’s note in evidence.
As the record recites that the jury was waived and the trial was had to the court as a law action, we should, in my opinion, so consider it here. This is the entire record in the case; no testimony of any kind being received, and no- documentary evidence being adduced save in introduction of the note in suit. I do not believe that these *61issues tendered any equitable issue in the case. It does not involve a mutual accounting, but is purely an action at law. See Citizens’ Bank v. Whinery, 110 Iowa, 390; McMartin v. Bingham, 27 Iowa, 234. These cases squarely hold that this is purely a law action. I do not see anything in the case which indicates any relation of trust or confidence, or any inadequacy in legal remedy, or any threat of multiplicity of suits, which would justify a court of equity in taking jurisdiction of the proceedings. It will be noticed that defendant does not ask any interest upon the items of his counterclaim. He does, it is true, ask that these items be credited as of the date thereof upon the note in suit. It is manifest from what has been said that there has been no “payment” of the note in suit, as that term is ordinarily used. There is nothing to indicate that defendant ever presented his account to the plaintiff, or that these items of account were intended to be applied upon the note.in suit, so that the note has not been “paid,” as that term is ordinarily used, and upon plea of payment alone the defendant would have been defeated. If the note is extinguished, it must be by reason of defendant’s counterclaim, and, if this be treated simply as a counterclaim, it is manifest that no interest can be allowed thereon, first, because no interest is asked, and, next, because it is pleaded as a counterclaim and not as a setoff. A counterclaim is not a defense because it does not deny the cause of action or plaintiff’s right to recover thereon. Haywood v. Seeber, 61 Iowa, 574. If, then, we are to treat defendant’s pleading as a counterclaim, the statute expressly says that money due upon open accounts draws interest only after six months from the date of the last item. See Code, section 3038, paragraph 6. No connection having been shown between the making of the note and the running of the account, it seems to me that the only thing which can be done, under the issues as they are here presented, is to allow defendant his counterclaim, with inter*62est, under the statute, which should be deducted from the amount due on plaintiff’s note.
Our statute as it now stands does not expressly recognize what was at one time known as a “setoff.” In Crookshank v. Mallory, 2 G. Greene, 257, it is said: “A setoff must be predicated upon an independent demand which a defendant has against the plaintiff.” And quoting from Chitty on Contracts, page 656, it'is said: “A setoff means a cross-claim for which an action might be maintained by the defendant against the plaintiff,, and is very different from a mere right to a reduction of his demand, or claim to defeat it, on account of some matter connected therewith.” Even if we were to treat this as an equitable suit, there is. lacking a showing which would justify the making of the credits, as defendant prays, for the reason that there is no showing of such mutual credits as to bring the case within the equitable principle announced in the majority opinion. In 2 Story’s Equity it is said that “by ‘mutual credit’ we are to understand a knowledge on both sides of an existing debt due to one party founded on’and trusting such debt as a means of discharging it.” In Zugg v. Turner, 8 Iowa, 223, it is said: “The mere existence of distinct debts, without mutual .credit, will not give a right of setoff in equity.” In Davis v. Milburn, 3 Iowa, 165, it is said: “The known rule of courts of equity is that they follow the law in regard to matters of setoff, unless there is some intervening equity going beyond the statute of setoff which constitutes the basis of setoff at law. Such natural equity arises where there are mutual credits between the parties, or where there is an existing debt on one side which constitutes the ground of a credit on the other, or where there is an express or implied understanding that the mutual debts shall be a satisfaction or setoff, pro tanto, between the parties. Howe v. Shepperd, 2 Sumn. 412, Fed. Cas. No. 6,773. It is said by Judge Story (2 Story, Equity Jurisprudence, par. 1435) that by ‘mutual *63credit/ in the sense in which the term is here used, we are to understand a knowledge on both sides of an existing debt due to one party, founded on and trusting such debt as a means of discharging it. The mere existence of distinct debts, withput mutual credit, will not give a right of setoff in equity.”
Finding then, -as I think we must, that the case is not properly in equity, it seems to me that defendant is entitled to nothing more than the statutory interest, upon his counterclaim, for there is no showing that defendant sold his goods, or gave his services, trusting thereby to discharge the plaintiff’s note. Indeed, the testimony shows that defendant sold plaintiff nearly $20 worth of his goods before he made his note to the plaintiff. Defendant’s account is, as we have seen, an open one, and never became an account stated at any time. There is no showing that he ever called upon plaintiff for the purpose of having any credits made upon the note, or that he relied upon plaintiff’s making any such credits. Upon facts quite similar to those in the case at bar, the Supreme Court of South Carolina, in Morse v. Ellerbe, 4 Rich. Law, 600, held that the items of open account should not be applied so as to stop interest upon notes given by the party furnishing the goods. See, also, Rogers v. Russel, 1 Nott & McC. (S. C.) 24. In Stephens v. Burgess, 69 Mo. 168, defendant interposed a counterclaim as against a note, but the court held the plaintiff was - entitled to interest on the full amount of the note down to the day of trial; the items of counterclaim being credited as of that date. In Tucker v. Jewett, 32 Conn. 563, the Supreme Court of Connecticut held that the interest on an interest-bearing claim should be computed down to the time the action was brought, and the defendant’s claim upon open account not drawing interest should be credited as of that day. See, also, Henry v. Butler, 32 Conn. 140. In McFarland v. McCormick, 114 Iowa, 368, we held, quoting from the syllabus, that *64“charges of interest on balance of account, between partners or joint debtors, are not allowable in the case of a continuous open account without any settlement or balance being ascertained,” Meriwether v. Bird, 9 Ga. 594, relied upon by the majority, is based upon the thought that a counterclaim or setoff under the laws of that State was a pleading in bar. Our statute clearly negatives any such construction, in that it has been, expressly held that a setoff is not an answer to plaintiff’s claim, and that a counterclaim is not a defense. See Haywood v. Seeber, supra, and Freeman v. Fleming, 5 Iowa, 460.
If the majority are right in their reasoning, the separate items of account should be credited as of the dates when the work was done or material furnished. The trial court applied the totals of items of each year as credits on the note as of the last day of each year. The opinion approves of this accounting which, to my mind, is improper, even under the view taken by the majority. That it was not the intent or purpose of the parties that the items should be credited in the manner approved by the majority is clear to my mind from a consideration of the account itself, which was not closed or even balanced at the end of each year, or at any other time; and that it was not the intent of the parties that the items of defendant’s account should be credited as of the date rendered or supplied is indicated by the fact that many of them were small, amounting to but ten or fifteen or twenty cents. There are approximately one hundred and eighty items of this account. Defendant at no time presented his claim or any part thereof to the plaintiff that it might be credited upon the note. When the note was given, no part of defendant’s account, which then amounted to more than $20, was taken into consideration. It seems to me that the defendant elected to treat his account purely as a counterclaim, and not as a bar to plaintiff’s action, even could he have pleaded this account in bar.
I think the judgment should be reversed.