Court Opinion

ID: 3617320
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:00:07.779072+00
Date Added: 2024-06-11T14:07:34.769403
License: Public Domain

The opinion in the action second above entitled is as follows:
The matters stated in the answer did not constitute a defense. The General Term gave them that force and effect upon grounds against which we have decided in the foreclosure suit brought by Acer. We there held that the covenant of Hotchkiss was to pay and discharge the Acer mortgage, and not merely to carry the debt till the Baker and Wooster mortgage became due. We further held that the covenant of Hotchkiss was independent, and payment of their mortgage by Baker and Wooster was not a condition precedent to their right of action upon such covenant. Granting the assertion of the General Term that the two bonds were cotemporaneous and to be read together as if contained in one paper, it would still *Page 408 
be the case of mutual covenants in which by the terms of the contract performance by Hotchkiss was to be upon days certain which preceded the conditions to be performed by Baker and Wooster. The covenant by the defendant comes within the first branch of the rule originally stated in Pordage v. Cole (1 Saunders, 320, note 4) that "if a day be appointed for the performance of an act, and such day is to happen or may happen before the performance of the act, which is the consideration for the first-mentioned act, then the covenants are considered mutual and independent, an action may be brought without averring performance of the consideration, for it appears that the party relied upon his remedy and did not intend to make the performance a condition precedent." (Tompkins v. Elliot, 5 Wend. 497.) The payment by Hotchkiss of Acer's mortgage was stipulated to be made as and when it became due, and such date, preceded the maturity of the $7,500 mortgage. (Northrup v. Northrup, 6 Cow. 296.) Hotchkiss himself foreclosed that mortgage without averring or proving performance of his covenant, and when in fact it was unperformed.
But the defendant now insists that he proved a counter-claim; and although he did not plead it as such, calling it by that name, yet as he did set out the facts and they were all established and found in his favor by the court, he argues that he is entitled to the benefit of them, at least so far as to discharge the plaintiffs' claim upon the bond. There is an obvious justice in the result thus sought to be accomplished. The damages of the plaintiffs might well be applied, if possible, upon the defendant's unpaid bond and mortgage, for it would then result in just such a reduction of that security as would have been made if no covenant of Hotchkiss had existed to pay the Acer mortgage. But the question is one of pleading. We have held that the counter-claim must be described as such where the question turned upon the want of a reply. (Eq. Life Ass. Soc. v.Cuyler, 75 N.Y. 511.) Such a rule is essential to protect a plaintiff from being misled by an answer, and to prevent the snare of a counter-claim lurking under the cover of a supposed *Page 409 
defense, and unconsciously admitted by a failure to reply. We have also held that where the pleader himself characterized his facts alleged as a "defense" he was bound by the choice which he deliberately made. (Bates v. Rosekrans, 37 N.Y. 412.) We have also ruled that the counter-claim could not be asserted for the first time on appeal. (Muldoon v. Blackwell, 84 N.Y. 646.) But that again was an attempt to get the benefit of a failure to reply. In this case, however, the pleader has set out the facts without at all characterizing their effect. He left the way open to use them either as a defense or counter-claim. He put no reliance upon the omission to reply, but practically waived the need of such a pleading, and proved his facts as if they had been put in issue by a denial. He relied upon them at the trial as sufficient to defeat the action and asserted their effect, and in his exceptions to the conclusions of law of the trial court he raised the question by insisting "that the facts proven on said trial did constitute and should have been adjudged a full counter-claim or defense." The proceedings on the trial are not in the return and we have no warrant for saying that this exception was the first effort to raise the question. Now the facts pleaded and proved and found constituted, if nothing more, at least an equitable set-off. At the date of the commencement of the action, the defendant owed the plaintiff $1,140 and some interest thereon, and the plaintiffs owed the defendant at least three payments of semi-annual interest, amounting to $787.50. Before the conclusion of the trial it was shown that the mortgage collateral to this debt had been foreclosed, and $1,050 and some interest found due, and on a sale but $200 had been realized, leaving a deficiency due from the plaintiffs of $1,113.27 with the whole $7,500 also remaining to become due. This evidence was given without objection. Now "the general rule is that equity requires cross-demands to be set off against each other, if, from the nature of the claim or the situation of the parties, justice cannot otherwise be done." (Coffin v. McLean, 80 N.Y. 564;Smith v. Felton, 43 id. 419.) Here there were, even at the commencement of the action, such cross-demands. We *Page 410 
dismiss the suggestion that the plaintiffs held their claim as trustees of an express trust for Acer, because no such trust was contemplated or constituted, and it is probable that neither of the present parties were ever liable to Acer at all. There were cross demands held by each party in his and in their own right, due and payable at the commencement of the action. Nichols, who had guaranteed the $7,500 bond and mortgage, was insolvent. That the plaintiffs were insolvent was alleged in the answer and is conceded in their counsel's brief; and that a part of this $7,500 bond and mortgage was intended to reimburse Hotchkiss for the assumption of the Acer mortgage is beyond dispute. Equity will readily lay hold of facts like these to establish an offset, and so reach substantial justice. Undoubtedly such equitable offset is now embraced in the definition of a counter-claim (Code Civ. Pro., § 501) and the question returns, whether the facts pleaded were thus available to the defendant without being expressly described as a counter-claim. In Van Brunt v. Day (81 N.Y. 254) the defendant pleaded facts "available to the defendant as a counter-claim to the extent of the damages sustained, in reduction or extinguishment of his liability." No reliance was put upon the absence of a reply if one was absent, but the defendant offered to prove his independent right of action. Objection was made, but not upon the ground of any defect in the pleadings. Because that evidence was rejected, this court reversed the judgment and ordered a new trial. In this case the evidence of the cross-demand came in without objection of any kind; the question was raised on the trial and nobody appears to have been misled. While at the commencement of the action the set-off due and matured did not equal the plaintiff's claim, yet at the time of the trial, and before the answer was served, the amount due had been judicially ascertained as $1,050, and interest, and before the judgment was reached, the plaintiffs' deficiency, with which they were chargeable, had become $1,113.72; a deficiency further increased before the final judgment was ordered to more than enough to extinguish plaintiffs' claim. That some portion of the offset *Page 411 
accrued during the pendency of the action is true, but no objection was taken upon that ground, and no rights of third parties had intervened. (Gay v. Gay, 10 Paige, 369.) If such objection had been made the defendant might have obtained leave to serve a supplemental answer setting up the maturing of the additional sums after the commencement of the action. (Code of Civ. Pro., § 544.) The General Term was, therefore, justified in reversing the judgment of the Special Term and ordering judgment for the defendant, but for the reason that the debt due to the plaintiffs upon defendant's bond is extinguished by the offset of an equal amount due from the plaintiffs to the defendant upon their bond, and the judgment in the foreclosure suit in favor of Hotchkiss is to that extent paid and extinguished.
The judgment of the General Term should be affirmed, with costs.
All concur.
Judgment affirmed.