CHAPTER XVIII. OF THE ANSWER, CONTINUED. 3. Of Counter-Claims. Section 367. Some general Considerations-Counter-claim a Code Term-Generally includes Recoupment and Set-off, and is a wider Term than either. 368. The Counter-claim not a Defense, except, etc. 369. The Statutes. 370. Recoupment and Set-off. 371. The first Class of Counter-claims in the first Subdivision. 372. The second Class in the first Subdivision. 373. The third Class in the first Subdivision. 375. Continued-New York Rulings in Actions upon Contract. 376. Continued-Indiana. 376a. Indiana-Continued. 377. The second Subdivision. 378. Continued-Must the Demands be liquidated?-Different Hold 384a. Counter-claims-How limited in number. 385. Some so-called equitable Counter-claims are really Defenses. 385a. Some Counter-demands may operate either as Defenses or Coun ter-claims. 386. A judicial Limitation upon Counter-claims made in New York. 387. Continued-Other Cases. 388. The View elsewhere. 389. Upon what is the Qualification based? 390. Cross-complaints or Petitions. (549) § 367. Some general Considerations'- Counter-claim a Code Term-Generally includes Recoupment and Set-off, and is a wider Term than either. The counter-claim must be between the same parties. If it is necessary to bring in other parties, the matter cannot be presented as a counter-claim, but a new action may be commenced, although several of the states have obviated this necessity by expressly authorizing the making of new parties. The answer which sets up a counter-claim must state facts which constitute a cause of action against the plaintiff, and its sufficiency is to be governed by the same rules that would apply to the complaint or petition if 1 [Originally, every several grievance had to be settled by a several action; that is, every separate demand in favor of separate persons had to be separately litigated in distinct actions. The defenses, of set-off and recoupment, were unknown at common law. Even when the plaintiff had become a bankrupt, the defendant was not permitted to have the benefit of any demands which he had as against him, but was compelled to pay the assignee the full amount, and then take his chances in recovering his (defendant's) claim out of the remaining assets of the bankrupt; and not until the act of 4 & 5 Anne, c. 17, was this hardship remedied by permitting the defendant, when sued by a bankrupt, to set off any mutual demand which might exist in his favor. This right of the defendant to interpose a mutual debt as a defense has been extended by statute (5 Geo. I. c. 11; 5 Geo. II. c. 30; 2 Geo. II. c. 22; 8 Geo. II. c. 24; 32 & 33 Vict. c. 71, in 1869; and the various state statutes of the United States), until at present every mutual debt existing in the same right, between the same parties, may be settled in the same action. Gibson v. Bell, 1 Bing. N. C. 753; Ex parte Prescott, 1 Atk. 230; Isberg v. Bowden, 8 Exch. 852; RAYMOND BROS. v. GREEN, 12 Neb. 215, 10 N. W. 709 (expressly overruling Boyer v. Clark, 33 Neb. 161, as to whether a setoff may be for unliquidated damages, and holding that it may. See, contra, Hardcastle v. Netherwood, 5 Barn. & Ald. 93, 187 E. C. L. 320; Barry v. Cavanagh, 127 Mass. 394; Tracey v. Grant, 137 Mass. 181); Cook v. Mills, 5 Allen, 37.] 2 Code Civ. Proc. Ohio, § 96 (Rev. St. 1878, § 5074); Code Civ. Proc. Ind. § 63 (Rev. St. 1881, § 277); Gantt's Dig. Ark. 1874, § 4571; Code Iowa 1873, § 2662; Code Civ. Proc. Kan. § 97; Code Civ. Proc. Neb. § 103; Conn. Pr. Act 1879, 18. The Code of Civil Procedure of New York of 1876 (section 501) provides for a counter-claim against the person whom the plaintiff rep resents. the defendant had sued the plaintiff. No special form of words is necessary, but it must distinctly appear that the defendant intends to present a claim against the plaintiff in his own favor. The usual, perhaps the only, way is for the pleader to designate his demand as a counter-claim, and pray for the affirmative relief which he seeks. Although new matter may entitle the defendant to affirmative relief, if it be set out as defensive merely, and it constitutes at law such defense, it will not be treated as a counterclaim.5 3 Vassear v. Livingston, 13 N. Y. 248; Merritt v. Millard, 5 Bosw. 645; Allen v. Haskins, 5 Duer, 332. See ante, §§ 350, 351, and cases cited. 4 BATES v. ROSECRANS, 37 N. Y. 409 [where Hunt, J., said: "I think the answer given by the court below is also a sound one, to wit, that the pleading does not purport to be a counter-claim. It designates itself simply as a 'further defense,' and there rests. No particular form of words is required to make a pleading a counter-claim; and if the party had, in any reasonable language, intimated that he intended to make a personal claim in his own favor against the plaintiff, it would have been sufficient. The ordinary and most satisfactory form of giving that intimation is by a statement that the pleading is a counter-claim, or by a prayer for relief." Wilder v. Boynton, 63 Barb. 547; Gilpin v. Wilson, 53 Ind. 443. [The following is an allegation of a counter-claim: [Title of Case. [The defendant in answer to the petition (or complaint) of the plaintiff alleges: [1st. That the plaintiff is indebted to the defendant upon a certain promissory note, executed and delivered by the plaintiff to the defendant on the day of —, of which the following is a copy: (Set out copy.) [2d. No part thereof has been paid, and there is now due thereon the sum of dollars. [3d. Wherefore the defendant prays judgment against the plaintiff for the sum of dollars and his costs of suit. [The introductory, instead of as above, may be as follows: The defendant, in answer to the petition of plaintiff, and for counter-claim to his said causes of action therein alleged, alleges, etc.] 5 Burrall v. DeGroot, 5 Duer, 379. "When a defense is intended as a counter-claim it should be explicitly stated in the answer so as to advise the opposite party and, in the absence of such allegation, especially when the party defines and characterizes his answer as a defense, and it is uncertain whether a counter-claim is intended, such party is not in a position to insist that he has actually set up a counter-claim and the answer should be construed and considered a defense." [McConihe v. Hollister, 19 Wis. 269]; Equi The counter-claim is founded upon a cause of action which the defendant may, at his option, prosecute independently; this is the general rule; but in some of the states that right is qualified. In Ohio, if the defendant omit to set up the counter-claim or set-off, he cannot, in a subsequent action thereon, recover costs; and this provision is adopted in Kansas and in Nebraska. In California he and his assignee are prohibited from subsequently prosecuting a cause of action embraced in the first subdivision of counterclaims." § 368. The Counter-claim not a Defense, except, etc. The answer consists of a defense and a counter-claim and the distinction between the two may be repeated. A defense, goes to the plaintiff's right of action; it either goes to his cause of action, like the plea in bar, or to his right to recover in the present proceeding, like dilatory pleas; but in either case it is a negation-a denial of the facts, or some material fact, pleaded by the plaintiff, or a denial of his right to recover because of other facts not appearing in making out his case. The one is the denial spoken of in the statute; the other is the statement of new matter constituting a defense. Neither of these makes any claim on behalf of the defendant except one purely defensive; if he succeed, the judg table Life Assur. Soc. v. Cuyler, 75 N. Y. 511; Union Nat. Bank v. Carr, 49 Iowa, 359. It is reasonable to require that the plaintiff be advised as to whether the defendant designs to make a counter-claim, that he may be prepared to meet it, and because of a possible doubt in respect to the defendant's intentions, the Supreme Court of Wisconsin, announced at January term, 1876, "hereafter no averment in answer will be held to constitute a counter-claim unless it is so denominated, and the appropriate relief prayed." Stowell v. Eldred, 39 Wis. 614. In Kentucky the words "set-off" or "counter-claim," must be in the caption. Bullitt's Code Ky. § 97. But if the plaintiff joins issue without objecting, he waives his right to take advantage of the omis sion. Cason v. Cason, 79 Ky. 558; Nutter v. Johnson, 80 Ky. 426. So in Wisconsin. Voechting v. Grau, 55 Wis. 312 [13 N. W. 230]. • Code Civ. Proc. Ohio, § 95; Rev. St. 1880, § 5073. 7 Code Civ. Proc. Kan. § 96. 8 Code Civ. Proc. Neb. § 102. 9 Code Civ. Proc. Cal. 1876, § 439. ment will be that the plaintiff take nothing by his suit, and the defendant recovers nothing but his costs. But the plaintiff may be owing the defendant an ordinary debt, or the defendant may have suffered damage from some breach of contract or duty on his part, or may have some other cause of action against him which does not depend upon the plaintiff's action or right of action, and which may be prosecuted whether the plaintiff sues or not. This right of action on the part of the defendant cannot be called a defense, nor can the pleading in pursuance of it be called a statement of new matter constituting a defense, although that term has been loosely used. The statute has applied a term new in our jurisprudence, 10 but comprehensive and, with the limitations upon its application, exact in its meaning. It is a counter-claim-the answer may contain a statement of new matter constituting a defense "or a counter-claim," a demand not antagonistic to, or destructive of, that of the plaintiff; not against, but counter-in an opposite direction to it. This, however, is not always true. We have heretofore seen 11 that, in certain equitable defenses, the same facts constitute both a defense and a counter-claim. This is true when the affirmative relief is essential to the defense, when an affirmative judgment on behalf of the defendant furnishes of itself the grounds of defense, and when without it there could be no defense. In such case the counter-claim stops the plaintiff's proceeding, and, if successful, effectually antagonizes his demand-doing the work of a perpetual injunction. The instances heretofore cited are where, in an action upon a written instrument, the defendant interposes fraud or mistake, and asks for such a reformation that the instrument, as reformed, would show that the plaintiff had no cause of action; and also, where, in an action of ejectment, the defendant can only contest the plaintiff's right by a judgment for a specific performance of the contract under which he has entered. There are other cases when a defendant's equitable counter-demand, though not antagonizing a money demand which the plaintiff may have against another defendant, yet may effectually destroy or impair the equitable relief which he may seek. I refer to counter-liens, where 10 It is recognized in Texas, though not defined. Rev. St. 1879, art. 1196. 11 Ante, §§ 348-351a. |