These may be said to constitute the chief distinctions between the counterclaim and the cross-complaint, distinctions which, upon closer study, will be seen to be vital. An extended discussion of the two pleadings will disclose other distinctions subsidiary to but no less important than the main ones pointed out. § 627. Essential features of the counterclaim. The counterclaim provided for in most of the codes must be one existing in favor of a defendant and against a plaintiff, between whom a several judgment might be had in the action. The term is of recent origin, and seems to be intended to take the place of both "set-off" and "recoupment," both of which terms are generally unknown to the codes. A set-off was unknown to the commonlaw, according to which mutual debts were distinct and inextinguishable except by actual payment or release. It was first provided for by statute 2, Geo. II. (c. 22), which has been generally adopted in the United States, with some few modifications. Under this statute, set-off could be resorted to only in actions of contract for the payment of money, and the matters which might be set off were mutual liquidated debts or damages. The statute in regard to set-off referred only to mutual, unconnected debts; for at common law, when the nature of the employment, transaction, or dealings necessarily constitutes an account consisting of payments, debts, and credits, the balance only is considered to be the debt, and, therefore, in an action in such cases it was not necessary either to plead or to give notice of set-off.1 The whole theory of the law with reference to counterclaims is to prevent multiplicity of suits. Set-off differs from recoupment, in that it is more properly applicable to demands independent in their nature and origin, while recoupment implies a cutting down of a demand by deductions arising out of the same transaction; and "counterclaim" includes both recoupment and set-off. Recoupment may be said. to be somewhat similar in its scope to the cross-complaint, in that it is confined to matters arising out of and connected with the transaction upon which the suit is brought, has no regard to 2 Cal. Code Civ. Proc., § 438; Mont. Rev. Codes, § 4184; Bliss Code Pl., $$ 367, 390. 3 Otty v. Ferguson, 1 Rawle, 293. 4 Green v. Farmer, 4 Burr. 2221. 5 St. Louis Nat. Bank v. Gay, 101 Cal. 286, 35 Pac. 876; Haskins v. Jordan, 123 Cal. 161, 56 Pac. 786: Stadler v. First Nat. Bank. 22 Mont. 210, 70 Am. St. Rep. 592, 56 Pac. 111. whether such matters are liquidated or unliquidated, and is not created by statute, but by the common law. A claim of recoupment itself springs out of the contract or transaction on which the action is founded.' And when the plaintiff counts upon a contract which the defendant denies altogether, the doctrine of recoupment has no application. A counterclaim is a cause of action in which a several judgment might be obtained against a plaintiff in favor of a defendant in an action arising out of the transaction set forth in the complaint. or connected with the subject of the action. And in an action arising upon contract it is any other cause of action arising also upon contract and existing at the commencement of the action.10 When cross-demands have existed between persons under such circumstances that if one had brought an action against the other a counterclaim could have been set up, the two demands shall be deemed compensated, so far as they equal one another, and neither be deprived of the benefit thereof by the assignment or death of the other. The statute relates to the situation of the parties at the commencement of the action; and the death of one of the parties to the demand, though such death occur before the maturity of the demand, will not change the relative rights of the parties in pleading a counterclaim or in compensating crossdemands, so far as they equal each other; provided, the set-off be due when the action is commenced by the executor of the deceased party.12 The demand of a counterclaim must operate in whole or in part to defeat the plaintiff's right of recovery in the action, 13 11 § 628. Must be an existing claim. It is essential to the validity of a counterclaim that it be one existing in favor of the defendant and against the plaintiff; and it must exist at the time of the 6 Ward v. Fellers, 3 Mich. 281; Greene's New Pr. 229. 7 Washington v. Timberlake, 74 Ala. 259. 8 Morehouse v. Baker, 48 Mich. 335, 12 N. W. 170. Richardson v. Penny, 10 Okla. 32, 61 Pac. 584; Story v. Story, 100 Cal. 30, 34 Pac. 671; Marks v. Tompkins, 7 Utah, 421, 27 Pac. 6; Allison v. Shinner, 7 Okla. 272, 54 Pac. 471. 10 Cal. Code Civ. Proc., § 438; Mont. Rev. Codes, § 4184; Miller 11 Cal. Code Civ. Proc., § 440. 12 Ainsworth v. Bank of California, 119 Cal. 470, 63 Am. St. Rep. 135, 51 Pac. 952, 39 L. R. A. 686. 13 National Fire Ins. Co. v. McKay, 21 N. Y. 191; Mattoon v. Baker, 24 How. Pr. 329. 14 King v. Wise, 43 Cal. 628. action,15 and at the time belong to the defendant.10 Whatever the basis of the defendant's claim, it must be one in præsenti, and not one to arise in futuro.17 It follows that items of counterclaim accruing after the commencement of the action cannot be given in the evidence.18 Where an answer setting up counterclaims in the nature of a promissory note and for work and labor performed failed to show when the note was due or the work and labor performed, it was held that it did not appear that the counterclaims relied on existed in favor of the defendant at the commencement of the action, and that a demurrer on the ground that there was a failure to state facts sufficient to constitute good counterclaims was properly sustained.19 It is immaterial that a cause for counterclaim may have existed before the time of commencement of the suit; it must appear that the counterclaim is still due and subsisting.20 If a claim is barred. at the time of the commencement of the action, such claim cannot be asserted by counterclaim.21 So far, however, as a counterclaim which exists at the time of the commencement of the action is concerned, the filing of the complaint suspends the running of the statute of limitations, although, if standing alone, the statute would have run against it before the answer was filed.22 § 629. Assignment of ground of claim.-A debtor may fortify himself against the coming suit of his creditor by the purchase of any cross-demands which may be counterclaimed when that suit shall come, and between them an assignee has no standing until he shall have given notice of the assignment.23 And one who buys a set-off to a claim against him without notice of a prior assignment of such claim may use the set-off as a defense, as though the 15 Gannon v. Dougherty, 41 Cal. 661; Wood v. Brush, 72 Cal. 227, 13 Pac. 627; McGuire v. Edsall, 14 Mont. 359, 36 Pac. 453. 16 McGuire v. Lamb, 2 Idaho, 378, 17 Pac. 749. 17 Stadler v. First Nat. Bank, 22 Mont. 190, 74 Am. St. Rep. 582, 56 Pac. 111; Lyon v. Petty, 65 Cal. 325, 4 Pac. 103. 18 Paige v. Carter, 64 Cal. 489, 2 Pac. 260; Collins v. Driscoll, 69 Cal. 551, 11 Pac. 244. 19 Gannon v. Dougherty, 41 Cal. 661. 20 Gannon v. Dougherty, 41 Cal. 661; McGuire v. Lamb, 2 Idaho, 378, 17 Pac. 749; Rumsey v. Robinson, 58 Iowa, 225, 12 N. W. 243. 21 Lyon v. Petty, 65 Cal. 325, 4 Pac. 103; Collins v. Driscoll, 69 Cal. 551, 11 Pac. 244. 22 Perkins v. West Coast Lumber Co., 120 Cal. 28, 52 Pac. 118; McDougald v. Hulet, 132 Cal. 161, 64 Pac. 278. 23 St. Louis Nat. Bank v. Gay, 101 Cal. 286, 35 Pac. 876. 25 claim against him had not been assigned.24 But a defendant cannot avail himself, by way of set-off, of a demand against the plaintiff which he has purchased for the purpose of so using it after the commencement of the plaintiff's action.2 A debtor may purchase cross-demands against a partnership and set them up as a defense against a debt due by him to the partnership.26 And the fact that the defendant gave verbal directions to a member of a firm which was indebted to him for his share of certain profits, to apply such profits to the payment of a debt due from defendant to such member and of a note due to plaintiff's assignor, also a member of the firm, does not affect the right of defendant to set off his share of such profits against a claim prosecuted against him by an assignee of the note who purchased after maturity and after the right to such set-off had accrued, nothing having ever been done in pursuance of the defendant's verbal directions.27 § 630. Mutuality of demands. In order to be set off, demands must be mutual as between the parties of the action;28 that is, they must be due to and from the same persons in the same capacity.20 Thus, in an action against joint defendants, an answer setting up a counterclaim which does not appear to be available to all of the defendants is demurrable.30 A separate demand cannot be set off against a joint demand, nor can a joint debt be set off against a separate debt.31 The individual indebtedness of a partnership cannot be set off against the debt of the firm, except by special contract or consent of all the partners.32 But a surety jointly bound with his principal may offset against such joint indebtedness his individual claim against the creditor in such joint indebtedness, where both the creditor and the principal are insolvent.33 Where, however, two defendants are sued on a joint 24 Clark v. Sullivan, 3 N. Dak. 280, 55 N. W. 733. 25 Todd v. Crutsinger, 30 Mo. App. 145. 26 Naglee v. Minturn, 8 Cal. 540; Marye v. Jones, 9 Cal. 335. 27 Davies v. Stevensor, 59 Kan. 648, 54 Pac. 679. 28 Woolman v. Capital National Bank, 2 Colo. App. 454, 31 Pac. 235; Murphy v. Colton, 4 Okla. 181, 44 Pac. 208. 29 Murray v. Toland, 3 Johns. Ch. 569. 30 Roberts v. Donovan, 70 Cal. 108, 9 Pac. 180, 11 Pac. 599; Stockton etc. Soc. v. Giddings, 96 Cal. 90, 31 Am. St. Rep. 186, 30 Pac. 1016, 21 L. R. A. 406. 31 Burgwin v Babcock, 11 Ill. 28; Ingols v. Plimpton, 10 Colo. 535, 16 Pac. 155. 82 Morganthau v. King, 15 Colo. 413, 24 Pac. 1048. 33 Clark v. Sullivan, 2 N. Dak. 103, 49 N. W. 416, 13 L. R. A. 233. 34 indebtedness, an individual claim due to one of them cannot be set up as a counterclaim without alleging that the plaintiff is insolvent. And although there exists an agreement to allow the set-off of an individual claim to one of several parties who are jointly liable, such agreement must be alleged.35 In an action for the partition of lands, the defendants may set off moneys paid out at the request of the plaintiffs in defending the title; and if necessary improvements were made upon the lands by the defendants, such improvements may be equitably considered in connection with the claim for use and occupation, the one offsetting the other.30 37 § 631. Unliquidated demands.-A counterclaim is shown to be more comprehensive than the old set-off, in that the latter. could not be resorted to in an action to recover unliquidated damages, that is, damages which could not be ascertained by mere calculation without the intervention of a jury. But in order to be available as a counterclaim, however, damages need not be liquidated. The code provision that a counterclaim may embrace a cause of action arising out of the transaction set forth in the complaint or connected with the subject of the action, or in an action upon contract, any other cause of action arising also upon contract is all-inclusive, and is immaterial that the cause of action may be for an unliquidated debt. Claims not liquidated and debts absolutely due, although payable in the future, are to be included.38 While, however, a counterclaim, whether filed in a legal or in an equitable action, may consist of a demand for either legal or equitable relief, or both, it is not to be concluded from the above that all unliquidated demands may be thus. counterclaimed for. For instance, in an action on a promissory note the defendant cannot set up by way of counterclaim any 34 Collier v. Ervin, 3 Mont. 142. 35 Davis v. Notware, 13 Nev. 421. 36 Blackwell v. McLean, 9 Wash. 301, 37 Pac. 317. 37 Collins v. Groseclose, 40 Ind. 414; Tracey v. Grant, 137 Mass. 181. 38 Roberts v. Donovan, 70 Cal. 108, 9 Pac. 180, 11 Pac. 599; Wheelock v. Pacific Pneumatic Gas Co., 51 Cal. 226; Ainsworth v. Bank of California, 119 Cal. 476, 63 Am. St. Rep. 135, 51 Pac. 952, 39 L. R. A. 868; Sheafe v. Hastie, 16 Wash. 563, 48 Pac. 246; 39 Corlett v. Mutual Benefit Life Ins. Co., 60 Kan. 134, 55 Pac. 844. Under the early decisions in California with reference to set-off, it was necessary that the demand be liquidated. Ricketson v. Richardson, 19 Cal. 330; Hook v. White, 36 Cal. 299. 39 Roberts v. Donovan, 70 Cal. 108, 9 Pac. 180, 11 Pac. 599; Lapham v. Osborne, 20 Nev. 168, 18 Pac. 881; Wyman v. Herard, 9 Okla. 64, 59 Pac. 1009; Dunham v. Travis, 25 Utah, 65, 69 Pac. 468. |