McGuire v. Gerstley

26 App. D.C. 193, 1905 U.S. App. LEXIS 5348

• Court: Court of Appeals for the D.C. Circuit
• Decided: November 8, 1905
• Docket: No. 1550
• Status: Published

Opinion

Mr. Chief Justice Shepard

delivered the opinion of the ■Court:

1. The court did not err in sustaining plaintiffs’ demurrer to the joint pleas of set-off filed hy J. Charles McGuire and William McGuire, principal and surety, respectively.

The plea of set-off is in the nature of a cross action by the defendant, who, it is declared in the Code, “shall be deemed to have brought an action, at the time of filing such plea, against the plaintiff for the matters mentioned in the plea.” When such plea has been filed, the plaintiff may not discontinue his action without the defendant’s consent, and, whether he undertakes to maintain his claim or not, “the defendant shall be entitled to a trial of, and judgment upon, his claim.” D. C. Code, ■§ 1565 [31 Stat. at L. 1423, chap. 854] ; Samaha v. Samaha, 18 App. D. C. 76.

It follows, necessarily, that the plea must state facts which not only bring it within the privilege of set-off, but would also constitute a good cause of action if the party pleading were the plaintiff in the prosecution of a suit therefor. And while the technical formality and accuracy of a declaration may not be required, the plea must, nevertheless, inform the plaintiff, with reasonable certainty, of the particulars of the demand which he is called upon to defend. Crawford v. Simonton, 7 Port. (Ala.) 110, 126; O'Brien v. Anniston Pipe Works, 93 Ala. 582, 584, 9 So. 415; Garrett v. Love, 89 N. C. 205, 207; Waterman, Set-off, §§ 646, 648; 17 Enc. Pl. & Pr. pp. 751, 752.

The two pleas fail under the application- of this test. Without reference to the general vagueness of allegation, it is sufficient to say that they are notably defective in respect of the agreement claimed to have been made between the plaintiffs and Monaghan and McGuire for the sale of merchandise, and of the manner in which that agreement was violated to the injury of them and their sureties. If there was an agreement between the plaintiffs and the principals, of which the contract of the sureties formed a part, and the breach of which occasioned recoverable damage, it was incumbent upon them to set out the terms of the same and the acts of breach with reasonable certainty. What has been said applies also to the first and fourth separate pleas of set-off by William McGuire, the surety.

2. The errors assigned on the striking out of the second, third, and fifth separate special pleas of the surety, William McGuire, can be considered together, as they rest upon substantially the same ground. As general defenses to the action against the surety, they substantially repeat the allegations of the pleas of set-off that have been considered. The fourth plea goes a little further in respect of the agreement made for the sale of merchandise than the others, by alleging that it was contained in a certain letter, which, however, is not set out, nor are its contents in respect of terms, prices, etc., alleged. The fifth plea omits the reference to the letter, but adds another item of' the general agreement which it alleges the violation of, namely,, that plaintiffs would never permit the indebtedness of Monaghan and McGuire to exceed $10,000.

It is questionable if these pleas were sufficiently certain and. definite; but, assuming that they do state an agreement between the plaintiffs and the principals in the bond, and a breach of that agreement by the plaintiffs, we are of opinion that the court did not err in sustaining the demurrer to each of them.

The sureties, Clark and William McGuire, had no connection with the business of Monaghan and McGuire. One feature of' the negotiations and the alleged agreement between them and plaintiffs was that they should furnish the surety bond. Clark and William McGuire brought themselves solely under obligation by executing the bond. This recites that Monaghan and McGuire are desirous of purchasing merchandise from plaintiffs,” now and from time to time hereafter,” which they “have-bound and hereby bind themselves to pay for in four months after the date of each respective purchase/’ and the condition is that if the said Monaghan and McGuire “shall strictly and faithfully pay or cause to be paid to” plaintiffs, “for merchandise now and hereafter purchased, the moneys due and to become due thereon when and as the same shall become due and payable,. then this obligation shall be null and void; otherwise,” etc. This bond neither incorporates nor refers to the alleged contemporaneous agreement between the principals and the obligees relating to the prices of the merchandise, or the gross amount of' sales that might be made upon credit. Contemplating that the credits might exceed $5,000 the sureties expressly limited their liability to that amount. Having fixed this limit, the bond recites what may have been a special stipulation of a general agreement with the principals, and which was of apparent importance-to the sureties, namely, that each separate sale of merchandise shall be upon a credit of four months. The bond is, therefore, upon its face, complete in itself, and has no relation to, or dependence upon, a general contemporaneous agreement with th& principals relating to the business to be carried on between them and the obligees. It is not pretended that by the agreement the principals were bound to deal exclusively with the plaintiffs, and it is reasonable (in fact, a different arrangement would seem extraordinary) that in commencing a business to continue indefinitely future prices would be regulated by a varying market, ■and amounts of sales by the needs of a probably increasing volume of business. The bond does not provide for or against such contingencies, either expressly or by inference, but confines itself to a limitation of the amount of the surety’s liability and the ■credits to be given on each sale. In the absence of any agreement with the surety to the contrary, the law imposes no restriction upon arrangements between principals and obligees that may affect the terms and volume of their continuing business. Domestic Sewing Mach. Co. v. Webster, 47 Iowa, 357, 361; Amicable Mut. L. Ins. Co. v. Sedgwick, 110 Mass. 163, 166. Both of those cases were actions upon surety bonds, and are directly in point. See also Stuts v. Strayer, 60 Ohio St. 384, 387, 71 Am. St. Rep. 723, 54 N. E. 368; United States Glass Co. v. Mathews, 32 C. C. A. 364, 61 U. S. App. 542, 547, 89 Fed. 828. The bond, not being by any of its terms dependent upon the agreement between the principals and obligees, the relation between them must depend for its. establishment upon parol evidence. In the absence of any allegation that the agreement was to be incorporated in the bond, or referred to therein as creating a dependence of one upon the other, and that it was omitted through mistake, accident, or fraud, such evidence is inadmissible. Domestic Sewing Mach. Co. v. Webster, 47 Iowa, 357, 361; Seitz v. Brewer’s Refrigerating Mach. Co. 141 U. S. 510, 517, 35 L. ed. 837, 840, 12 Sup. Ct. Rep. 46; Purity Ice Co. v. Hawley Down Draft Furnace Co. 22 App. D. C. 573, 591; Knight v. W. T. Walker Brick Co. 23 App. D. C. 519, 524; Newman v. Baker, 10 App. D. C. 187, 194.

It is to be remembered, moreover, that the bond is not merely ■silent in respect of the alleged contemporaneous agreement, but expressly incorporates one of its stipulations, of obvious importance to tbe risk assumed by the sureties, namely, that fixing the ■credit periods.

It is hardly necessary to remark that there is no allegation in the pleas that the bond was not to take effect as an obligation, ■except upon the performance of a definite, precedent condition, as in Burke v. Dulaney, 153 U. S. 228, 38 L. ed. 698, 14 Sup. Ct. Rep. 816, and Donaldson v. Uhlfelder, 21 App. D. C. 489.

3. The sixth special plea of the surety, William McGuire, heretofore recited, must be separately considered.

This plea is not technically one of set-off within the form prescribed by the Code, sec. 1564, but rather of recoupment, although it has been argued in both aspects.

(1) Treating it as a plea of set-off, and assuming that a valid claim for damages comes within the definition of “an indebtedness of the plaintiff to the principal,” which the surety might set off under the provisions of section 1568, it is, nevertheless, substantially defective. If it were made the ground of an original action by the other partner, .J. Charles McGuire, it would be subject to demurrer, because it does not appear that the partnership with. Monaghan, who, it is alleged, terminated it under the malicious persuasion of the plaintiffs, was one for any specified term of duration. No action would lie against Monaghan for terminating a partnership at will. Karrick v. Hannaman, 168 U. S. 328, 335, 42 L. ed. 484, 489, 18 Sup. Ct. Rep. 135. The motives prompting him in so doing, therefore, are immaterial.

It has been held that if one maliciously interferes in a contract between two parties, and induces one of them to break that contract to the injury of the other, the party injured can maintain an action against the wrongdoer. Angle v. Chicago, St. P. M. & O. R. Co. 151 U. S. 1, 13, 38 L. ed. 55, 62, 14 Sup. Ct. Rep. 240; Leonard v. Abner-Drury Brewing Co. 25 App. D. C. 161, 175. If, however, the conditions were such that the ag•grieved partner might have a cause of action against the plaintiffs, it would not be maintainable by him or his surety by way ■of set-off under the Code. Section 1563 thereof provides that •“'mutual debts and claims, under contract between the parties to a common- law action, or between [any of the several defendants, and the plaintiff], * * * may be set off against each other by the plea in bar, whether said debts or claims be of the same or a different nature or degree, and whether the claims be for-liquidated debts or unliquidated damages for breach of contract and if either debt be in the form of a penalty of a bond the exact sum to be set off shall be stated in the plea.” [31 Stat. at L. 1422, chap. 854.]

Liberal as this section is in permitting set-off, it embraces matters of contract only; and while unliquidated damages for a breach of the contract relating to the sale or warranty of the goods could be set off in an action by the vendors for their value, no damages for a mere tort, as is the case in this plea, can be so pleaded. Matters of mere tort are clearly not within the statute.

Assuming, but without intending to intimate an opinion, that the surety has a right of action for malicious interference in the matter of the partnership contract of his principal, whether that principal has or has not a similar right, it necessarily falls, within the same rule of exclusion.

(2) On the other hand, regarding the plea as one of recoupment at common law, independent of any statute, it is likewise bad. The rule which permits the introduction of evidence in defense of actions upon contracts, in mitigation, diminution, or extinction of damages, has been liberally expounded by the courts of common law generally, without the sanction of statutes, through the natural desire to avoid circuity and multiplicity of actions. But no one of these, so far as we are advised,, has ever permitted defenses by way of recoupment that were not immediately connected with, or had not arisen out of, the same contract or suit on which the plaintiff relied to maintain his action. See Van Buren v. Digges, 11 How. 461, 475, 13 L. ed. 771, 776; Winder v. Caldwell, 14 How. 434, 443, 14 L. ed. 487, 491 (both cases arising in the District of Columbia) ; Dushane v. Benedict, 120 U. S. 630, 30 L. ed. 810, 7 Sup. Ct. Rep. 696, and cases therein reviewed; Washington & G. R. Co. v. American Car Co. 5 App. D. C. 524, 529; Tyler v. Mutual District Messenger Co. 17 App. D. C. 85, 90.

(3) We have not deemed it important to consider the objection that one of the sureties could not maintain a separate cross action for the damage done to both by the same wrongful act, because the cosurety has filed a similar plea, and the practical result is the same as if they had joined in one.

The judgment must be affirmed, with costs, and it is so ordered. Affirmed.

A writ of error to the Supreme Court of the United States was allowed December 6, 1905.