Smith v. Rowe

Section 501 of the Code of Civil Procedure provides as follows:

“The counterclaim specified in the last section must tend in some way to diminish or defeat the plaintiff’s recovery, and must be one of the following causes of action against the plaintiff, or, in a proper ease, against the person whom he represents and in favor of the defendant, or of one or more defendants between whom and the plaintiff a separate judgment may be had in the action. (1) A cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim, or •connected with the subject of the action.”

It is clear that the alleged counterclaim arose “out of the contract” which is “the foundation of the plaintiff's claim.” The meaning and effect of the allegations in the complaint is that the plaintiffs sold their bicycle pumps to the W. S. Spring Company under a contract which provided that for all pumps which it resold to the defendants Wanamakers and Ogden that firm should pay the plaintiffs directly through the Second National Bank, and thus security for the payment to the plaintiffs of the purchase price of their pumps was provided. The pumps were sold to the Wanamaker Company by the W. S. Spring Company, and not by the plaintiffs. Biffs or invoices for the same sent to the Wanamaker ‘Company were made •out on the billheads of the W. S. Spring Company. The only knowledge the Wanamaker Company had of the plaintiffs was that it was to pay the purchase price of all pumps bought by it "to the bank, to be divided between the plaintiffs and the Spring Company. This action is brought to enforce a contract made by the Spring Company with the Wanamaker Company. Has the Spring Company, represented by Bowe, any interest in the enforcement of.such contract, and, if so, may not his rights be materially affected by the allegations in the answer, if found to be true? Suppose that Wanamaker contracted with Bowe to pay for a quantity of pumps at $1.50 each, and Bowe agreed that such pumps should be of a" certain speciffed quality (of the same quality as the plaintiffs agreed to furnish to him). If the pumps furnished to WTanamaker were as represented, payment of $1.50 each could be compelled, 75 cents of which would go to the plaintiffs and 75 cents to Bowe, under their agreement. But suppose the pumps were not as represented (as alleged in the answer they were not), and by reason thereof only 75 cents each could be collected, must that entire sum be paid to the plaintiffs, and Bowe get nothing? That is the logical result of the plaintiffs' contention in this action. Under such circumstances, must the defendant Bowe, in order to obtain his rights, bring an action against the plaintiffs to recover the damages which he sustained on account of the inferior quality of the pumps furnished by them, and sold by him to the Wanamaker Company? In such an action the defendants Wanamakers and Ogden would be necessary parties, for Bowe would not be bound by the adjudication in this action if he had not been made a party, but, having been made a party, he would be concluded. It should be borne in mind that in this action, *392or in an action brought as above suggested, Eowe would not be entitled to recover simply because the goods were not as represented, nor unless the parties to whom he sold failed to pay the purchase price, because of the fact that the pumps were not as represented to him by the plaintiffs, for only in that case could Eowe sustain damage. If there were no issue as to the amount owing by the Wanamaker Company for the pumps purchased by them, on account of misrepresentation as to the quality of those goods, the contention of the respondent would be correct. In that case the defendants Wanamakers and Ogden would be in the attitude of offering to pay the exact amount which they agreed with the defendant Eowe to pay, and, the proportions which the plaintiffs and Eowe were to receive respectively being fixed by the contract between them, and being conceded, either could maintain an action to recover his share; and in such case damages sustained by Eowe on account of the inferior quality of pumps delivered to other parties could not be made the subject of counterclaim. The allegation in the answer is broad enough so that it may fairly be interpreted to mean that the bicycle pumps (the purchase price of which this action is brought to recover) were of inferior quality, were not as represented by the plaintiffs, and that by reason of that fact there cannot be recovered so large an amount from the Wanamaker Company as there otherwise could have been, and that the answering defendant will thereby sustain damage, and will thereby be compelled to accept as his share of the purchase price a less or reduced sum; and he asks that the plaintiffs msike good to him in this action such loss. We are of the opinion that the defendant Eowe was not only a proper party, but that he was a necessary party, in order that a final determination of the cause of action set forth in the complaint may be had. We are also of the opinion that if Eowe had not been made a party by the plaintiffs, upon his application or upon the application of the other defendants it would have been the duty of the court to have made him such party. The complaint contains all the allegations necessary to enable a court of equity to settle and adjust all the matters in dispute between the parties, not only as to the pumps which were bought by the Wanamaker Company,—which is the only issue in which it is interested,—but also as to all the pumps bought by the W. ti. Spring Company from the plaintiffs, and sold by it to other parties. The circumstance that the complaint demands only a money judgment, and does not ask for equitable relief, is immaterial. All the parties are before the court, and the complaint contained all the allegations necessary to a final adjudication. Bell v. Merrifield, 109 N. Y. 202, 16 N. E. 55. “The theory of the Code is to authorize all connected causes of action, whether arising out of contracts or torts, to be litigated in the same action.” Ter Kuile v. Marsland, 81 Hun, 423, 31 N. Y. Supp. 5; Carpenter v. Insurance Co., 93 N. Y. 552. The conclusion is reached that the demurrer should have been overruled.

Interlocutory judgment reversed, with costs. All concur.