Uvalde Asphalt Paving Co. v. Morgan Contracting Co.

The action is to forclose a mechanic’s lien and for a personal judgment against the appellants. The defendant Morgan Contracting Company entered into a contract with the Bealty Associates for the erection of certain buildings, and sublet .the work to the plaintiff. The plaintiff filed a lien for the amount claimed to be unpaid and due, and the defendant Metropolitan Surety Company was the surety upon the undertaking given to discharge the lien. The counterclaim alleges the contract and ■ the sub-contract, and avers that after the plaintiff had entered upon the performance of the sub-contract “ it began in every way it could to annoy and injure said defendant Morgan Contracting Company; ” that the plaintiff was paid from time to time under its contract all moneys it could justly and reasonably demand, but nevertheless the plaintiff filed a mechanic’s lien against the property for the purpose of injuring the credit of the Morgan Contracting Company; that after the lien was discharged by the giving of a bond, the plaintiff filed another lien for the same claim, with the same purpose; and that with the same .end in view, the plaintiff, through its representatives, agents and officers, circulated stories of the lack of financial responsibility of the defendant Morgan Contracting Company among its debtors, and induced many of them to default in payments due the said defendant. The counterclaim alleges that all such statements were false and known to be false by the plaintiff when made, and were for the purpose of injuring the Morgan Contracting Company, which was thereby damaged. The plaintiff demurred to the *500counterclaim ón the ground that it. is not of the- cliáractér specified in section 501 of the Code of Civil Procedure in that it does not arise out of the contracts or transactions set forth in the complaint as the foundation of the plaintiff’s claim, nor is it connected with the subject of the action, nor does it tend to diminish or defeat the plaintiff’s recovery. These are the only grounds stated of the demurrer. '

Section. 501 of the Code of Civil Procedure reads 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 case, 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. 1

“ 2. In an action on contract,'any other cause of -action on contract, existing at the commencement of the action.”

It is clear that the counterclaim does not set forth a cause ■. of action on contract, and- hence, under subdivision 1 of section 501 of the Code of Civil Procedure (supra), the defendants may not assert the counterclaim appearing in the answer unless the matters there alleged arose out of the contract or transactions sét forth in' the' complaint or were' connected with the subject of- the action.

In our opinion the demurrer was properly sustained. The trans:' action alleged in the complaint, and the subject-matter of the action, deal with the performance of the sub-contract between the .plaintiff and the defendant Morgan Contracting Company, and the- unfilled ' promise of the -latter to pay. It is apparent that the allegations . concerning the lien filed by the plaintiff pertain to. the remedy and the method of enforcing the payment of the judgment rather than to the nature- of the action. The conduct of the. plaintiff’s agents . in an effort to injure the credit of the defendant Morgan1 Contracting Company ispnno way connected, with the subject of the plaintiff’s action, nor does it arise out of the ..sub- contract, for it has nothing to do with the manner or extent of performance of' the sub-contract, the- acceptance of the work done- under the. sub-corn *501tract or the payment of the moneys therein, provided. As well might a defendant sued for money loaned allege a counterclaim that the plaintiff, in seeking to enforce his claim, slandered the defendant in respect to his business or profession, as that the counterclaim of the defendants here should be permitted. (See People v. Dennison, 84 N. Y. 272; Haupt v. Ames, 26 App. Div. 550; Lundine v. Callaghan, 82 id. 621.)

The interlocutory judgment should, therefore, be affirmed, with costs. .

Hirscbberg, P. J., Woodward, Jenks and Hiller, JJ., concurred. -

Interlocutory judgment affirmed, with costs.