Hand v. Fielding

So in the case of Morgan v. Richardson, reported in a note to the case of Farnsworth v. Garrard, (1 Campbell, 40,) the action was against the ac*119ceptor of a bill of exchange, at the suit of the drawer, the bill being payable to his own order; defence, that the bill had been accepted for the price of somb hams bought by the defendant, from the plaintiff, to be sent to the Bast Indies; and that the bams had turned out so very bad, that they were almost quite unmarketable. The sum, for which they actually sold, was paid into court. Lord Ellenborough held, that though where the consideration of a bill of exchange fails entirely, this will be a sufficient defence to an action upon it by the original party, it is no defence to such action, that the consideration fails partially; but that, under such circumstances, the giver of the bill must take his remedy by action, against the person to whom it was given.

The same rule was adopted in the case of Tye v. Gwinne, 2 Camp. 346. That was also an action by the drawer and payee, against the acceptor. The defendant offered to prove, in mitigation, that the bill had been accepted for the price of a quantity of cheese, sold by the plaintiff to the defendant for exportation. That the cheese was of a bad quality and improperly packed, and that the consideration for the acceptance had, in great measure, failed. But Lord Ellenborough overruled the defence, and declared his determination to adhere to the judgment of the court in the case of Morgan v. Richards. In Frisbee v. Hoffnagle, (11 Johns. 50.) the same rule is adopted, and the two cases above stated, cited in support of it. In this case, the plaintiff sued as payee of a promissory note, made by defendants to secure the purchase money of a certain piece of land, conveyed to the defendant by the plaintifij by a deed with warranty. It appeared by way of defence, that at the time of the conveyance, a judgment had been rendered against the plaintifij and the land, so conveyed, was, after the making of the promissory note, seized by virtue of an execution on that judgment, and sold by the sheriff. The judge, at Nisi Prius, being of opinion that the consideration had totally failed, non-suited the plaintiff, and the court confirmed his decision. So also in Greenleaf v. Cook, the same rule was adopted by the supreme court of the United States, 2 Wheat. 13. In the principal case in the text, such a fraud as would avoid the sale, was not made out, the defendant being acquainted with the article, purchased on his own judgment, without warranty, and no deception was practiced, to induce him to believe that the sumach was free from copperas, and no art was used to disguise it. The case, therefore, under the testimony offered, was one merely of partial failure of consideration, in which the party is driven to his cross action. If fraud had been fully made out, it would have been a bar.

Thus in Fleming v. Simpson, (1 Camp. 40, n.) which was an action by the indorsee against the acceptor of a bill, given for the amount of a pipe of best London particular Madeira, which the defendant had ordered of the drawers. The defence was, that the wine was of bad quality, and could not have been *120best London particular Madeira when shipped, and that the indorsee was a partner in the house of the shippers. Lord Ellenborough held, that if it was a clear fraud in the shippers, and the plaintiff was a partner in the house, he could not recover, but that the defence was not sufficient, if the commodity shipped was only of inferior quality to that ordered. So in Solomon v. Turner, (1 Starkie, 51,) which was an action on a promissory note, by payee against maker. The defendant offered to prove that certain pictures had been sold to defendant, by the plaintiff, who was a dealer in pictures, at prices infinitely exceeding their real value, and that the note, in question, had been given as security for the price of one of them, and that the plaintiff, at the time of the sale, knew the pictures were of little value. Lord Ellenborough decided, that the testimony was inadmissible for the purpose of reducing the damages, by showing that the pictures were of inferior value, but that if the defendant could, by the inadequacy of the value, and other circumstances, prove fraud on the part of the plaintiff, so as to show that there was no contract at all, the evidence would be admissible, but that it would be inadmissible if it fell short of that.

It might be inferred, from the loose language of some learned commentators, that this rule had been shaken or overthrown by more recent cases. Story on Bills, sec. 187. But this is not so; it has, on the contrary, been pretty uniformly upheld. Chitty on Bills, 86; Obbard v. Betham, Mood. & Malk. 483 ; Frisbie v. Hoffnagle, 11 Johns. 50; and Batterman v. Pierce, 3 Hill. 171. A new doctrine, however, lately engrafted upon it, has modified and controlled its application to a great extent.

The annotator to the eighth edition of Ohitty on Bills, remarks, with judgment, as follows: “It is submitted that it would be more consistent with justice in practice to extend rather than narrow the just and equitable right to deduct or reduce a part of the claim on a bill or a note, at least when arising in the same transaction, rather than to compel a defendant to pay the whole amount, and then in a cross action, as for unliquidated damages, to endeavor to recover back a part of the money he has thus parted with, perhaps to a person who, in the mean time, may have become insolvent. The trouble and inconveniences resulting from the investigation of the amount of damages, would not be greater in an action upon the bill than in a cross action, which only tends to an increase of costs and frequent loss. Chitty, 89, Not. W.

I think it will be found that Reab v. McAllister, (8 Wend. 109,) and Batterman, v. Pierce, (3 Hill. 172,) have introduced in this particular, by the application of the right of recoupement, all that could be desired in qualifiea* tion of this doctrine. It is here held, that when the demands of both parties spring out of the same contract or transaction, the defendant may recoupe,• although the damages on both sides are unliquidated; but he can only set

*121off when the demands of both parties are liquidated,, or capable of being ascertained by calculation.

It was formerly supposed that there could only be recoupment where some fraud was imputable to the plaintiffj in relation to the contract on which the action was founded; but it is now well settled, that the doctrine is also applicable when the defendant imputes no fraud, and only complains that there has been a breach of the contract on the part of the plaintiff.

For the purpose of avoiding circuity, or the multiplication of actions, and doing complete justice to both parties, they are allowed (and compelled, if the defendant so elect,) to adjust all their claims growing out of the same contract in one action. It is no objection to the defence that the plaintiff is not suing upon the original contract of sale, but upon a note given for the purchase-money.

The promise of the defendant to pay the purchase-money, has undergone the slight modification of being put into the form of a written obligation, and on that the action is founded; but still the plaintiff is. in effect, seeking to enforce the original contract, and the question must be settled in the same manner as though the action was in form upon the contract.

The same judge, who pronounced this opinion, remarked, in reply to some cases cited in opposition, “The truth is, that the doctrine, although founded in the plainest principle of justice, is not of very long standing; and while it was in a forming state, it may very well have happened that the rule should be sometimes overlooked, both by court and counsel. But the principle is now too firmly settled to be shaken by a few straggling cases or the occasional dicta which seem to look in the opposite direction. Batterman v. Pierce, 3 Hill. 172. There may still remain a class of cases to which the old rule may fully apply. It is certainly not directly overruled. Nor is the principle, on which it rests, impugned. The right to deduct is, in the language of the annotator above cited, extended. Spalding v. Vandercook, 2 Wend. 432; Burton v. Stewart, 3 Wend. 238; People v. Niagara, 13 Wend. 246. It is, however, still confined to demands arising out of the same contract which gave rise to the note, but, with this qualification, has a most extensive application, embracing all claims proceeding from fraud, warranty, or breach of contract, generally. This, it must be remarked, is strictly in mitigation; no balance can be certified for defendant, nor, after having thus exhausted the plaintiff’s demand, can he bring a suit for a balance or remainder. Batterman v. Pierce, 3 Hill. 174.

The doctrine of recoupement is generally treated and considered as a new doctrine. It is, indeed, new in its extended application to uncertain demands, but still it is a very ancient head of the law. Thus, (in 1 Dyer. 2, a. 7,) if a man disseise me of land, out of which a rent charge is issuant, which has *122been in arrear for several years, and the disseisor pay it, if the disseisee recover in an assize, the rent that the disseisor has paid shall be recouped in damages. It is defined, the keeping back or stopping something which is due, and in our law we use it for to defalk or discount; as if a person hath a rent of £10 out of certain lands, and he disseises the tenant of the land, in an assize brought by the disseisee, if he recover the land and damages, the disseisor shall recoupe the rent due in the damages. So of a rent charge issuing out of land, paid by the tenant to another, &o., he may recoupe the same. Terms de ley.; Jacob Dic Ad. Voc. The extension, therefore, to uncertain damages, is the innovation of modern times.