Stevenson v. Ruth

• Citation: 76 F.2d 501
• Decision Date: 05 March 1935
• Docket Number: No. 5583.,5583.
• Parties: STEVENSON v. RUTH.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

76 F.2d 501 (1935)

STEVENSON v. RUTH.

No. 5583.

Circuit Court of Appeals, Third Circuit.

March 5, 1935.

H. E. McCamey, Charles A. Woods, Jr., and Dickie, Robinson & McCamey, all of Pittsburgh, Pa., for appellant.

Thomas W. Pomeroy, Jr., Carl E. Glock, and Smith, Shaw, McClay & Seifert, all of Pittsburgh, Pa., for appellee.

Before BUFFINGTON, WOOLLEY, and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge.

This is an appeal from a judgment of the District Court for the Western District of Pennsylvania. On March 18, 1931, the appellant borrowed $15,000 from the Monongahela National Bank of Pittsburgh. He gave the bank a note secured by 140 shares of stock of the People's City Bank of McKeesport, Pa., and 1,000 shares of stock of Columbia Radiator Company, as collateral. The bank suspended operations on October 21, 1931, and the appellee was appointed receiver thereof. He sold the stock at private sale for $7,000 and brought suit in assumpsit for $8,000 due on the note. The defense was that the appellee failed to act in good faith and to use due diligence in that the stock had been sold without any prior demand upon the appellant for the payment of the note and without notice to him of the sale. In the original affidavit of defense the appellant pleaded, by way of set-off and counterclaim, that the stock sold had a market price at the time of the sale of $20,500; that the price for which it had been wrongfully sold was inadequate; and that he had been damaged in the sum of $13,500. He therefore asked for affirmative damages in the sum of $5,500. In a supplemental affidavit of defense he claimed an additional set-off and counterclaim based on a joint account which he carried in the bank in the sum of $6,770.67. The appellee agreed to allow this set-off, and thereby reduced the bank's claim to $1,229.33.

The District Court instructed the jury to restrict its verdict to the issues raised by the defense and to ignore the questions raised by the original set-off and counterclaim. After the case had been submitted to the jury, the appellant asked for leave to withdraw his supplemental set-off and counterclaim. This was refused. The jury returned a verdict for the appellant on the suit brought by the appellee.

The refusal of the District Court to submit the original set-off and counterclaim to the jury is assigned as error. The theory of the District Court is that the suit for damages arising out of the failure of the appellee to act in good faith and use due diligence in selling the stock sounded in tort, and that a set-off and counterclaim based on a tort cannot be pleaded in an action arising in assumpsit.

It is beyond dispute that the Pennsylvania Defalcation Act of 1705 (1 Smith's Laws, 49), 12 PS §§ 601, 1071, 5 PS § 8 and the Act of May 14, 1915, P. L. 483, § 14, amended by Act April 22, 1929, P. L. 627, § 2 (12 PS § 431), were restricted to actions ex contractu. The latter act reads: "In actions of assumpsit a defendant may set off, or set up by way of counter-claim against the claim of the plaintiff, any right or claim for which an action of assumpsit would lie, and a verdict may be rendered in his favor for the amount found to be due, and judgment entered thereon. * * *"

It is also beyond dispute that the Pennsylvania Act of April 4, 1929, P. L. 140, § 1 (12 PS § 412), amending Act May 14, 1915, P. L. 483, § 13, is limited to set-off in actions ex delicto. This act provides: "* * * The defendant in such actions i. e. actions of trespass may, by affidavit of defense, in addition to denying negligence on his own part, allege negligence on the part of the plaintiff, and set up against the plaintiff, in the manner by this act prescribed, a claim for damages arising out of the same general circumstances upon which the plaintiff's claim is based, and both claims shall in the said cause be tried as one action."

Neither statutory nor common law in Pennsylvania grants a defendant, sued in assumpsit, the right to set off a claim sounding in tort. We therefore agree with the District Court that, if the appellant's claim sounded in tort, his remedy was not by way of set-off and counterclaim.

The District Court properly relied upon Dushane v. Benedict, 120 U. S. 630, 7 S. Ct. 696, 30 L. Ed. 810, for this ruling. The Supreme Court there held that under the Pennsylvania Defalcation Act of 1705, which allows a defendant in an action upon a contract to set off any matter of contract, the defendant, when sued for goods sold and delivered, may set off a claim in the nature of assumpsit upon a warranty, but may not set off a claim for a fraudulent representation or any other claim sounding in tort only. The...