Emerson-Brantingham Co. v. Brennan

• Decision Date: 12 October 1916
• Citation: 159 N.W. 710,35 N.D. 94
• Parties: EMERSON-BRANTINGHAM CO. v. BRENNAN.
• Court: North Dakota Supreme Court

35 N.D. 94

159 N.W. 710

EMERSON-BRANTINGHAM CO.

v.BRENNAN.

Supreme Court of North Dakota.

May 22, 1916.

On Petition for Rehearing, Oct. 12, 1916.

Syllabus by the Court.

Under the Code of North Dakota and the Negotiable Instrument Act as adopted by the National Commission on Uniform State Laws, a note which is payable to order and which has not been indorsed and has come into the hands of a third person by assignment merely is subject to any defenses which could have been interposed against the original payee.

Damages which might have been recouped by the maker of a promissory note in an action against him by the original payee may be also recouped against a mere assignee thereof.

Absence or failure of consideration for a note is a matter of defense as against any person not a holder in due course, and a partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.

Where a person sued on a promissory note seeks to prove that part of the consideration thereof was that the payee should purchase and obtain the transfer to him of a certain piece of land and alleges these facts in a special plea, and the added fact that by reason of the payee's failure to perform his part of the agreement the consideration of the note has failed to the amount of $1,000, such plea will sustain proof of such contract and loss, and is not vulnerable to a demurrer on the ground that the terms on which the payee was to purchase the property or the value of the property, or its value at the time of its sale, or the compensation to be paid to the payee, if any, are not stated.

A plea which alleges that the consideration of a note has failed to a certain amount by reason of the breach of one of the terms of its delivery by the payee, but which does not ask for affirmative relief, must be looked upon as a defense or plea of recoupment and not as a set-off.

On Petition for Rehearing.

Under the provisions of sections 7396, 7449, of the Compiled Laws of 1913, if C. buys from B. a nonnegotiable note which is made by A. to B., A. can counterclaim against C. an unliquidated claim arising out of another contract, but prior to any notice of the assignment in question.

A complaint or counterclaim which asks to recover damages for the failure to convey land is sufficient as against a demurrer if it merely alleges a promise to convey, and that the plaintiff was damaged by the breach thereof in an amount stated. Such damages are general, and need not be specially pleaded.

Additional Syllabus by Editorial Staff.

The term “set-off” includes any right of action arising out of contract or ascertained by decision of the court and existing at the commencement of the action (citing Words & Phrases, Set-Off).

Appeal from District Court, Ramsey County; C. W. Buttz, Judge.

Action by the Emerson-Brantingham Company against D. V. Brennan. From a judgment for plaintiff, defendant appeals. Reversed and remanded.

This is an action brought by the assignee of a promissory note to recover against the maker thereof. The amended complaint alleges:

“(1) That the plaintiff now is and at all the times hereinafter mentioned has been a corporation duly organized and existing under and by virtue of the laws of the state of Illinois, and licensed to transact business within the state of North Dakota.

(2) That heretofore and for valuable consideration the defendant made and delivered to one Robert W. Madeford his certain promissory note dated January 17, 1912, wherein he promised to pay to the order of the said Robert W. Madeford, for value received, on October 1, 1912, the sum of seven hundred dollars, with interest at the rate of 8 per centum per annum from date until paid.

(3) That thereafter and before the maturity of said note, for a valuable consideration, the said Robert W. Madeford sold, assigned, transferred, and delivered said note to the Gas Traction Company, a foreign corporation, having its principal place of business in the city of Minneapolis, Minn.; and thereafter, for a valuable consideration, the said Gas Traction Company sold, assigned, indorsed, and delivered said note to the plaintiff, which has ever since been and now is the owner and holder thereof.

(4) That no part thereof has been paid.

Wherefore plaintiff demands judgment against the defendant for the sum of seven hundred dollars, with interest thereon at the rate of 8 per centum per annum from January 17, 1912, and costs of suit.”

The amended answer was as follows:

(1) The defendant in this action admits paragraphs 1 and 11 of the complaint.

(2) He alleges that he has not sufficient knowledge or information to form a belief as to whether the note described in paragraph 2 before the maturity of the same was sold, assigned, or delivered to plaintiff, but alleges on information and belief that the same was not indorsed to the plaintiff prior to the commencement of this action, and alleges that the plaintiff is not a bona fide holder of said note in due course.

“(3) For a counterclaim in this action against the said Robert W. Madeford, payee of said note and against plaintiff (said note), this defendant alleges that as an inducement held out by the said Madeford, to purchase from him the west half of section thirty-two (32), township one hundred sixty-three (163), range sixty-six (66), the said Madeford agreed to and did become the defendant's agent to purchase for him the northwest quarter of section five (N. W. 1/4 5) in township one hundred and sixty-two (162), range sixty-six (66), in Towner county, N. D., and to procure the title for defendant; that relying upon said inducement and said Madeford's promise to do so, and as part consideration therefor, defendant purchased said west half of section thirty-two aforesaid, from said Madeford; that afterwards and prior to the alleged transfer or assignment of said note for $700 herein, and prior to any notice to defendant of such alleged transfer or assignment, said Madeford refused to act as defendant's agent in the purchase or procuring title to said northwest quarter of section five (N. W. 1/4 5) in township 162, range 66, for defendant, and that afterwards and prior to the commencement of this action, the said Madeford obtained title to said northwest quarter of section five in township 162, range 66, in his own name, and as defendant is informed and believes, sold and disposed of the same; that said Madeford thereby became trustee for said defendant in regard to said land, and that by reason of his refusal and failure to act as agent for defendant in procuring title to said land as above set forth and by reason of said Madeford's sale and disposal of said land (N. W. 1/4 5-162-66) defendant has been damaged in the sum of one thousand dollars, by which amount the consideration for said agreement in regard to the land in section thirty-two (32), aforesaid, has failed.”

Then there followed another or fourth paragraph, which was identically the same as the third, with the exception that the word “defense” instead of “counterclaim” was used in the first line thereof. Then followed a prayer for a judgment dismissing the action, with costs. To this answer a demurrer was interposed on the ground:

“That the alleged counterclaim contained in the defendant's amended answer does not state facts sufficient to constitute a cause of action or a counterclaim in favor of the defendant and against the plaintiff. Our position is that the defendant cannot interpose a counterclaim; that the statute which counsel has read namely, 6943, provides, ‘In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were nonnegotiable.’ There is not one word or syllable there concerning counterclaims; it is not therefore subject to counterclaim, and our statute on the subject of counterclaim is clear upon that point. I make the further proposition that the damages attempted to be set off are unliquidated and uncertain. If the paragraph of the defendant's answer which has been amended constitutes anything at all it constitutes an attempt to set up a defense as against the collection of the note, and is not a counterclaim; that is, it is unliquidated, unfixed in amount, and it is not a defense or subject to be pleaded as a defense in this action. There is nothing in the answer as a basis for determining any damages, even though unliquidated damages were the proper subject of set-off; it not being alleged in the answer on what terms the said Madeford was to act as agent for the defendant, on what terms he was to purchase the property referred to, the value of the property at the time of its purchase, the value at the time of its sale, the compensation to be paid the said Madeford, or any other of the necessary elements of damages to be alleged in order to leave the defendant open to proof of any damages. The plaintiff does not wish this ground of objection to be understood as waiving in any way its claim that unliquidated damages are not a proper subject of set-off.”

This demurrer was sustained, and the defendant not having asked leave to amend his answer or taking further action, the plaintiff then introduced his evidence, and at the close thereof defendant asked for a verdict on the ground:

“That the plaintiff had failed to show owner-ship in the note; that the defendant's answer is a sufficient defense to the amount of the note is admitted by the demurrer and is a valid defense and counterclaim, and for the further reason that the note in suit is not properly identified by any proof in this action as being the property of the plaintiff.”

The court then denied this motion for a directed verdict, and on a motion being made by the plaintiff for one in its favor, the same was granted. Defendant then moved for judgment notwithstanding the verdict, and the motion being denied, has appealed to this court.

M. H. Brennan and D. V. Brennan,...