Falkenstern v. Herman Kussy Co.

• Decision Date: 13 May 1948
• Docket Number: No. 16.,16.
• Citation: 137 N.J.L. 200,59 A.2d 372
• Parties: FALKENSTERN v. HERMAN KUSSY CO.
• Court: New Jersey Supreme Court

137 N.J.L. 200

59 A.2d 372

FALKENSTERN

v.HERMAN KUSSY CO.

No. 16.

Court of Errors and Appeals of New Jersey.

May 13, 1948.

Appeal from Supreme Court.

Action by Marion Falkenstern, as assignee of the Fruitcrest Corporation, against Herman Kussy Co. to recover on a matured debt owed by defendant to plaintiff's assignor for goods sold and delivered, wherein defendant filed a counterclaim as assignee of two choses in action against plaintiff's assignor. From a final judgment in favor of plaintiff entered on orders striking the answer and counterclaim, 55 A.2d 11, 25 N.J.Misc. 447, defendant appeals.

Judgment affirmed.

Schneider & Schneider, of Newark (Jacob Schneider, of Newark, of counsel), for plaintiff-respondent.

Bilder, Bilder & Kaufman, of Newark (Walter J. Bilder and Sanford Freedman, both of Newark, of counsel), for defendant-appellant.

OLIPHANT, Chancellor.

This is an appeal from a final judgment in favor of the plaintiff-respondent and against the defendant-appellant entered on two orders striking the answer and counterclaim of the appellant.

The respondent, as assignee of the Fruitcrest Corporation, a New York corporation, instituted an action to recover $1,412.50 with interest and costs. The complaint contained four counts all predicated upon the same cause of action (for $1,412.50): the first for the price of goods sold and delivered; the second on a book account; the third for the reasonable value of the goods and the fourth a count in debt. The answer admitted all the material allegations of the complaint but denied the assignment.

By way of counterclaim, the appellant as assignee sought unliquidated damages against the respondent on two separate and distinct causes of action. The first count alleged that in 1946 the Fruitcrest Corporation sold to one Wallace, Burton & Davis Company certain canned goods for export shipment. The goods were delivered to the purchaser, were sold and shipped out and paid for but upon their receipt by the purchaser's customer were found to be unfit for consumption. The theory of this count was a breach of the warranty of fitness, for which the purchaser had paid its customer damages.

The second count was on the same theory covering a similar yet different transaction with the original purchaser covering the same types of merchandise but in different amounts, which merchandise had not been resold in the trade. The purchaser sought to recover what it had paid Fruitcrest, the respondent's assignor, plus the amount of resale profit it would have received if the goods were merchantable.

The respondent made a motion to strike the counterclaim on several grounds, including (1) the counterclaim was improper, (2) the counterclaim presented an issue involving unliquidated damages and was improperly set off to the complaint which involved a liquidated claim, and (3) the counterclaim was improper in that it presented issues which could not be conveniently tried with those presented by the complaint.

The trial court struck the counterclaim. The learned trial judge held that since the complaint sought liquidated damages and the causes of action pleaded in the counterclaim were for unliquidated damages, as such they were not the proper subject matter of set-off citing R.S. 2:26-190, N.J.S.A.; Godkin v. Bailey, 74 N.J.L. 655, 65 A. 1032, 9 L.R.A.,N.S., 1134; John Wills, Inc. v. Citizens National Bank, etc., 125 N.J.L. 546, 16 A.2d 804; Yeskel v. Gross, 105 N.J.L. 308, 144 A. 312. He held further ‘An assignee of a chose in action takes what the assignor had, subject to all set offs, discounts, and defenses which the debtor has not only against the assignee but also against the assignor before notice of the assignment; R.S. 2:41-1, N.J.S.A., but the assignee does not thereby, without more, assume the liabilities of the assignor. Discount connotes a set off or reduction arising out of the claim sued upon, and defenses imply matters in defense of that particular claim stemming from it, such as failure of consideration, payment, or fraud.’

By this language we understand the trial court to have held that the defendant, even though an assignee, could and is required to set off any liquidated claim which could be set off in an action between the original parties to the contract upon which the plaintiff relies.

In strictness set-off is not a defense at all, since it neither denies the plaintiff's right nor denies that the amount claimed is due. On the contrary, it passes these defenses for the purpose of exhibiting a cause of action against the plaintiff. It need not arise out of the same transaction or contract. There is no such thing as a ‘plea of set-off’. Naylor v. Smith, 63 N.J.L. 596, 44 A. 649, 650. ‘Discounts and defenses' (R.S. 2:41-1, N.J.S.A.), like pleas, neither destroy the plaintiff's claim nor deny that the amount of the claim is due and therefore they are related to and must be confined to the particular claim asserted in the complaint since their efficacy depends upon the legal infirmities of the cause of action therein asserted. With this we are in accord.

The counterclaim was stricken for the reasons stated and a motion was then made to strike the answer as sham which motion was granted and a final judgment entered.

The appellant makes the point that the trial court erred in striking the counterclaim because it presented a legally sufficient cause of action.

Relying on the broad language of R.S. 2:27-137, N.J.S.A. ‘Subject to rules, the defendant may set off or counterclaim any cause of action’, the appellant argues ...