Fulton Cnty. Gas & Elec. Co. v. Hudson River Tel. Co.

• Decision Date: 03 January 1911
• Citation: 200 N.Y. 287,93 N.E. 1052
• Court: New York Court of Appeals Court of Appeals
• Parties: FULTON COUNTY GAS & ELECTRIC CO. v. HUDSON RIVER TELEPHONE CO.

200 N.Y. 287

93 N.E. 1052

FULTON COUNTY GAS & ELECTRIC CO.

v.HUDSON RIVER TELEPHONE CO.

Court of Appeals of New York.

Jan. 3, 1911.

Appeal from Supreme Court, Appellate Division, Third Department.

Action by the Fulton County Gas & Electric Company against the Hudson River Telephone Company. From an order and judgment of the Appellate Division (130 App. Div. 343,114 N. Y. Supp. 642), reversing an interlocutory judgment overruling a demurrer to each of two separate counterclaims in the amended answer, defendant by permission appeals on certified questions. Affirmed, and questions answered in part.

See, also, 131 App. Div. 919,115 N. Y. Supp. 1121.John A. Delehanty, for appellant.

Fred Linus Carroll, for respondent.

COLLIN, J.

The action is to recover the sums expended by plaintiff in paying in full the judgment recovered against the plaintiff and defendant herein, in an action against them jointly in which Nathan W. Horning was plaintiff; also, the sum expended by plaintiff for the services and disbursements of its attorneys and counsel and otherwise in defending said Horning action, those sums aggregating, as alleged, $20,923.47. The defendant demurred to the complaint upon the ground that it did not state facts sufficient to constitute a cause of action. The Special Term overruled said demurrer with leave to defendant to answer. The amended answer of defendant, served under said leave, set forth, in addition to denials and defenses, two counterclaims to each of which the plaintiff demurred upon the two grounds that: (1) The counterclaim was not of the character specified in section 501 of the Code of Civil Procedure; (2) the counterclaim did not state facts sufficient to constitute a cause of action. The Special Term rendered a judgment overruling the demurrers to the counterclaims, which the Appellate Division reversed, and the defendant has appealed to this courts, under leave of the Appellate Division, which has certified four questions for determination:

‘First. Does it appear on the face of the complaint that it does not state facts sufficient to constitute a cause of action?

‘Second. Does it appear on the face of the counterclaim set forth in paragraph numbered seventeenth of the defendant's amended answer: (1) That said counterclaim is not of the character specified in section 501 of the Code of Civil Procedure; (2) that said counterclaim does not state facts sufficient to constitute a cause of action?

‘Third. Does it appear on the face of the counterclaim set forth in paragraph numbered eighteenth of the defendant's amended answer; (1) That said counterclaim is not of the character specified in section 501 of the Code of Civil Procedure; (2) that said counterclaim does not state facts sufficient to constitute a cause of action?

‘Fourth. Is the interlocutory judgment in this case, overruling the demurrer to the plaintiff's complaint on the ground of insufficiency, the law of the case as to the sufficiency of the complaint?’

The questions designated ‘First’ and ‘Fourth’ assume that we are permitted, under the demurrer of plaintiff to the counterclaim, to determine whether or not the complaint is defective in substance. The learned counsel for the defendant takes and supports with authorities the same position. Those authorities rest their conclusion upon two grounds: The one, a demurrer searches all the pleadings prior to itself for the first fault in pleading, and, upon the trial of the issues created by the demurrer, judgment is to be given against the party who committed that first fault; the other, a counterclaim is a pleading in the action and to the complaint and is subject to the rule that a demurrer reaches back to the first defective pleading. The second ground cannot be sustained. A counterclaim is a statutory remedy. The Code of Procedure created it in an amendment of 1852 of subdivision 2 of section 149 thereof. Such subdivision continued unchanged until it was repealed in 1877, in consequence of the enactment of section 500 of the Code of Civil Procedure. The Code of Procedure in its section 150 contained provisions now represented by section 501 of the Code of Civil Procedure. Under the provisions of the Code of Civil Procedure, which prescribe the fabric and regulate the exercise of a counterclaim, the facts alleged as a counterclaim must be sufficient to constitute a perfect cause of action in favor of the defendant and against the plaintiff and to sustain the judgment against the plaintiff which the defendant thereby seeks and must demand. Sections 501, 509. They must be alleged as a counterclaim in order that they shall not be deemed a mere defense. Bates v. Rosekrans, 37 N. Y. 409. They may be verified as an independent pleading where the complaint is not verified. Section 527. They may be demurred to upon the ground that they are not sufficient to constitute a cause of action (section 495) and must be answered by a reply in the substance and form of the answer to a complaint, if defendant shall not have, through default of plaintiff, the judgment he demands. Sections 514, 515. The mode of trial of an issue of fact arising upon a counterclaim is the same as if it arose in an action brought by the defendant against the plaintiff for the cause of action stated in the counterclaim and demanding the same judgment (section 974), and the right of the defendant to any provisional remedy is the same as in an action brought by him against the plaintiff for the said cause of action; and for the purpose of applying therefor the defendant is deemed the plaintiff, the plaintiff is deemed the defendant, and the counterclaim is deemed the complaint (section 720). Where a plaintiff under his complaint and a defendant under his counterclaim establish equal demands, the judgment must be in favor of defendant; where unequal demands, the judgment must be in favor of the party establishing the greater demand for the excess; where the defendant defeats the plaintiff's demand and establishes his counterclaim, judgment must be rendered for the defendant accordingly; and where the defendant, in an action upon contract, where the complaint demands judgment for a sum of money only, admits the claim of plaintiff, and sets up a counterclaim, amounting to less than plaintiff's claim, the plaintiff, upon filing an admission of the counterclaim, may take judgment for the excess, as upon a default for want of an answer. Sections 503, 504, 514. The plaintiff may, if the counterclaim exceeds his claim, make an offer of judgment against himself, upon which, if accepted by defendant, the clerk must enter the judgment offered. Section 739. Those provisions avouch that a counterclaim passes far beyond the range of merely answering or defending against or being responsive to the complaint. It may and frequently does admit the entire complaint and stand as the sole litigation between the parties. The answer alleging it is, in effect, both answer and complaint, and in so far as it is a complaint, in so far as it thrusts into the pending action a cause of action in without the favor against the plaintiff, it is without the line of pleading started by the complaint, and which, upon demurrer, may be followed back in order that judgment shall be rendered against the party who committed the first fault. It is just that he who does not so plead as to invite an issue cannot compel his adversary to so plead as to accept it, but it is not just that he should be compelled to accept and defend as a cause of action against him that which is not a cause of action and fails, through insufficiency of substance, to charge him with liability. The wisdom of this conclusion may be variously illustrated. It would not be orderly or proper that a defendant might, because of the insufficiency of the complaint, proceed against the demurring plaintiff upon plaintiff's indorsement of a promissory note held by defendant, payment of which had not been demanded, and which had not been protested; or upon a counterclaim wholly inadmissible under section 501 of the Code of Civil Procedure. For the reasons stated, we decline to pass upon the sufficiency of the complaint and to answer the questions designated ‘First’ and ‘Fourth.’

Turning now to the first subdivision of the question designated ‘Second.’ Section 501 of the Code of Civil Procedure provides that the cause of action, which an answer may contain as a counterclaim, must tend in some way to diminish or defeat the plaintiff's recovery and must be: ‘(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. (2) In an action on contract, any other cause of action on contract, existing at the commencement of the action.’ We state here, without discussion, the obvious fact that the complaint does not set forth a contract as the foundation of plaintiff's claim. The question, therefore, is: Does the counterclaim arise out of the transaction set forth in the complaint as the foundation of the plaintiff's claim, or is it connected with the subject of the action? The complaint alleges that in July, 1903, each defendant maintained upon a street of Johnstown, N. Y., a line of wires; those of the defendant being telephone wires strung over and across those of the plaintiff which were electric lighting wires. On July 6 1903, a building to which wires of defendant were attached was burned, and one or more of said wires sagging came into contact with plaintiff's wires at their crossing upon said street so that an electric current was transferred from plaintiff's to defendant's wires and thereby transmitted to the place, where, by reason of the burning of the building, they had fallen to the ground, and Nathan W. Horning came in contact with them thus charged with electricity and was seriously injured. Plaintiff's line was in materials and workmanship properly...