Sterling Products Co. v. Watkins-Gray Lumber Co.

• Decision Date: 26 February 1923
• Docket Number: 23015
• Citation: 131 Miss. 145,95 So. 313
• Court: Mississippi Supreme Court
• Parties: STERLING PRODUCTS CO. v. WATKINS-GRAY LUMBER CO

95 So. 313

131 Miss. 145

STERLING PRODUCTS CO. v. WATKINS-GRAY LUMBER CO

No. 23015

Supreme Court of Mississippi

February 26, 1923

1 EQUITY. Set-off and counterclaim. "Recoupment" purely defensive claim, and cannot be used by defendant offensively; jurisdiction of courts of equity to make complete adjustment necessary to ends of justice not affected by statutes allowing set-off and recoupment nor repeal thereof; nonresident complainant ground for equity entertaining, recoupment both defensively and offensively.

Recoupment in the law courts is purely a defensive claim, and cannot be used by a defendant offensively; but that is not the limit of the power of courts of equity with respect to such claims for claims of that character had their origin in those courts where they were entertained to prevent injustice. The courts of equity adjusted all conflicting claims between the parties capable of adjustment and necessary to the ends of justice and their jurisdiction so to do is in no wise affected by statutes allowing set-off and recoupment in the law courts nor are they affected in any sense by the repeal of such statutes. One of the well-established grounds for courts of equity entertaining recoupment both defensively and offensively is the nonresidence of the complainant.

2 EQUITY. Decree for defendant on cross-bill for difference in claims of party for breach of contract held not erroneous.

Where a complainant, which was a nonresident corporation, sued a defendant, a resident corporation of this state, in a court of equity to cancel a contract existing between the parties, and to recover damages for an alleged breach of said contract by the defendant, and defendant answered making its answer a cross-bill, claiming that said contract was breached by the complainant, and seeking to recover damages therefor over against the complainant for the difference between their claims, and the court found that defendant was entitled to relief on its cross-bill, and that complainant was indebted to the defendant for damages for such breach in a larger sum than defendant was indebted to the complainant for goods bought by the latter from the former under said contract, and rendered a decree over against complainant for the difference, held, there was no error under the principles above stated.

HON. V. A. GRIFFITH, Chancellor.

APPEAL from chancery court of Forrest county, HON. V. A. GRIFFITH, Chancellor.

Suit by the Sterling Products Company against the Watkins-Gray Lumber Company. From a decree for defendant, plaintiff appeals. Affirmed.

Affirmed.

C. G. Mayson, for appellant.

It will be seen that the appellee's claim is for unliquidated damages. If damaged at all, its claim grew out of the same transaction and was recoupment as contra-distinguished from set-off. It would not be a set-off because a set-off is a demand for liquidated damages. The utmost damages that appellee was entitled to recover, if entitled to recover anything at all, was damages to the extent of appellant's demand, two thousand and thirty-seven dollars. Recoupment is purely defensive and never carries with it any affirmative relief. It may operate to abate a part or the whole of the plaintiff's demand, but can never justify the rendition of a judgment over against him. Fowler & Moore v. Payne, 52 Miss. 391, 39 So. 218. Recoupment is distinguished from set-off in the three particulars.

First: It carries out the matters connected with the transaction or contract on which the plaintiff's cause of action is founded; second, it matters not if it be liquidated or unliquidated; third, it is not dependent upon any statutory regulations, but is controlled by the principles of the common law. Haynes v. Slidell Liquor Company, 99 Miss. 583, 55 So. 356.

The office of a recoupment is a defensive one. Amory Independent Telephone Company v. Cox, 103 Miss. 541, 60 So. 641.

Recoupment is a defensive rather than an offensive proceeding. Hoover Commercial Company v. Humphrey, 107 Miss. 810, 66 So. 214.

The appellee's claim being founded on the claim for unliquidated damages, we are convinced that if entitled to recover at all it cannot recover more than the appellants demand. Under the provisions of our statute a demand greater than the plaintiff's can only be interposed by the defendant by way of setoff, and that must grow out of some transaction other and different from the action upon which plaintiff's claim is founded. Set-off takes place only in action on contract for the payment of money, as assumpsit, debt and covenant, and where the claim set-off grows out of a transaction independent of the contract sued on. Bouvier's Law Dictionary, Rawls Revision, Vol. 2, page 988.

A set-off is a counter-demand growing out of an independent transaction, either liquidated or unliquidated, not sounding in damages but subsisting between the parties at the commencement of the suit. 22 Am. & Eng. Ency. of Law, page 211. While on the other hand recoupment is the right of the defendant in the same action to claim damages from the plaintiff either because he has not complied with some obligation of the contract upon which he was sued, or because he has violated some duty which the law imposed upon him in the making or performance of that contract. 22 Am. & Eng. Ency. of Law, page 340.

In addition to the numerous Mississippi authorities so holding, it is stated by a very reliable authority, that; except as authorized by statute, recoupment is generally available only as a defense, and the defendant cannot recover and balance or excess. Sutherland on Damages (3 Ed.) sections 186 and 188.

It appears manifest that the learned court below was in error in allowing anything over the alleged difference between complainant's debt and appellee's supposed profits.

N. C. HILL, for appellee.

The object and purpose of the parties in making the contract in question was solely for profits that each could make therefrom and especially the profits that the appellee could make therefrom and appellant having breached the contract as found and determined by the court below, it being a non-resident of the state of Mississippi domiciled in Indiana, and having sought to have said contract enforced by court of equity is Mississippi and having chosen its forum, asking for a debt that it claims was owing to it by the appellee under said contract, now seeks to avoid the consequences of its own act and to avoid the damages sustained by appellee by reason of its breach of the contract, saying and endeavoring to get the court to hold that notwithstanding the breach of contract on our part, you cannot recover in cross-action for a sum beyond the amount of its claim against the appellee. In other words, it seeks the aid of a court of equity in Mississippi to collect a debt arising under a contract and at the same time says that the same court of equity cannot allow the appellee its damages sustained by breach of said contract upon the part of appellant, and if the court were to so hold, it would require and necessitate the appellee to resort to a court in Indiana to enforce its claim for breach of contract. Now, I submit that the appellant having chosen a court of equity in which to enforce its claim under said contract against the appellee, that it cannot be heard to deny the right of said appellee to claim the damages sustained by it and established in said court for the breach of said contract upon the part of appellant. It is a well settled principle of equity and of the jurisprudence of this state as well as elsewhere that when a court of equity takes jurisdiction for one purpose, it will draw all other questions involved in said matter to it and that it will have jurisdiction to give full and complete relief to all the parties connected therewith and if this be true, then I submit that when the appellant sought the aid of a court of equity in Mississippi for the recovery of a debt it claimed that was due it arising under said contract, then said court of equity should take into consideration any claims of the defendant, appellee here, for damages either liquidated or non-liquidated, out of the same transaction and give full and complete relief to any of the parties thereto and that is what is sought to be done in this case. I submit that it would be wholly inequitable to permit the appellant to sue for its account under said contract in a Mississippi court and then drive the defendant to a foreign jurisdiction to sue it for a breach of contract under which appellant's claim arose but that the court should try and determine all questions between the parties arising under said contract and do full justice between them, and I submit respectfully that the decree of the chancellor should be affirmed.

I beg to call the court's attention to section 2135, page 333, Volume 3, Elliott on Contracts, which for convenience to the court I quote: "Loss of Profits--Necessity of Certainty of Proof.--It is essential to the recovery of anticipated profits for breach of contract, however, that they shall be established with reasonable certainty and that they shall be the proximate consequence of the breach. It is likewise essential that these profits should have been within the contemplation of the parties at the time the contract was made, or such as should be deemed to have been within their contemplation. Generally where profits are recoverable, the profits for a reasonable period preceding the injury may be taken as a basis of estimate. "

I respectfully submit in conclusion that the appellant had no just cause for complaint as the court below was exceedingly liberal to it in allowing its claim against the defendant and for the small amount of damages allowed by the court for the wilful breach of the...