Smith v. Willis

163 P. 810 | Or. | 1917

Opinion by

Mr. Chief Justice McBride.

1. It is first objected that the demand of defendants here being unliquidated and not arising out of the same transaction as that which occasioned the execution of the mortgage cannot be set off against plaintiff’s claim; and to that effect the able counsel for plaintiffs cite Section 74, L. O. L., as amended by Laws of 1913, p. 312; Burrage v. Bonanza Gold & Quicksilver Mining Co., 12 Or. 169 (6 Pac. 766); Le Clare v. Thebault, 41 Or. 601 (69 Pac. 552). The relation of these cases to the one at bar will be considered later. It may be said that the defense here urged is not strictly a counterclaim, and is not so pleaded. A counterclaim is purely a creature of the statute. It did not exist at common law, which left parties having reciprocal causes of action to litigate them separately; but there has grown up in the courts of this country a practice in equity independent of statutes allowing a defendant to recoup or set off reciprocal demands against the plaintiff where a denial of such privilege would work such hardship as to amount to a substantial denial of justice. Among the principal reasons for the application of this doctrine the non-residence of the plaintiff in the state where the action or suit is brought and insolvency are mentioned: Ewing-Merkle Electric Co. v. Lewisville Light & Water Co., 92 Ark. 594 (124 S. W. 509, 19 Ann. Cas. 1041, 30 L. R. A. (N. S.) 21). This was a case in which an action was brought to recover a balance for goods sold and delivered to defendant, to which defendant filed a cross-bill alleging damages for breach of warranty by the plaintiff in another transaction, stating that plaintiff was a nonresident of Arkansas and had no agent in the state upon whom service of summons could be made, and asking that the cause be heard in chancery. The case is not different in principle from the case at bar. The court allowed the offset and gave judgment for the defendant for a balance found due it, and in the course of its opinion said:

“The evidence was sufficient to sustain the findings of fact by the court. At law appellee was not entitled to set up in this action by way of set-off or countei'claim, the $1,050 damages suffered by it by a breach of contract made by appellant. Was it entitled to set it up as an equitable set-off? In 2 Story’s Equity Jurisprudence, 13th ed., § 1437a, it is said: ‘It has been already suggested that courts of equity will extend the doctrine of set-off and claims in the nature of set-off beyond* the law in all cases where peculiar equities intervene between the parties. These are so very various as to admit of no comprehensive enumeration.’ In North Chicago Rolling Mill Co. v. St. Louis Ore & Steel Co., 152 U. S. 596, 616, 38 L. Ed. 565, 572, 14 Sup. Ct. Rep. 710, 716, it is said: ‘By the decided weight of authority it is settled that the insolvency of the party against whom the set-off is claimed is a sufficient ground for equitable interference. * * In addition to insolvency it is held by many well-considered decisions, including those of Illinois, that the nonresidence of the party against whom the set-off is asserted is good ground for equitable relief. Quick v. Lemon, 105 Ill. 578; Taylor v. Stowell, 4 Metc. (Ky.) 175; Forbes v. Cooper, 88 Ky. 285 (11 S. W. 24); Robbins v. Holley, 1 T. B. Mon. (Ky.) 191; Edminson v. Baxter, 4 Hayw. (Tenn.) 112 (9 Am. Dec. 751); Davis v. Milburn, 3 Iowa, 163.’ In Forbes v. Cooper, supra, it is said: ‘It is certainly unconscientious for an insolvent party to coerce the payment of his claim when he is owing the other party an equal or larger sum, and thus leave the latter remediless, nor should a nonresident be allowed, under like circumstances, to enforce through, the agency of the courts the collection of his debt, and compel the other party to seek a foreign jurisdiction for relief, and then perhaps find the debtor insolvent. If the object of litigation be the attainment of justice, assuredly such results should be prevented. Indeed, the.doctrine of equitable set-off to the extent it was formerly applied was based upon moral justice, and to meet such cases as the above, thus preventing wrong. It was then not uncommon to stay an insolvent or nonresident debtor in the collection of his claim until damages to which the complainant might be entitled against him were liquidated under the order of the chancellor, and then apply them in satisfaction of his independent debt.’ In Quick v. Lemon, supra, it is said: ‘It would seem to be inequitable to require the corporation to go to another state to collect its demand in an action at law, and we are inclined to hold that the nonresidence of the complainant, in connection with the fact that he calls upon a court of equity to enforce his judgment, is sufficient to allow the defendant corporation to prove and set off its demand set up in the cross-bill against the judgment of the complainant.’ To the same effect see Porter v. Roseman, 165 Ind. 255, 112 Am. St. Rep. 222, 74 N. E. 1105, 6 Ann. Cas. 718, and note to that case and cases cited. The rule announced in these cases is a just rule, and should be enforced. We see no good reason for sending a citizen of this state to a foreign jurisdiction to obtain justice when the courts of this state can afford relief. They are as fully competent to afford relief to the citizen as to the nonresident. Why should one in cases like this be accorded greater rights than the other ?’’

Among the cases cited in the note to the above case are the following, where the claims offset were for unliquidated damages: Plattner Implement Co. v. Bradley A. & Co., 40 Colo. 95 (90 Pac. 86); Fitzgerald v. Wiley, 22 App. D. C. 329; Taylor v. Stowell, 4 Met. (Ky.) 175; Forbes v. Cooper, 88 Ky. 285 (11 S. W. 24); Edminson v. Baxter, 4 Hayw. (Tenn.) 112 (9 Am. Dec. 751); North Chicago Rolling Mill Co. v. St. Louis Ore & Steel Co., 152 U. S. 596 (38 L. Ed. 565, 14 Sup. Ct. Rep. 710). The authorities both for and against the proposition are so exceedingly well collated in the note in 30 L. R. A. 21, that it is needless to recapitulate them here. We have carefully examined them, as well as other cases cited by counsel, and agree with the doctrine announced by the Supreme Court of Arkansas in the case first cited. The plaintiffs in this case come into a court of equity and say to the defendants:

“You owe us $3,000 upon a note and mortgage, and we demand payment or foreclosure.”

The defendants reply:

“Yes, it is true that we gave you a note and mortgage and agreed to pay you $3,000, but that promise was in consideration, among other things, that you would furnish us water to irrigate our orchard and crops. You did not furnish the water, and by reason of your breach of the contract the land that we mortgaged to you failed to produce the crops which a compliance by you with your agreement would have enabled us to produce, and by your failure to keep your agreement we are injured in a sum greater than the amount of your mortgage.”

The plaintiffs then say to the court:

“Please allow us to use the equitable machinery of this court to sell these people out of house and home, and after we have done that they can come to Chicago and bring an action at law to determine whether we have broken our agreement to furnish them water.”

This is not one whit overdrawn. It is plaintiffs’ contention stripped of legal verbiage and expressed in common, every-day language; and the very statement of it marks its inequity. The defendants’ answer was good as an equitable defense.

2. The next question suggested in the brief of appellant is that there was no allegation in the answer upon which the court could base a finding of damage to defendants’ agricultural crops. While the allegations in regard to damage to agricultural crops are somewhat meager when compared with the reiteration of the claim for damages respecting the orchard, we think in the absence of a motion to make more definite and certain they were sufficient. They are these:

“That by the use of said water on said land in the irrigation thereof under and pursuant to said perpetual right of use as aforesaid, said land became especially valuable for the cultivation and propagation of fruit trees and particularly for apples, peaches, and pears, and said land also thereby became valuable for the raising of the ordinary agricultural crops.”

This taken in connection with the other allegations regarding the worthlessness of the land without water fairly states that water was necessary in order to raise agricultural crops. Again we find this allegation:

“And by reason of said faults, failures, and refusals [referring to plaintiffs’ failure to furnish water], said S. M. Willis has suffered the loss of, and to, her fruit trees and fruit, and agricultural crops planted and growing on said land to the full amount of $4,500.”

Both these allegations are denied in the reply. We think they put in issue three matters: (1) Whether the water was necessary for the growing of agricultural crops; (2) whether such crops were planted and grown upon said land; and (3) whether they were injured by reason of plaintiffs’ refusal to furnish the necessary water to irrigate them as provided in the agreement. It is true that the allegations in the answer are not models of good pleading, but they were sufficient to raise the issue, and the testimony on this branch of the case was not objected to on the ground of the insufficiency of the pleading. We think such damages were general and such as might reasonably be expected as the result of the injury averred: 1 Sutherland on Damages, 763 et seq.; 8 R. C. L., § 156, p. 611; Wisner v. Barber, 10 Or. 342; Dose v. Tooze, 37 Or. 13 (60 Pac. 380). It is the view of the writer that the pleading would be sufficient even if tested by the rule applied to allegations of special damage; there being no specific objection to it by motion: 13 Cyc. 179; Knittel v. Schmidt, 16 Tex. Civ. App. 7 (40 S. W. 507); Conover v. Hanke, 71 Wis. 108 (36 N. W. 616). The wrong alleged is a breach of a contract to furnish water.' The damage therefrom is alleged to be the injury to fruit and agricultural crops planted and growing upon the land. The defendants were not asked and neither did the law require them to itemize their damages nor to present them in the form of a bill of particulars.

3. It is further contended that under the irrigation agreement between plaintiffs’ predecessor and the defendants the plaintiffs could not be put in default for failure to furnish water unless the defendants should have demanded the delivery thereof by a three days’ notice in writing. We do not so construe the contract. It is evident that it was the intention first to provide for a continnous flow of water in quantity of one half a miner’s inch for every acre of land in tract No. 2 during the irrigation season, namely, from April 1st to September 15th of each year. The succeeding clause giving the purchaser a right to vary the method of delivery by giving three days’ notice in writing was for the benefit of the purchaser, who might thereby instead of having a small quantity delivered continuously amass water, so to speak, and have the quantity so conserved delivered to him according to his needs so long as the quantity ultimately demanded should not exceed 4% acre-feet during the season, which would be the total flow computed in acre-feet. There was reason in requiring notice to be given in writing when a delivery of water was to be required in larger quantities and at intervals instead of continuously, since it would enable the grantor to mate arrangement to conserve in its reservoirs a sufficient quantity of water to meet the demand. The evidence indicates that defendants frequently verbally demanded the water to which they were entitled, and that it was not furnished. It also sufficiently appears that the original grantor and these plaintiffs used water from their irrigation system to irrigate 800 acres of their own land, and that this occasioned such a shortage they were unable to furnish the water in the agreed quantity to defendants. This they had no right to do. It was their duty to furnish the water they had contracted to furnish to defendants at any inconvenience that a compliance with their contract might occasion to themselves, and they had no legal right to occasion a shortage by creating an additional use on lands owned by them.

4-6. The court erred by decreeing that there should be no deficiency judgment relative to tract No. 1. As to this tract there was no defense. The demurrer to the answer having been sustained, and no new pleading having been filed, the case stood as though no answer had ever been attempted, and there was no pleading upon which the court could base a decree that the note and mortgage given on that tract were executed to secure the purchase price. Upon tract No. 2 the case is different. The agreement to furnish the water, the deed conveying the land, and the mortgage were all parts of the same transaction, and it is specified in the contract, which is executed with all the formalities attending a conveyance of real property, that the right therein conveyed shall be perpetual. The water right thereby became an appurtenance to the land, and as such a part of the realty: Ruhnke v. Aubert, 58 Or. 6 (113 Pac. 38).

Treating the deed, the water contract, and the mortgage as one instrument, as they should be considered under the circumstances, the conclusion follows that the mortgage was for the purchase price of real property, and the plaintiffs were not entitled to a deficiency judgment as to the mortgage upon tract No. 2. With the modification above suggested the decree will he affirmed, and defendants will recover their costs.

Modified and Affirmed.

Mr. Justice Benson, Mr. Justice Burnett and Mr. Justice Harris concur.