Nelson v. Nelson , 97 Vt. 50 ( 1923 )

The judgment rendered below can not stand for at least two reasons: First, the action is assumpsit, brought to the county court, declaring upon a certain promissory note, dated August 22, 1904, signed by defendant, and payable to the order of plaintiff on demand after date, for the sum of $2,095 with interest at five per cent. Defendant pleaded the general denial and payment. He also filed a complaint on book in set-off, with specifications thereunder. Plaintiff joined issue on the two pleas; and denied the allegations of the complaint, alleging that the causes of action therein set forth, if any such there were, "accrued between two partnerships in only one of which the defendant was a partner and not between the parties hereto, and are not proper to be herein considered"; and also pleaded the Statute of Limitations.

If we assume that the complaint in set-off was based on a demand on book had by the defendant against the plaintiff and so, under the provisions of G.L. 1819, properly filed in this case, then the complaint became a part of the pleadings (Proctor v.Wiley, 53 Vt. 406), and by G.L. 1820 the defendant was given the right to a trial on his complaint before the trial on the original action; and if he recovered on the complaint, the sum so recovered was to be pleaded as a set-off to the demand of the plaintiff. Such right of prior trial and set-off, in substantial compliance with this statute, was not affected by the fact that the same person was appointed both auditor and referee. The statute still required the issues to be determined in the order and manner as therein pointed out. In discussing this statute (prior to a later amendment not necessary to notice here), this Court said in Stewart v. Knight, 83 Vt. 201, 75 A. 12: "Reasonable regard must be had to the spirit of the statute, for statutes of set-off are favored in law, since they confer just benefits upon both plaintiff and defendant in simplifying litigation, and since they lessen the danger that a plaintiff who is insolvent or `execution proof' may recover an enforceable judgment and leave his adversary to the recovery of a worthless one. * * * Where there are mutual credits between two persons each of them being debtor and creditor to the other, good sense and even-handed justice suggest that each be permitted `to retain in payment of what is due him that which he owes on his part.'" The provisions of this statute seem to have been ignored by the trier. He made no report as auditor, nor did he in fact hear and determine the matter of book account presented by the complaint. His report and two supplemental reports are as referee only. And yet there appears on the books of Rising Nelson an unbalanced account with Rising Company, showing a balance due the latter on January 1, 1902, of $4,080.63 for slate taken from quarries No. 4 and No. 5. This account does not show any debit items covering interest on money advanced by the former company to the latter, nor commissions on sales made by the former, of slate owned by the latter, both of which defendant asserts should be allowed in the accounting justly to be had between those companies in this case, in arriving at proper results between these two brothers in this litigation.

But (Secondly) the plaintiff, in denying the allegations of the complaint, alleges that the cause of action, if any, set forth in the complaint and specification, accrued between those two partnerships in only one of which the defendant was a partner, and not between the parties hereto, and are not proper to be herein considered. The position here taken by the plaintiff in answer to the complaint, founded as it is on allegations true in fact, is unanswerable in this action at law; for the book account declared on has no legal mutuality between these parties, and is therefore not proper matter of set-off. Kendall v. Aldrich,68 Vt. 478, 35 A. 429. Yet the account between those two partnerships so enters into the subject-matters involved in the original action as to make its adjudication essential to final results which shall be just and equitable between the parties.

Such final results can be had only in a court of equity where, brushing technicalities aside, all questions involved may be considered and determined as their substance shall, in good conscience and fair dealing, require. The pleader must have had such a course in mind when concluding defendant's additional plea with a prayer for judgment, and that his defense may be treated pursuant to G.L. 1797, and he be awarded the amount his due, with a further prayer for general relief. The section of the statutes to which reference is there made provides that an action at law in a county, municipal or city court, may, at any stage thereof, be amended into a suit in equity and transferred to the court of chancery; and a suit in equity may, in like manner, be amended into an action at law and transferred to the proper court. Acting upon the provisions of this statute, this action at law, on remand, should be amended into a suit in equity and transferred accordingly, to be there proceeded with anew, under the rules of law and equity applicable to the case.

Regarding the effect of the Statute of Limitations, pleaded to the claim of defendant to recover back the payments made by him on the note in suit, we say nothing at this time, except that the court of equity can act on the question of the lapse of time in that respect, if presented, in analogy to the Statute of Limitations, as the circumstances of the case may in justice and good conscience require. See 2 Story Eq. Jur. (9th Ed.), §§ 1521, 1521a; Brookshank v. Smith, 2 Younge Coll. 58, 6 L.J. (N.S.) Exch. Eq. 34; Spear Carlton v. Newell, 13 Vt. 288.

Judgment reversed, report of the referee set aside, and causeremanded to be amended into a suit in equity, to be thereproceeded with anew. Let the costs be determined in connectionwith the equity suit.