Everding & Farrell v. Gebhardt Lumber Co.

Mr. Justice Bean

delivered the opinion of the court.

1. The main question for determination in this case is whether or not the facts alleged in the second further and separate answer constitute a counterclaim or defense or partial defense to the plaintiff’s complaint so that the same should not be stricken out. It is immaterial by what means or process the plaintiff obtained the possession of the property described in the contract, if by so doing it breached the contract. It will be noticed that the condition specified therein is that the defendant company shall be entitled to the possession of the premises for the purpose of cutting and removing the timber therefrom. It is the contention of counsel for the plaintiff that when the contract was executed and delivered to the defendant and it was placed in possession of the premises, plaintiff’s part of the contract was performed and that defendant is not entitled to set up a wrongful attachment in the prior action as a counterclaim. Whatever might be considered if the attachment proceedings were entirely separate and distinct from the contract, it seems to us that in order to carry out the stipulations of the agreement it is incumbent upon the party executing the same, or its assignee, to permit the defendant to continue in the possession of the land in order to cut the timber therefrom. The contract is mutual. Upon *245 the one side the first party agrees to sell about ten million feet of timber to the second party who agrees to pay therefor $12,000, or $1.20 per thousand feet in case there shall not be found that amount of timber on the land. Each party by its pleading accuses the other of violating the contract. "While the answer, particularly the second separate and further answer, is not a model pleading, it alleges a breach of the contract in question on the part of the plaintiff and that by reason thereof the defendant is damaged in the amount named.

2,3. Regardless of whether the contract may be treated by the injured party as terminated by the breach, the breach thereof gives rise to a cause of action : 6 R. C. L., § 389, p. 1032. When a tort arises out of the same transaction as plaintiff’s cause of suit and the proof of it tends to impeach the consideration of the contract sued on, to meet and repel the allegations of the complaint in whole or in part, it may be made available as a defense in an action of assumpsit: 2 R. C. L., § 28, p. 772.

In Willman v. Friedman, 4 Idaho, 209 ( 38 Pac. 937 , 95 Am. St. Rep. 59 ), at the time the» defendant filed the complaint he sued out a writ of attachment which on motion of defendant was dissolved as having been wrongfully sued out. The defendant then answered the original complaint and at the same time filed a cross-complaint setting up the claim for damages by reason of the wrongful issuance of the writ of attachment. It was held that the cause of action set forth in the cross-complaint arose out of the transaction which formed the basis of the action: See, also, as somewhat in point, Waugenheim v. Graham, 39 Cal. 169, 177 .

Section 74, L. O. L., requires that the counterclaim mentioned in Section 73 which may be contained in the answer,

*246 ‘1 Must be one existing in favor of a defendant, and against a plaintiff, between whom a several judgment might be had in the action, and arising out of one of the following causes of action: (1). A cause of action arising out of the contract, or transaction set forth in the complaint, as a foundation of the plaintiff’s claim. (2) In an action arising on contract, any other cause of action arising also on contract, and existing at the commencement of the action. The defendant may set forth by answer as many defenses and counterclaims as he may have. They shall each be separately stated, and refer to the causes of action which they are intended to answer, in such manner that they may be intelligently distinguished. ’ ’

Subdivision 1 of Section 74 provides for two classes of counterclaims, namely: (1) A demand existing in favor of the defendant and against the plaintiff which arises out of the contract upon which the plaintiff has based his cause of action: (2) a demand, so existing, which arises out of the transaction, a broader term than contract, upon which the plaintiff has based his action. Mr. Bliss in his work on Code Pleading, commenting on the first class, uses the following language:

“Under the first class, the original action being based upon a contract, if the plaintiff is liable, at the suit of the defendant, in respect to the same contract, the latter may present his demand by way of counterclaim. This covers, as we have seen, what was known as recoupment, and by the terms of the statute extends to equitable demands. Questions of difficulty will seldom arise in respect to this class, as it is easy to determine whether the defendant’s demand arises out of the contract in suit. Thus, in an action to recover the rent stipulated in a lease, the defendant may present a counterclaim based upon a breach, on the part of the plaintiff, of other provisions in the same lease”: Section 371.

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4. In the case at bar the contract is in the nature of a lease and sale of standing timber. The second further and separate answer constitutes a counterclaim coming within the first class provided for in Section 74, L. O. L., and is in accordance with the principle announced in the cases of Chance v. Carter, 81 Or. 229 ( 158 Pac. 947 ), and Zigler v. McClellan, 15 Or. 499, 502 ( 16 Pac. 179 ).

Under the terms of the agreement the defendant wa.s entitled to the possession of the premises for the full time stipulated, if necessary, for the purpose of cutting the timber upon the conditions named in the contract. This time had not expired and the timber was not all cut when, as the defendant alleges, the plaintiff wrongfully took possession of the land and property and prevented the defendant from further proceeding to carry out the contract and obtain the benefits of its purchase. The contention of plaintiff that the contract was fully performed on its part when the property was turned over to defendant in 1912, and there was nothing more for it to do, would, when taken into consideration together with the facts set forth in the second affirmative defense, lead to the conclusion that the plaintiff, or its assignor, during the first month or year after the defendant had so taken over the property, could have wrongfully retaken possession of the premises and prevented the defendant from cutting the timber. The allegation of plaintiff’s complaint that the plaintiff and its assignors had “performed all the terms and conditions of said contract on their or its part to be performed” recognizes the law of this case, .and must necessarily mean that the defendant had been permitted to retain possession of the land and had not been prevented by plaintiff from *248 cutting the timber as stipulated. Any other construction of the contract would permit the first parties thereto or their assignee to make any number of successive sales of the standing timber as often as they eould wrongfully oust the purchaser from the premises and prevent him from cutting the timber. In other words, defendant asserts that plaintiff has wrongfully prevented it from obtaining a portion of the timber purchased which it was agreed defendant should have the privilege of. cutting and removing from the land during a period of five years; that thereby plaintiff has violated the contract and the defendant has been damaged in a certain sum. We think the defendant should have been allowed to plead and prove the matter set forth in the affirmative answer and that it was error to strike out the same. At the oral argument counsel for plaintiff conceded that the matter referred to should not have been stricken out if it constituted a defense. It is contended by defendant that the complaint is insufficient in not alleging that the amount claimed had not been paid and no demand was made for costs. We pass this as it is believed that both the complaint and answer will be amended before another trial.

The answer is not as definite and clear as it might be in the assertion of the breach of the contract on the part of the plaintiff. Some of the material matters set forth as having been found or adjudged by the court upon the trial of the former action are not alleged as positive facts. Nevertheless, the answer shows a breach of the contract on the part of the plaintiff causing the defendant damages in a specified amount.

The general rule is stated thus in 9 Cyc., p. 635:

‘ ‘ The breach of a contract by one of the parties gives to the other a right of action for the injury suffered by *249 him from such breach, but it does not in all cases discharge him from performance on his part. The contract may be broken wholly or in part, and if in part the breach may or may not be sufficiently important to operate as a discharge; or if it is of such importance the injured party may choose not to regard it as a discharge, preferring to continue to carry out the contract, reserving to himself the right to sue for such damages as he may have sustained by the breach. It is often very difficult to determine whether or not a breach of one of the terms of a contract discharges the party injured.”

It does not appear that an estoppel is pleaded by the defendant or that it has been discharged from performance of the contract on its part or that the same has been rescinded. Some of the facts set forth in the so-called plea of estoppel may be material in order to show a breach of the contract by the plaintiff, and resulting damages. For a complete discussion of the question of estoppel, we refer to the language of Mr. Justice Moore in the case of Stamm v. Wood, ante, p. 174 ( 168 Pac. 69 ), which is applicable to the case at bar.

5, 6. It is contended by the plaintiff that the defendant waived its right to complain of the action of the court in striking out part of the amended answer by electing to go to trial. It is apparent that the defendant was forced to go to trial. Plaintiff made this election and not the defendant. If it had omitted to plead the new matter in its second amended answer, then the question of waiver would have been presented. It is unnecessary to consider the former answers. They are no longer a part of the record: Wells v. Applegate, 12 Or. 208 ( 6 Pac. 770 )

*250 The judgment of the trial court is reversed and the cause remanded for a new trial, with leave for each party to apply to amend its pleading.

Reversed and Remanded.

Mr. Chief Justice McBride, Mr. Justice Moore and Mr. Justice McCamant concur.