JONES v. MORTIMER

Reset A A Font size: Print

District Court of Appeal, First District, Division 2, California.

JONES v. MORTIMER et al.

Civ. 12937.

Decided: October 25, 1945

Kenneth R. Malovos and Herman J. Mager, both of San Jose, for appellant. Robert W. Kenny, Atty. Gen., and John J. Dailey, Roy D. Reese, and Lenore D. Underwood, Deputy Attys. Gen., for respondent.

This appeal is presented on an agreed statement.

California Mutual Building and Loan Association (hereinafter called the association) is in course of liquidation by the Building and Loan Commissioner (hereinafter called the commissioner). On November 10, 1938, the commissioner levied a ratable assessment of $100 per share on the outstanding stock of the association. Appellant Jones owned four shares of the stock and the assessment against his stock amounts to $400.

On December 29, 1933, appellant commenced an action against the association and the commissioner for services rendered to the association. In this action appellant's liability of $400 to the association was not pleaded in the answer, appellant recovered judgment on February 19, 1940 in the sum of $1536.10, and costs and this judgment was set up on the records of the association as an approved claim payable out of dividends in the course of liquidation. Liquidating dividends of 50% having been declared the commissioner set up a credit on the books of the association in favor of appellant in the sum of $768.05 and set off against that sum the $400 assessment leaving a balance on the books in favor of appellant of $368.05. Appellant refused to accept this amount and filed a petition in the superior court to compel the commissioner to pay him the $768.05 in full. This petition was denied and this appeal followed.

Appellant argues that the failure to plead the $400 assessment as a counterclaim in the original action operates to bar the commissioner's right to assert it now. We agree with appellant that the $400 assessment could have been set up as a counterclaim under Code Civ. Proc. § 438 as broadened by its amendment in 1927. Under that section as it now reads ‘the sole requisites of the counterclaim are (1) that it must tend to defeat or diminish plaintiff's demand; and (2) the demands must be reciprocal.’ Bond v. Farmers & Merchants Nat. Bank, 64 Cal.App.2d 842, 846, 149 P.2d 722, 724; Terry Trading Corporation v. Barsky, 210 Cal. 428, 435, 436, 292 P. 474. It does not follow, simply because the $400 obligation might have been pleaded as a counterclaim in the appellant's action for services and was not so pleaded, that the commissioner is barred to assert it under Code Civ.Proc. § 439. The latter section provides: ‘If the defendant omits to set up a counterclaim upon a cause arising out of the transaction set forth in the complaint as the foundation of the plaintiff's claim, neither he nor his assignee can afterwards maintain an action against the plaintiff therefor.’ It is clear that the assessment against appellant's stock was not a counterclaim ‘arising out of the transaction set forth in the complaint as the foundation of the plaintiff's claim.’ The services rendered by appellant to the association, which formed the foundation of his claim, and the assessment were separate and distinct transactions in no way connected one with the other. The assessment therefore did not fall within the class of counterclaims covered by Code Civ.Proc. § 439.

A considerable portion of the briefs is devoted to a discussion as to whether a building and loan association in this state is entitled to enforce a ‘blanker's lien’ against a debt owing by the association under Civil Code, § 3054. We do not find it necessary to decide that question.

Section 440 Code of Civil Procedure provides that: ‘When cross-demands have existed between persons under such circumstances that, if one had brought an action against the other, a counterclaim could have been set up, the two demands shall be deemed compensated so far as they equal each other * * *.’ This section has been construed to make an off-set falling within its terms operate as a payment pro tanto. Estate of Gamble, 166 Cal. 253, 256, 257, 135 P. 970; People v. California, etc., Trust Co., 168 Cal. 241, 141 P. 1181; Estate of Bell, 168 Cal. 253, 141 P. 1179; In re Bank of San Pedro, 11 Cal.2d 313, 79 P.2d 1057; Automobile, etc., Co. v. Salladay, 55 Cal.App. 219, 226, 203 P.2d 163; Ripley Imp. Co. v. Hellman, etc., Sav. Bank, 90 Cal.App. 83, 265 P. 835; Layne v. Superior Court, 121 Cal.App. 206, 8 P.2d 895. Our statutory rule is contrary to that prevailing at common law. (See 48 C.J. 626 in which the general rule is stated and the statutory modification in California is noticed in note 17(a).) It follows that the commissioner had the right to treat the $400 assessment as a part payment on the larger judgment obligation to appellant unless prohibited from doing so by the statutory provisions next to be noticed.

Sec. 7.02 of the Building and Loan Association Act, Deering's Calif.Gen.Laws 1937, Act 986, provides that: ‘The liability of stockholders pursuant to section 7.01 of this act shall be enforced exclusively pursuant to this section and the next succeeding three sections of this act.’

Sec. 7.03 provides that: ‘If any stockholder of such association shall fail to pay said assessment in full upon the date specified * * * a right of action shall immediately accrue to the commissioner * * * to recover the amount of said assessment or the amount remaining unpaid thereon * * *’ and that he shall have full power to maintain an action to enforce this liability.

Appellant argues that by virtue of the language of sec. 7.02, ‘shall be enforced exclusively’, the commissioner's sole remedy was by action pursuant to sec. 7.03 and that he had no power to set off the $400 assessment against appellant's judgment.

It is to be noted that by the express language of sec. 7.03 such action is only to be prosecuted if the assessment is not paid; and, as we have seen, by virtue of the language of Code Civ.Proc. § 440, that ‘the two demands shall be deemed compensated so far as they equal each other’, the two obligations pro tanto cancelled one another and the plaintiff thereby paid his assessment. Under the circumstances not only was the commissioner not required to bring suit to collect the assessment but, the assessment having been paid, he had no cause of action thereon.

The order appealed from is affirmed.

DOOLING, Justice pro tem.

NOURSE, P. J., and GOODELL, J., concur.