## Facts

- The Scanlons owned a large, wooded parcel of land in Muskegon County, Michigan.
- George McCastle was engaged in manufacturing and selling lumber and sought timber for his business.
- After an earlier oral arrangement allowing McCastle to cut and remove timber, the parties executed a written agreement dated May 24, 1951.
- The written instrument stated that the Scanlons “sold and conveyed” to McCastle all trees on the premises “suitable for lumber,” whether standing or lying on the ground, and granted permission to cut and haul the timber within one year.
- McCastle began operations under the agreement and cut timber on the property.
- McCastle later attempted to transfer or sell his cutting rights to a third party (Morse), who entered the property to cut timber.
- The Scanlons refused to allow the third party to cut timber and then barred McCastle as well, stating that any right to cut had been revoked.
- McCastle sued, alleging that the written agreement conveyed a right to the timber for the stated term and that the Scanlons repudiated the agreement without justification by preventing further cutting.
- McCastle’s amended pleading sought damages based on the value of the remaining timber he could not cut because of the Scanlons’ actions.
- The Scanlons denied liability and filed a cross-declaration asserting counterclaims, including (1) an assault-and-battery claim by Evelyn Scanlon against McCastle and (2) a claim for timber allegedly cut after the Scanlons’ asserted revocation.
- The trial court struck the counterclaims, reasoning they did not arise out of the contract sued upon and, even if viewed as recoupment, could not support affirmative recovery.
- The case proceeded to a jury on McCastle’s claim; the jury returned a verdict for McCastle, and judgment was entered accordingly.
- The Scanlons appealed to the Michigan Supreme Court, challenging the treatment of their counterclaims and the legal effect of the timber agreement, among other trial rulings.

## Issues

1. Whether the May 24, 1951 written agreement constituted a sale and conveyance of the timber (a property interest) or only a personal, revocable license to enter and cut timber.
2. Whether the trial court properly struck defendants’ counterclaims for assault and battery and for timber allegedly cut after defendants’ asserted termination of the agreement, where those claims did not arise out of the timber contract transaction and sought affirmative recovery.

## Decision

- The Michigan Supreme Court affirmed the judgment for McCastle.
- The Court agreed that the trial court properly refused to allow defendants’ counterclaims because they did not arise out of the contract forming the basis of McCastle’s action and could not be used to obtain affirmative relief under a recoupment theory.
- The Court treated the written instrument’s “sold and conveyed” language, together with the one-year cutting period, as supporting the view that McCastle received a transferable timber interest for the term rather than a revocable permission.
- Because defendants repudiated the agreement and prevented further cutting during the contract period, the verdict awarding McCastle damages based on the value of the remaining timber was allowed to stand.

## Legal Principles

- An instrument by which landowners “sell and convey” standing (or down) timber to a buyer, with a specified time to cut and remove it, may create a property right in the timber rather than a mere license revocable at the landowners’ will.
- When the seller prevents performance under a timber-sale agreement that conveys timber rights for a stated term, the buyer may recover damages tied to the value of the timber interest wrongfully withheld (including the value of timber remaining on the land).
- Counterclaims (or cross-actions) must arise out of the same contract or transaction sued upon to be litigated in that action; claims based on separate alleged torts occurring after an asserted termination of the contract may be excluded.
- Recoupment operates defensively to reduce or defeat the plaintiff’s recovery based on matters arising from the same transaction; it does not authorize affirmative judgments for the defendant on independent claims.

## Conclusion

McCastle v. Scanlon holds that a written agreement stating the landowners “sold and conveyed” all timber suitable for lumber, with one year to cut and remove it, supported treating the buyer’s right as a timber interest for the contract term rather than a revocable license, and that the landowners’ repudiation justified damages based on the value of the remaining timber; the Court also upheld striking the landowners’ tort-based counterclaims because they did not arise out of the timber contract and could not be pursued for affirmative recovery in that action.


McCastle v. Scanlon, 337 Mich. 122, 59 N.W.2d 114 (1953)