Struver v. Ocean Insurance — 9 Abb. Pr. 23

Majority

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STRUVER a. THE OCEAN INSURANCE COMPANY.

New York Common Pleas;

General Term, June, 1859.

Headnote

Pleading.—Irrelevant and Frivolous Answers.—Remedy by Motion or by Demurrer.—Waiver.

An answer which is so framed that it does not set up a valid defence, but which states facts that may, by being properly averred, constitute a defence, will not be struck out as sham, irrelevant, or frivolous.

The remedy in such case is by demurrer.

The complaint against defendants as makers of certain promissory notes, named the defendants, in the title of the cause, as “The Ocean Insurance Company,” and alleged that they were a corporation. The answer set up that the notes were given in payment of a supposed loss due to the plaintiff from the defendants on an insurance policy issued by the defendants, and alleged matter tending to absolve them from any liability on the policy in question, on ground of fraud in the plaintiffs.

Held, that it was not necessary that the answer should show that the defendants had power to insure.

Giving admission of due service of notice of appeal, is a waiver of the objection that it was not served within the time to appeal.

Appeal from an order striking out an answer as irrelevant and frivolous.

The action was on five several promissory notes, made by the defendants to the order of the plaintiffs. The complaint alleged that the defendants were a corporation, organized under the laws of the State of New York, and transacting business in the city of New York, and then alleged the making and delivery of the notes, in the usual form; but it did not show the character of their business or corporate powers, except so far as that is implied in the defendant’s name.

The allegations of the answer were as follows :

“First. That the promissory notes mentioned and described in the plaintiff’s complaint, to the extent of twenty-five hundred dollars thereof with interest, were given to the plaintiffs on a loss under an open policy issued by the defendants to the plain

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tiffs, insuring part of the cargo of the brig Mary C. Haskell against loss by the perils of the sea, on a voy'age from New York to Cienfuegos, on which voyage the said Mary G. Haskell was lost.

“ And defendants say, that at the time of the said insurance, and of indorsing the risk aforsaid on said policy, which was an open policy to the plaintiffs, the said brig Mary C. Haskell, as the defendants have recently learned, been informed, and believe, and at the time she left the port of New York, was badly worm-eaten, unsound, and unseaworthy, contrary to and in violation of the provisions and effect of the said policy ; and the defendants, by reason of such unseaworthiness and unsoundness, were not, by the provisions and force of said policy, bound for any loss sustained on such voyage to the said brig or her cargo. That the defendants had no knowledge of the unsound condition of said brig at the time of the issuing of said policy, nor at the time of giving the said promissory notes, nor until a short time previous to the commencement of this action.

“ And these defendants further say, that as they believe the said plaintiffs, at the time of making said insurance, had notice, or were chargeable with notice, that the said brig was so unseaworthy as aforesaid, prior to her leaving the port of New York, by reason of which premises the defendants were not bound to give the said notes nor to pay such loss. That these defendants, at the time of giving said notes, deposited with, and assigned to Carl Struver, one of the said plaintiffs, a first bond and mortgage for twenty thousand dollars on real estate in Westchester county, as security for said notes mentioned in said complaint, and these defendants pray, as affirmative relief, that so far as regards the said twenty-five hundred dollars and interest, the said bond and mortgage may be reconveyed to the said defendants, and that the plaintiffs may be adjudged to have no claim thereupon to that extent.

“ Second. And for a further answer as to the residue of the amount claimed by the said plaintiffs in their complaint, the defendants say, that such residue of said notes were given in settlement of an alleged loss of the schooner Falmouth, insured by a policy issued by the defendants to the plaintiffs.

“ And these defendants are informed and believe that since the said alleged loss the plaintiffs have caused the said schooner

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to be sold, and received the proceeds thereof to a large amount, but the particular amount these defendants do not know, without accounting for the same to these defendants,—and which proceeds are a proper set-off and counter-claim against the said residue of said notes. And these defendants say that the said schooner Falmouth was not, as they are informed and believe, a total loss, as represented by the plaintiffs at the time of the giving of the notes as aforesaid. And these defendants pray, as affirmative relief, that the said plaintiffs 'may account to these defendants for the value of the said schooner Falmouth at the time of the sale thereof as aforesaid.

“ Third. And for a further answer to the whole of the said complaint, these defendants say that on or about the 20th day of May, 1858, the plaintiffs alleged themselves to be creditors of these defendants by means of the identical notes described in the plaintiffs’ complaint in this action, and that these defendants were insolvent, commenced their certain action in the Supreme Court of the State of New York, under the act of this State, entitled “ Of Proceedings against Corporations in Equity,” and praying in their complaint that these defendants may be restrained from collecting or delivering to any person, any of the money, property, or effects of these defendants, and from exercising any corporate rights or privileges, and for the appointment of a receiver of all the property and effects of these defendants, to the end that the property and effects of these defendants shall be distributed ratably to and among all creditors of these defendants, pursuant to such statute, under which said action was commenced and is prosecuted. That said action is still pending, in no ways discontinued, and is still being prosecuted by the said plaintiffs. These defendants therefore pray that the plaintiff’s complaint may be dismissed with costs.

“ And as and for affirmative relief, these defendants pray that, pursuant to such statute, the plaintiffs may be restrained by order from all proceedings in this action, and all proceedings at law against these defendants, and that the plaintiffs’ complaint in this action may be adjudged to be dismissed with costs.”

The plaintiffs moved at special term to strike out the first and second defences as sham, irrelevant, and frivolous, and the third defence as irrelevant and frivolous; and for judgment. The motion was founded on affidavits, showing, among other

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things, admissions made by the defendants of their liability and promises to pay; and upon the pleadings in this cause, and in the cause in the Supreme Court referred to in the third defence. The motion was granted at special term, and the defendants appealed to the general term.

On the argument, the respondents raised the preliminary objection that the notice of appeal was served after the time to do so had expired.

George W. Stevens, for the appellants.

I. The answer shows a sufficient defence to the notes mentioned in the complaint, as to the alleged loss by the brig Mary C. Haskell, because it shows that the brig was unseaworthy at the time of the issuing of the policy of insurance, and that the defendants had no notice of that fact until after the making of the notes mentioned in the complaint. It also avers, on belief, that the plaintiffs had notice of that fact at the time of the issuing of the policy.

II. It demands affirmative relief as to the mortgage for $20,000 assigned to Struver, one of the plaintiffs, as security for the said notes. The plaintiffs cannot have this mortgage over a judgment in their favor on the notes for the same debt. Struver being one of the plaintiffs, the acceptance by him of the mortgage in question, as security for the notes, bound all the plaintiffs.

III. When such a proceeding as that shown by the third defence is commenced, any suit at law, by any creditor against the corporation, may be restrained by the Supreme Court. It surely cannot be necessary to apply to that court to restrain the creditor, who has commenced the proceedings in the Supreme Court, from proceeding at law to recover the very debt which is the basis of his application to the Supreme Court for an injunction. He at least has made his election, and must abide by their election. (See 2 Rev. Stats., 466 (marg. paging), § 56, 4th ed., ] 708, § 64.)

Lane & Roelker, for the respondents.

The plaintiff has mistaken his

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remedy. He should have either demurred, or moved to make the first defence set up in the answer, more definite and certain. The substance of this part of the answer, if well pleaded, would be a defence to some part of the plaintiffs’ claim. If the notes were given in payment of a claim arising upon a policy of insurance fraudulently procured, the plaintiff could not succeed. The question of consideration is always open between the original parties to a promissory note. The distinctions between a sham, irrelevant, and frivolous answer, are settled by many authorities, which will be found collected under sections 152 and 247 of the Code. (’Voorhies' Ed., 1857.) A sham answer is one that is false in fact; a pleading is irrelevant, which has no substantial relation to the controversy between the parties to the action; and a frivolous answer is one which, assuming its contents to be true, presents no defence to the action. An answer, however,'which is so framed that it does not set up a valid defence, but which states facts that may, by being properly averred, constitute a defence, will not be struck out as sham, irrelevant, or frivolous, but it may be demurred to. (Alfred a. Watkins, 1 Code R., N. S., 343.)

The answer in this action may be stated thus : As to $2500 of the plaintiffs’ claim, the plaintiffs are not entitled to a recovery, because they obtained a policy upon a vessel they knew to be unseaworthy, and did not disclose the fact; and as to the balance, it is for notes given in settlement of a claim arising upon a policy, and for a loss, represented by the plaintiffs to be a total loss, which was not ti*ue, but on the contrary the plaintiffs sold the vessel insured, and appropriated the proceeds without accounting. If these facts were well pleaded, it seems to me that they constitute a defence to the action. It is not an answer to this view that the defendants do not show an organization which gives power to insure. The plaintiffs have described them as an insurance company, and have alleged their incorporation. Hor is it an answer that the notes are a payment of the loss, for the reason that the defence, if good at all, is one of fraud on the part of the plaintiffs, and that defence is not precluded by the settlement.

The preliminary objection to this appeal is not well taken. The plaintiffs have admitted due service of the notice of the appeal, and are concluded. .

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I think the order of the special term should be reversed.

I agree with Judge Brady that this answer should not have been stricken out as irrelevant and frivolous, but that the question of its insufficiency should have been raised by demurrer. • I shall not, therefore, discuss the question whether there is a sufficient averment of fraud contained in the answer, to release the defendants from the effects of an adjustment and settlement of the loss, by the giving of their promissory notes, or the other matters relied upon as a defence, as I have. already intimated my views upon the motion below, and it would not be proper again to consider and review the matter until the defendants have been heard upon the demurrer.

Order reversed, with $10 costs to the appellants, to abide the event.

Footnotes

* Present, Daly, F. J., Brady and Hzlton, JJ.