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E. P. Reynolds, Inc. v. Nager Electric Co.

17 N.Y.2d 51 Court N.Y. Decision date 1966-02-17 English

Delivered by Keating, J.

Contents

Majority

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E. P. Reynolds, Inc., Plaintiff-Respondent, v. Nager Electric Company, Inc., Defendant-Appellant and Third-Party Plaintiff-Appellant. Massachusetts Bonding & Insurance Company, Third-Party Defendant-Respondent. (And Another Third-Party Action.)
Argued January 6, 1966;
decided February 17, 1966.
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Jerrold Morgulas and Alfred Foreman for appellant.
I. The cases cited by the Appellate Division in support of its contention that appellant’s appeal might be dismissed out of hand because of the alleged insufficiency of the record are not controlling and in fact do not support the position taken by the Appellate Division. (Esso Standard Oil Co. v. Sacatore’s Inc., 246 F. 2d 17 , 355 U. S. 834 ; Sparrow v. Yellow Cab Co., 273 F. 2d 1 ; Smith Corp. v. Prefab Tr. Co., 287 F. 2d 210 ; Teitelbaum v. Curtis Pub. Co., 314 F. 2d 94 , 375 U. S. 817 .) II. Assuming, arguendo, that plaintiff-respondent is entitled to recover damages for fraud in the inducement, nevertheless, defendant-appellant is entitled to recover on its third-party claim against Massachusetts Bonding & Insurance Company on the performance bond. (Ettlinger v. National Sur. Co., 221 N. Y. 467 ; Taylor-Fichter Steel Constr. Co. v. Fidelity & Cas. Co., 258 App. Div. 235 .) III. As a matter of law, plaintiff is barred from allegations and misrepresentations with regard to underground site conditions obtaining on the job. (Danann Realty Corp. v. Harris, 5 N Y 2d 317 .) IV. Actual fraud is never presumed and must be proven as a fact before an affirmative finding can be made. (Schumaker v. Mather, 133 N. Y. 590 ; Morris v. Talcott, 96 N. Y. 100 ; Jaeger v. Kelley, 52 N. Y. 274 ; Grosjean v. Galloway, 64 App. Div. 547 ; Shotwell v. Dixon, 163 N. Y. 43 ; Berkey v. Third Ave. Ry. Co., 244 N. Y. 84 ; Riley v. Larocque, 163 Misc. 423 ; First Nat. Bank of Hempstead v. Level Club, 254 App. Div. 255 , 282 N. Y. 577 ; Graham v. Blake, 265 App. Div. 927 , 291 N. Y. 653 ; Keighley v. American Trust Co., 265 U. S. 590 ; Hill v. International Prods. Co., 129 Misc. 25 ; Grauer v. Schenley Prods. Co., 32 F. Supp. 225 ; Benz v. Kaderbeck, 241 App. Div. 583 ; Harmon Nat. Real Estate Corp. v. Swanson, 154 Misc. 380 .) V. The burden of proving fraud is upon him who alleges it. (Smith v. Vara, 136 Misc. 500 ; Matter of Cushman, 95 Misc.
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9 ; Hotaling v. Leach & Co., 126 Misc. 845 ; Matter of Timko, 150 Misc. 701 ; Polochek v. New York Life Ins. Co., 147 Misc. 16 ; Cave v. Green, 281 App. Div. 560 , 306 N. Y. 669 .) VI. In an action in fraud, plaintiff must show not only that he did not know the representations to be false but that by the exercise of reasonable care he could not have ascertained their falsity. (Murphy v. Cady, 30 F. Supp. 466 , 113 F. 2d 988 , 311 U. S. 705 ; Wheelock v. Bennett, 207 App. Div. 89 ; Sylvester v. Bernstein, 283 App. Div. 333 , 307 N. Y. 778 ; White v. La Due, 197 Misc. 589 .) VII. Had a representation regarding subsurface conditions been deemed by respondent to be a crucial element of the contract and one without which he would not have executed the contract, it should have been included in the contract and the fact of its exclusion bars any collateral proof. (Mitchill v. Lath, 247 N. Y. 377 ; Foundation Co. v. State of New York, 233 N. Y. 177 .)
Alfred J. Klein for respondent.
I. Whether defendant-appellant was guilty of fraud is a question of fact which the jury answered correctly on the basis of the weight of the evidence presented. (Daly v. Wise, 132 N. Y. 306 ; Kiechle v. Circelli, 10 Misc 2d 1016 .) II. Plaintiff could not by reasonable effort have learned the truth about defendant’s fraud in advance and, even if it could, defendant’s conduct was, in law, such as to relieve plaintiff of the obligation to conduct an investigation of its own. (Jarcho Bros. v. State of New York, 179 Misc. 795 ; Foundation Co. v. State of New York, 233 N. Y. 177 ; Albert v. Title Guar. & Trust Co., 277 N. Y. 421 ; Mead v. Bunn, 32 N. Y. 275 .) III. Appellant may not now be heard to raise the questions of law it poses for it took no exception to the law announced in the trial court’s charge. IV. The applicable rule of law is that one who fraudulently misrepresents underground site conditions to another can be held liable thereby for damages caused, and the courts have consistently so held. (Jackson v. New York State, 210 App. Div. 115 , 241 N. Y. 563 ; Foundation Co. v. State of New York, 233 N. Y. 177 ; Woodmont, Inc. v. Daniels, 274 F. 2d 132 , 290 F. 2d 186 ; Pittsburgh Testing Labs. v. Farnsworth Chambers Co., 251 F. 2d 77 ; Imperator Realty Co. v. Tull, 228 N. Y. 447 .) V. Plaintiff was justified in rescinding the contract and abandoning the work and defendant’s liability to plaintiff as reported in the
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jury’s verdict should be affirmed. (Sabo v. Delman, 3 N Y 2d 155 ; Adams v. Gillig, 199 N. Y. 314 ; Kiechle v. Circelli, 10 Misc 2d 1016 .) VI. Since plaintiff-respondent proved that defendant-appellant was guilty of fraud and since Nager’s counterclaim against Reynolds was proved to be spurious, and was therefore disallowed, it was necessary and just that Nager’s claim against the impleaded surety, Massachusetts Bonding & Insurance Company, also be disallowed. (Ettlinger v. National Sur. Co., 221 N. Y. 467 .) VII. The Appellate Division’s unanimous judgment of affirmance was in all respects proper and should be affirmed. Appellant’s submission was “ obviously insufficient ”. VIII. Appellant did “ insist ” upon its “ inadequate ” appendix and was guilty of “ intransigence ”, IX. The cases cited by the Appellate Division do support its decision; appellant is in error in asserting otherwise. (Esso Standard Oil Co. v. Sacatore’s Inc., 246 F. 2d 17 , 355 U. S. 834 ; Sparrow v. Yellow Cab Co., 273 F. 2d 1 ; Teitelbaum v. Curtis Pub. Co., 314 F. 2d 94 , 375 U. S. 817 ; Di Francesco v. Di Francesco, 23 A D 2d 740 .) X. The appeal to the Court of Appeals should be dismissed as being time-barred.

This case reaches us in an unusual posture.

The respondent has recovered a judgment for damages arising out of false representations which induced it into a construction contract with appellant. The appellant’s counterclaim for completion cost of the construction in excess of the contract price and the third-party claim against the surety on respondent’s performance bond have been disallowed, and the Appellate Division has unanimously affirmed.

Affirmance, however, rests solely upon the ground that the appendix submitted to the Appellate Division by the appellant was insufficient to permit determination of the questions sought to be raised. Legal and factual issues were not considered.

We agree with the Appellate Division that it is not required to determine an appeal with the aid of an appendix which it considers inadequate.

On the present appeal, appellant submitted a 13-page appendix extracted from a trial transcript of over 950 pages, and sought to contend that (1) the evidence did not sustain a finding of

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fraudulent representations, (2) the respondent was barred from claiming misrepresentations as a matter of law, and (3) dismissal of appellant’s third-party claim against the surety was improper. It may well be, of course, that the raising of such contentions requires the use of an extensive appendix but, in any event, merely to state the points raised makes the inadequacy of the appendix and the difficulty of full review thereon apparent.

We think, however, that neither CPLR 5528 nor the necessary implementation of its purpose warrants affirmance of this appeal on the ground stated by the Appellate Division. To hold otherwise would inevitably decrease the value to be derived from an appendix by encouraging the inclusion of material unnecessary to the questions sought to be reviewed. In the final analysis, an unnecessarily extended appendix proves as burdensome as one which is too short.

We note that the appendix system was adopted in New York after extended study indicated the need to reduce the cost of printing records on appeal. (Second Preliminary Report of Advisory Comm, on Practice and Procedure [N. Y. Legis. Doc., 1958, No. 13], pp. 344-347; Eleventh Annual Report of N. Y. Judicial Council, 1945, pp. 414-416.)

In accordance with this policy, paragraph 5 of subdivision (a) of CPLR 5528 provides that an appellant’s appendix shall contain “ only such parts of the record on appeal as are necessary to consider the questions involved, including those parts the appellant reasonably assumes will be relied upon by the respondent ”.

Subdivision (b) provides that respondent’s appendix “ shall contain only such additional parts of the record as are necessary to consider the questions involved.”

The draftsmen assumed that the main practice problem would be the printing of appendices that were too extensive rather than too attenuated. Thus, while the provision for sanctions in subdivision (e) of CPLR 5528 allows the court to “ withhold or impose costs ” for “ any failure to comply with subdivision (a), (b) or (c) ” (see 7 Weinstein-Korn-Miller, N. Y. Civ. Prac., par. 5528.03, p. 55-208 [1965]), the draftsmen

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assumed that the power would be exercised " if unnecessary parts of the record are printed; ” (Second Preliminary Report of Advisory Comm, on Practice and Procedure [N. Y. Legis. Doc., 1958, No. 13], p. 354; italics supplied). This, of course, is the situation in which sanctions are most useful.

The most effective guarantee against an inadequate appendix, of course, is an attorney’s' desire to supply the court with all material necessary to convince it to .adopt his client’s position. And with the tactical and practical risk of omission so great, the main danger to be guarded against, in the view of the draftsmen, is the too verbose rather than the too cryptic appendix.

Should the natural caution of the advocate and the threat of cost sanctions fail to provide an adequate appendix, the court may direct the appellant to submit a further appendix or it may dismiss the appeal unless appellant files a further appendix within a specified period of time.

Whichever course is chosen, the court’s control over the adequacy of the appendix is effectively maintained while, at the same time, appellant avoids, at least initially, the serious sanction of an affirmance without consideration of the merits. Harsher penalties might defeat the purpose of CPLR 5528 by encouraging the careful advocate to submit an unreasonably lengthy appendix in order to avoid the extreme consequence of a mistaken belief that only a lesser portion of the record needed to be printed. .Should such sanctions, short of an automatic 1‘ affirmance, ’ ’ prove inadequate, a revision of the CPLR in this regard can be considered by the Judicial Conference and the Legislature.

The order appealed from should be reversed and the case remitted to the Appellate Division for further proceedings not inconsistent with this opinion, without costs.

Chief Judge Desmond and Judges Fuld, Van Voorhis, Burke, Scileppi and Bergan concur.

Order reversed, etc.

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