Otis v. Shantz — 28 N.Y. St. Rep. 69

Majority

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John L. Otis et al., Trustees, etc., App’lts, v. Moses B. Shantz, Resp’t.

(Supreme Court, General Term, Fifth Department,

Filed December 30, 1889.)

Headnote

1. Pleading—Answer.

In an action to recover for goods bought of trustees in liquidation of a corporation,_ the answer set up that defendant was creditor of the corporation; that his consent to the agreement of liquidation was procured by the fraud of the corporation and the agreement was void; and also set up counterclaims against the corporation which accrued before the assignment. On demurrer, Held, that the facts stated did not constitute a defense or counterclaim to the cause of action sued upon.

2. Same—Demurrer.

Where it is apparent on the face of an answer that the facts averred constitute no defense or counterclaim to plaintiff’s cause of action, the objection is properly raised by a demurrer for insufficiency.

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Appeal from an interlocutory judgment entered on the decision of the court at special term, overruling the plaintiffs’ demurrer to the defendant’s answer.

H. M. Hill, for app’lts; M. T Bly, for resp’t.

The plaintiffs are “trustees in liquidation ” of the Mili River Button Company, a corporation organized and doing business in the state of Massachusetts. On the 10th day of April, 1887, the company, which had become financially embarrassed, and its creditors, including the defendant, at Northampton, Mass., made and executed an instrument in writing by which it was agreed that the affairs of the company should be liquidated, by trustees, and named the plaintiffs as trustees for that purpose. The agreement contained provisions for an assignment by the company of all its property to the trustees named, a conversion of such property into money and the payment of all its creditors pro raía, such payments to be received in full of all claims. The assignment was made the next day, and the trustees immediately entered upon the performance of their duties.

. On the 19th day of July, 1887, and on the 5th of December of fche same year the defendant bought goods of the plaintiffs, which ad been received by them under the assignment, for each of which purchases he gave them his promissory note, payable to the order of the trustees of the Mill River Button Company, the first for $1,333.48, on demand, and the second for $638.86, in six months after date. This action was brought after the maturity of the second note for the amount due on both.

The answer denies no allegation of the complaint, but avers, in its first count, that the defendant was a creditor of the Mill River Button Company to the amount of $5,000, and that his consent to the agreement of liquidation was obtained by fraudulent representations of the corporation, its agents, officers and directors, as to the true state of its finances, and that the agreement was for that reason void; and prays that the same be cancelled and set aside as to him.

The answer further sets up, in several counts, several matters of counterclaim against the corporation, all of which accrued before the assignment to the plaintiffs, which he asks to offset to the plaintiff’s demand.

The plaintiffs demurred to the several counts of the answer on the ground that they were insufficient in law upon their face, and that the facts stated did not constitute a defense or counterclaim.

We think the demurrer should have been allowed. Neither of the alleged defenses or counterclaims existed as to the plaintiffs, or had any connection with the causes of action alleged in the complaint and admitted by the answer. The cause of action to set aside the agreement of liquidation alleged in the first count of the answer was one which could not be tried in this action for want of the proper parties, and the allegations in support of it were wholly insufficient as a defense to this action, even if the proper parties had been before the court, since there was no allegation

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that the defendant was ignorant of the fraud when he contracted with the plaintiffs; and if not so ignorant his contract with the plaintiffs was an affirmance of the agreement which he asks to have set aside. All the other matters of counterclaim set up by the answer were such as accrued against the Mill River Button Company before the assignment to the plaintiffs, and in which the plaintiffs had no interest; whereas the causes of action alleged in the complaint accrued to the plaintiffs after the assignment and the corporation had no interest in them. Very clearly the one -could not be offset against the other.

The case is the same as that of an assignment for the benefit of creditors; if a creditor purchases property of the assigned estate from the assignee he must pay for it the same as any other purchaser. Or if a creditor of a deceased person buys goods of the estate from the administrator, he cannot offset his claim against the decedent in an action by the administrator for the price of the goods. Burr ill on Assignments, 403; Thompson v. Whitmarsh, 100 N. Y., 35 . The objection to the answer seems too clear to require further discussion or the citation of authorities.

The objection was properly taken ■ by the demurrer for insufficiency. That is the first ground of demurrer to an answer allowed by the Code. “ The plaintiff may demur to a counterclaim, or a defense consisting of new matter, contained in the answer, on the ground that it is insufficient in law, upon the face thereof.” Oiv. Pro., § 494. The meaning of the provision is not obscure. “ Insufficient in law ” means insufficient, the facts being admitted, to constitute a counterclaim or a defense to the cause of action alleged in the complaint. So that where, as in this case, it is apparent on the face of the answer that the facts averred constitute no defense or counterclaim to the plaintiff’s cause of action, the objection is raised by a demurrer for insufficiency.

That was the precise objection which the plaintiff makes to the answer in this case, and it was unnecessary for him to resort to the permission of the next section, § 495, to interpose a demurrer on any of the grounds there enumerated. Indeed, there is but one subdivision of that section which might cover the ground of the plaintiff’s objection to either of the counts of the answer. That is subdivision 5. “ That the counterclaim does not state facts sufficient to constitute a cause of action,” but this seems to us to add nothing to the ground of demurrer for insufficiency given by § 494, supra.

We are of opinion that the demurrer was well taken in all respects, and that it should have been allowed.

The interlocutory judgment must be reversed, the demurrer allowed, and judgment ordered thereon for the plaintiff for the relief demanded in the complaint.

So ordered, with costs.

Barker, P. J., and Macomber, J., concur.