Van Alstyne v. Norton — 8 N.Y. Sup. Ct. 537

Majority

p. 537

GEORGE VAN ALSTYNE, Respondent, v. SAMUEL E. NORTON and CARSO CRANE, Appellants.

Headnote

Answer — demurrer to — when overruled.

Where an answer in an action for fraud, contains a denial of the fraud, and a statement of facts which tend to prove the absence of an intent to defraud, a demurrer to it should be overruled, even though the pleading is wholly defective, and ought on motion to be stricken out.

Appeal from an order, sustaining a demurrer to a portion of the defendants’ answer. The facts appear in the opinion.

William H. Adams, for the appellants.

J. W. Stebbms, for the respondent.

This action is brought to recover of the defendants, who were bankers at Phelps, in the county of Ontario, $770, alleged to have been obtained from the plaintiff, by false and fraudulent representations. The facts alleged in the complaint, are, that on the 6th January, 1872, the day the money was received by defendants from the plaintiff, they were insolvent, and proceedings were pending against them, instituted by their creditors, to have them declared bankrupts, in which proceedings an injunction had been issued by the Court in Bankruptcy, restraining them from doing any further business. The defendants concealed these facts, and opened their banking-house, on said sixth of January, and continued business as usual, with intent to cheat and defraud their creditors. The plaintiff, relying upon their appearances, and in ignorance of their condition, deposited with them $770, and received from them a draft on Henry Clews & Co., of New York, for that sum. It is further alleged, that defendants had, at that time, no funds in the hands of Clews & Co. The draft was presented to Clews & Co., and payment refused.

The defendants put in an answer containing two defenses. One, a denial of most of the facts alleged in the complaint; the other, after admitting the receipt of money from plaintiff, and the delivery

p. 538

of the draft, alleges that, when the draft was delivered to plaintiff, the defendants had on deposit with Clews & Co., funds or securities, against which they had been accustomed and permitted to draw, to an amount much larger than that called for by the draft; that plaintiff or his transferrees held said draft, and it was not presented until a number of days after it was drawn, and that drafts drawn subsequent to that of the plaintiffj were duly paid. It is further alleged, that the proceedings in bankruptcy were commenced against them, on or about the sixth of January, by the service of an order to show cause and an injunction; that the service was made by a young man, who stated that the proceedings had been instituted for the purpose of bringing about the consummation of an agreement between defendants and their creditors, to extend time for payment of their liabilities, and requesting defendants to go to Syracuse the following Monday, and an arrangement would be completed, by which the proceedings in bankruptcy would be terminated; that defendants went to Syracuse, leaving the sons of defendant Norton, in charge of the bank, instructing them to open the bank, but not to transact any business, or, if any was transacted, to keep it separate, so that it could be canceled in the event that an arrangement was not completed at Syracuse; that a meeting was held, and an agreement prepared and signed by most of defendants’ creditors; and a full settlement was considered so certain by Norton and the creditors, that, by the advice and consent of a number of his creditors, he, Norton, returned home and continued business as before, until and including the thirteenth January, when negotiations for a settlement suddenly terminated, and the bank was closed. That the receipt of the plaintiff’s money and the sale of the draft were in good faith.

Subsequently, a petition, setting forth the facts, was presented to the Court in Bankruptcy, and an order was made, authorizing the assignee to pay to all persons being creditors after the sixth of January, upon their proving their debts and accepting the samé in satisfaction of their claims.

The plaintiff demurred to this defense, as not constituting a defense to the action. The Special Term sustained the demurrer, and gave leave to defendants to answer within twenty days, on payment of costs. From this order, the defendants appeal.

p. 539

In stating a cause of action or defense in a pleading, facts, and not the evidence of facts, must be set forth.^[1] This was the rule at common law, and it is the rule that common sense requires to be applied, in determining the sufficiency of a pleading.

The ground on which a recovery is sought in this action, is fraud; and the facts constituting the fraud, are alleged in the complaint. A denial of the fraud, as charged, puts the plaintiff on proof of it, and entitles the defendants to prove all such facts as they are able to produce, disproving the fraud charged.

In Moak's Van Santvoord's Pleadings,^[2] it is said, there are matters of defense that need not be set up in the answer-, but may be introduced under a mere denial, as, for example, matters which go to the essence of the cause of action or contract, showing that no sufficient contract in fact was ever made, or no cause of action ever existed, and, generally, all such matters as go to disprove any material allegation in the complaint.

There is no doubt that the matter’s set up in the defense demurred to, could have been proved under the denial in the first defense.

At common law, almost all defenses were admissible in the action of assumpsit, and in case for torts, under the plea of the general issue. But the defendant was nevertheless at liberty to plead specially any matters of defense, not amounting to the general issue, that admitted that a contract, for example, was made, but that it was void, or voidable, for arry cause which, in law, rendered it void or voidable.^[3] It is not necessary to consider whether such a mode of pleading is, or is not, admissible under the Code. Certain it is, that a defense, denying fraud, which is the gravamen of this complaint, amounts to a denial of the whole cause of action, and would not have been admissible as a special plea.

There is a constantly increasing tendency to prolixity in pleadings, and, when to this mischief is added that of setting up in answers, matters wholly unnecessary, thereby increasing largely the costs to suitors and the labors of the court, it is time the practice was stopped, and counsel required to conform to the rules of pleading, which would render impossible these abuses.

* Boyce v. Brown, 7 Barb., 80 ; Russell v. Clapp, 7 id., 482; Pattison v. Taylor, 8 id., 250; Talman v. The Rochester City Bank, 18 Barb., 123 .

† † 3 Ed., 507.

‡ ‡ 1 Chitty Pl., 474.

p. 540

I do not propose to affirm the order of the Special Term on this ground; and perhaps the defects in the pleading cannot be reached by demurrer. I shall not consider that question. The defense was demurred to, because it did not constitute a defense to the action. The defense is a denial of the fraud charged, and a statement of facts which tend to prove the absence of intent to defraud. These allegations, If established by evidence, would be a defense to the action, assuming them to be well pleaded. The court could consider no facts, other than those stated in the part of the answer demurred to, and which were admitted by the demurrer. He however goes back to the complaint, and assumes the facts, therein stated, to be true. He comes to the conclusion that the defendants were, upon the complaint and answer, guilty of fraud. This I think the court below had no right to do.

While I entertain no doubt that the pleading demurred to, is wholly defective, and ought to be stricken out, yet, I think it constitutes a defense to the action. The order of the Special Term should be reversed.'

Order reversed.