Hyperlawhypertext legal database Pittsburgh Bessemer Steel Co. v. Buckley 51 N.Y. Super. Ct. 342

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Pittsburgh Bessemer Steel Co. v. Buckley

51 N.Y. Super. Ct. 342 19 Jones & S. 342 Court N.Y. Super. Ct. Decision date 1885-03-02 English

Delivered by Sedgwick, Ch. J.

Contents

Majority

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THE PITTSBURGH BESSEMER STEEL CO., LIMITED, Respondent, v. THOMAS T. BUCKLEY, et al., Appellants.

Headnote

Pleading—fraud, insufficient averments—cónsPi'ueüon, negative or affirmative—several defenses, effect on each other.—Trial—effect of claiming right to open.— Consideration—matters insufficient to constitute, yet forming no defense—matters sufficient to form consideration for note and indorsement —return insufficiently pleaded.
That “ certain representations were'made;” reliance thereon; deception thereby; and their untruth,—are insufficient to let in evidence for avoidance of a contract on the ground of fraud.
When the answer alleges that the contract in the complaint mentioned, was in consideration of an agreement made, etc., and then proceeds, with averments specifying what the agreement was, all these averments must be taken together, and so taken mean that there was no consideration other than the agreement set forth: and if the agreement did not make a legal consideration, the averments "would be tantamount to a plea of no consideration, and "would let in evidence by an indorser to the effect that he was an accommodation indorser ; that the maker had received no credit on faith of the indorsement, or that the contract on which credit might have been given was without consideration ; and that the plaintiff was not a bona fide holder for value.
In this case, there being several defenses, the defects and positive averments in one, held not to affect the force of another.
On the trial of an action on a promissory note, the issue being want of con
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sideration, defendant by insisting on and obtaining the right to open, does not thereby necessarily admit that a consideration was actually received, but, in this case, only that there is a presumption it was, from the admission of the answer, which he is entitled to rebut.,
Decided March 2, 1885.
An oral arrangement amounting to an agreement that one shall not be held to the performance of his written contract, while it will not constitute a consideration for the contract,forms no defense to an action for its nonperformance:
An agreement by the plaintiff, that he would, on the receipt of the notes in suit, deliver up other notes of equal amount to those sued on (less interest included in the notes received), held by or under his control, furnishes a consideration for the notes, and for an indorsement thereof, on the faith of which the plaintiff entered into the agreement.
An answer setting forth such agreement, and averring “ that the plaintiffs have not performed their said agreement ” (the objection that this is a statement of a legal conclusión and not of a fact, being deemed waived by the proceedings at the trial and on the argument), and not showing that the notes that were to bo delivered up had been satisfied by the transaction, sufficiently pleads such failure of consideration.
Catlin ®. Hansen ( 1 Duer, 309 ), distinguished.
Before Sedgwick, Ch. J., and O’Gorman, J.
Appeal by defendants from judgment entered upon verdict for plaintiff as directed by the court.
On the trial, the defendants claimed the right to open and to close. The court directed that they should have the right. Before the defendants proceeded, the plaintiff’s counsel moved for judgment upon the pleadings, on the ground that the answer did not aver any defense. This motion was granted, the court directing a verdict for plaintiffs.
Further facts appear in the opinion.
W. P. Prentice, attorney and of counsel for appellants,
argued :—I. It was error to take this case from the jury, and neither allow any evidence to be given, nor the jury to pass upon the facts of the several defenses set out in the answers of the defendants (Bookstaver v. Jayne, 60 N. Y. 146 ; Anthony v. Harrison, 14 Hun, 198 ; affirmed, 74 N.
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Y. 613 ; Stone v. Flower, 47 N. Y. 566 ; Murphy v. Keys, 39 Super. Ct. 26).
II. Between the immediate parties, the failure of consideration is a good defense (Bytes on Bills, 130; Chalmer’s Bills of Exch. Art. 56 Expl’n; Saxton v. Dodge, 57 Barb. 111 ; 60 N. Y. 146 ; 39 Super. Ct . 26, supra ; Leggett v. Cochrane, 10 Daly, 270 ). The court at first ruled that this defense was sufficiently pleaded, and that the defendants had the affirmative, but changed this decision upon the new motion of plaintiff’s counsel, and ordered judgment upon the pleadings without evidence, construing the third defense of the Ford answer, which is pleaded separately in paragraph four, and the fourth defense in the Buckley answer set out in the fifth paragraph, in connection with the allegations in the other parts of the answers, as a hmitation and an admission inconsistent with the defense of failure of consideration. This also was error, for as will be later shown, under the Code of Procedure (§ 507, as amended in 1879), inconsistent defenses may be pleaded. It is, however, insisted that in this rule there was error of fact as well as law, for it must be remembered that the defendants are only indorsers, and their transactions were with the payee of the notes, and the renewal notes are simply extensions of the time of payment (Jagger Iron Co. v. Walker, 76 N. Y. 521 ); they were not the defendants’ notes, were not asked for by the maker of the notes, and the defendants denied any indebtedness or consideration upon them.
III. The rule prohibiting the reception of parol evidence to vary or modify a written agreement, or promissory note, does not apply to a collateral undertaking, which is open to inquiry, and may be proved by parol; such collateral undertaking may be a condition precedent to the taking effect of the written agreement which is neither varied nor modified (Chapin v. Dobson, 78 N. Y. 74 ; Benjamin Chalmers Notes, Bills, &c., Art. 55, p. 65 note; Johnson v. Oppenheim, 55 N. Y. 280 ; Murphy v. Keyes, 39 Super. Ct. 26). Even in the case of Martin v.
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Cole (104 U. S.), principally relied upon by the plaintiff in the court below, it is said at page 39, that “there are many distinctions which upon the circumstances of cases determine the applicability of the rule and classes of cases which form apparent exceptions to it, the hmitations of the rule are perfectly consistent with itso also, in the case of Wilson v. Deen ( 74 N. Y. 531 ), the rule is stated as only applicable “in the absence of fraud or mistake.” In the further case of Jaffray v. Brown ( 74 N. Y. 393 ), evidence was necessary on the part of the plaintiff, to show the indorser lmew the contract was as alleged by the payee. The case in 46 Super. Ot. 541, is not applicable, for the facts are different, and that case depends upon Cottrell v. Conklin ( 4 Duer, 50 ), wherein evidence was held to be necessary, and a verdict directed by the court was set aside ; and Albron v. Smith ( 27 Barb. 489 ), in which evidence of the plaintiff was ruled out, because the question was of the import of an indorsement in blank.
IV. The indorsements of the defendants were rendered invalid by the fraud and deception practiced upon them by the plaintiff, which the defendant Buckley alleges, and Ford. Upon this point the defendants had a right to introduce testimony, for fraudulent representations will vitiate any contract (Wilson v. Deen, 74 N. Y. 531 ). This case is considered in Chapin v. Dobson ( 78 N. Y. 80 ), and is there held not to be inconsistent with that decision, which allows evidence of a collateral undertaking.
V. A valid defense was set forth in the fourth paragraph of Ford’s answer, and the fifth paragraph of Buckley’s (Beaufort v. Patterson, 10 Daly, 333 ; Bookstaver v. Jayne, 60 N. Y. 146 ; Erskine v. Adeane, L. R. 8 Ct. App. 756 ; Sweeney v. Rogers, 10 Daly, 469 ; Miller v. Ritz, 3 E. D. S. 253).
VI. A defendant may interpose as many defenses as he may have, and no objection of inconsistency against them wih lie. At one time a defendant might have been compelled under certain circumstances to elect between defenses which were held to be inconsistent. That is not now
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the rule (Code Civ. Pro. § 507 ; Old Code, § 150 ; Bruce v. Burr, 67 N. Y. 237 ).
It follows, therefore, that the court could not take this separate defense' of the non-delivery of the notes out of its place, and weave it in with the defense of the failure of any consideration, and rule upon it as an admission of the defendants. The defendants’ exceptions are, therefore, good. The defendants were not required to request the court to submit the questions of fact to the jury.
Victor Morawitz, attorney and of counsel, and Charles M. Da Costa, of counsel for respondent,
argued :—I. No fraudulent representations are alleged. No rule of law is better settled than the rule that a misrepreprentation is not a ground of avoiding a contract, unless it be fraudulent as well as false. The intent to deceive must be alleged and proven (Morehouse v. Yeager, 41 Super. Ct. 146; Marsh v. Falker and Chester v. Comstock, 40 N. Y. 562 , 575). Neither one of the defendants has shown any misrepresentation of facts. Indeed, throughout both of the answers every misrepresentation which is charged is likewise alleged as a promise or agreement on the part of the plaintiff.
It is well settled that a broken promise is not a fraudulent representation (Treacy v. Hecker, 51 How. Pr. 69 ; Lexow v. Julian, 21 Hun, 577 ; affirmed, 86 N. Y. 638 ; Fisher v. New York Common Pleas, 18 Wend. 608 ; Gray v. Palmer, 2 Rob. 500 ; affd. 41 N. Y. 620 ; See Commonwealth v. Brenneman, 1 Rawle, 315 ; Stitt v. Little, 63 N. Y. 431 ; Farrington v. Bullard, 40 Barb. 516 ; Farrar v. Bridges, 3 Humph. 566 ).
II. The promises alleged in the answers are not a defense. ' All the promises which are alleged in the answers as a defense to the action, consist of oral representations or statements made at the time of the execution of the indorsements. This was conceded by counsel for the defendants ‘at the argument at trial term, and is expressly so stated in the answers. It is well settled that when a
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contract is reduced to writing, all prior or contemporaneous oral promises and agreements are superseded; and such oral promises and agreements cannot be set up as a defense to the contract (Martin v. Cole, 104 U. S. 30 ; National Bank v. Place, 86 Ib. 444; Grocers’ Bank v. Keyes, 9 Daly, 510 ; And see other cases cited below). There are numerous cases precisely analogous to the case at bar, in which similar promises have been held not to constitute a defense (Grocers’ Bank v. Keyes, 9 Daly, 510 ; First Nat. Bank v. Tisdale, 18 Hun, 151 ; affd. 84 N. Y. 655 ; Lewis v. Jones, 7 Bosw. 366 ; Higgins v. Barrowcliffe, 46 Super. Ct. 540 ; Wright v. Remington, 41 N. J. L. 48 ; Wilson v. Deen, 74 N. Y. 531 ; Bank of United States v. Dunn, 6 Pet. 51 ; Brown v. Spofford, 95 U. S. 481 ; Brown v. Leroy, 20 How. 442 . These cases were re-affirmed in the late case of Martin v. Cole, 104 U. S. 30 ).
A promise to renew notes at maturity is not a defense (National Bank v. Place, 86 N. Y. 444 ; Hoare v. Graham, 3 Campb. N. P. 57; Willse v. Whitaker, 22 Hun, 242 ; Bull’s Head Bank v. Koehler, 1 City Ct. 264; Kust v. Hart, 73, Pa. St. 286 ; 1 Daniel Neg. Ins. 159). The alleged oral agreement or statement that the original notes of the railway company (which were renewed by the notes in suit) would be surrendered to the railway company, is not a defense (Nat. Bank v. Place, 86 N. Y. 444 ).
A further reason why this alleged agreement to surrender the old notes cannot be set up as a defense, is that the agreement was with the railway company and not with the defendants. If the plaintiff made a contract with the railway company, and broke the contract, the railway company alone has a right to complain. It has often been decided that a surety or indorser of a note cannot set up as a defense, when sued by the creditor, that the debtor has a right of recoupment or counterclaim (Gillespie v. Torrance, 25 N. Y. 206 ; Lasher v. Williams, 55 N. Y. 619 ; Bellows v. Folsom, 2 Rob. 138 ; La Forge v. Halsey, 1 Bosw. 171 ; Emery v. Baltz, 22 Hun, 434 ). It is well settled that if a new note is accepted “in renewal
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of ” an old note, it is wholly immaterial, in legal effect, whether the paper on which the old notes are written is preserved, or destroyed, or surrendered. In either event the acceptance of the notes operates at law as a suspension of the right to enforce payment of the old notes until the new notes fall due. If the new notes have not been negotiated, and are not paid at maturity, the holder has his option either to sue upon the old notes or the new ; and this is true whether the old notes have been surrendered or not. The surrender of the old note would not even raise a presumption of payment (2 Daniels Neg. Instr. § 1266a ; Spencer v. Ballou, 18 N. Y. 327 ; Winisted Bank v. Webb, 39 Ib. 325 ; First Nat. Bank v. Morgan, 6 Run, 346 ; Olcott v. Rathbone, 5 Wend. 490 ; Bates v. Rosecrans, 37 N. Y. 409 ).
III. There was ample consideration for the indorsements. It has often been decided that the renewal of a note is ample consideration for the delivery of a new note with indorsements, and that the indorsers are bound under these circumstances, although they have indorsed merely for the accommodation of the maker (First Nat. Bank v. Tisdale, 18 Run, 152 ; affirmed 84 N. Y. 655 ; Spencer v. Ballou, 18 N. Y. 327 ). The accommodation maker or indorser of a note is liable, even though the note be given by the principal debtor merely as security for a pre-existing debt (Grocers’ Bank v. Penfield, 69 N. Y. 503 ; Shepp v. Carpenter, 51 N. Y. 602 ).
IV. We know of no authority which is in conflict with the views expressed in the preceding pages. At the argument at trial term counsel for the appellant relied on two cases, Chapman v. Dobson ( 78 N. Y. 74 ), and Murphy v. Keyes (39 Super. Ct. 18). In Chapman v. Dobson the plaintiff sued for the price of a certain machine sold to the defendant. The latter set up the breach of an oral warranty collateral to the sale, “to reduce or defeat the plaintiff’s claim.” The court held that the defendant was entitled to show this warranty, although the terms of the sale had been reduced to writing, saying : “It
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seems plain, both upon principle and authority, that the plaintiff’s undertaking was collateral to the contract by which they undertook to furnish the machines.” In Murphy v. Keyes (39 Super. Ct. 18), the defendant introduced evidence showing that he had indorsed the note in suit for the accommodation of the plaintiff, and in order to enable the plaintiff to raise money on the notes. The evidence offered by the defendant showed that the indorsement was not made to obtain credit for the maker, as in the present case, but after the maker had obtained credit from the plaintiff. The case was commented upon and distinguished by both the judges who delivered opinions in Grocers’ Bank v. Murphy (9 Daly). Besides, if the decision of Murphy v. Keyes be construed, as the defendant’s counsel claims it should be, then it suffices to say that both the earlier and later cases in this court, namely Lewis v. Jones ( 7 Bosw. 366 ) and Higgins v. Barrowcliffe (46 Super. Ct. 540), hold a contrary doctrine, and are in accord with all the other cases which have been cited on behalf of the plaintiff.
V. That the proper practice, where the answer does not set up a sufficient defense, is to disregard irrelevant statements, and move for judgment on the pleadings, see Fox v. Hunt (How. 12), per Barculo, J., quoted with approval by the general term, in Richmeyer v. Haskins ( 9 How. 481 ), and Hyatt v. Saratoga Ins. Co. ( 9 How. 488 ); See also, Grocers’ Bank v. Murphy (supra).

By the Court.

The action is upon two promissory notes made by the Cleveland, Youngstown & Pittsburgh Bailway Company, and against the defendant .Buckley, the first indorser, and the defendant Ford, the second and last indorser. The question here is whether the answers of the defendants set out a defense. The answer of the defendant Ford will be first examined. This answer contains no defense, unless it be that of want of consideration for the indorsements or of a failure of consideration. The allegations “that the indorsements

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of said notes were obtained by certain representations and statements on the part of the plaintiffs to him and upon which he relied, which have proved not to be true, and through which he was deceived and mistaken,” are not such sufficient allegations of fraud in obtaining the indorsements, as would allow the defendant in a proper case, to avoid the indorsement. The answer proceeds to aver that the indorsements “were in consideration of an agreement then and there made, etc.” This averment implies that there was a consideration for the indorsements, yet if the specification of what the agreement was, shows that it did not make a legal consideration, then all the averments taken together will mean that there was no other considerations which would be tantamount to there being no consideration. This would cover the possibility of the indorsements having been made for the accommodation of the onakers and to give them credit with the plaintiffs. For, if the defendants were accommodation indorsers, they have the right to set up an absence of consideration between the plaintiffs and makers, and an averment of want of consideration would imply that the makers did not receive credit, or that the contract upon which credit might have been given was without consideration (Sawyer v. Chambers, 44 Barb. 42 ).

The answer avers that the consideration was “an agreement then and there made on the part of the plaintiffs with the indorser, that the defendants should not be held liable for the payment of the said notes or any part thereof, but if there were any loss upon the .said notes, the plaintiffs should bear it, and they would not trouble the defendants about the matter, and would never call upon them for payment ; that the said notes should be paid out of the bonds then offered for sale by the Cleveland, Y. & P. Railway Company, the makers; that the said notes should be renewed from time to time. ” Stopping here, it is manifest that these averments constitute no defense to the action. . It is assumed that this agreement was not in writing. This assumption is not based upon any averment

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of the complaint. Undoubtedly it accords with what the parties know to be the facts. These oral agreements cannot in any way affect the written obligation of the defendants to pay the notes. But on the other hand, they do not make any consideration for a contract. I speak with hesitation as to the agreement, “that the notes should be paid out of bonds then offered for sale, etc. (Chester v. Bank of Kingston, 16 N. Y. 336 ) ; yet prefer to say that what amounts to an oral agreement, that a man shall not be held to the performance of his written contract, is not a consideration for the contract.

The averments as to the agreement proceed, “that if the said notes were delivered to the plaintiffs, prior notes of the said Cleveland, Y. & P. R. Company, to the amount of the said notes, less the interest which was added in to the notes mentioned and described in the complaint, should be delivered up to the said railway company or to the defendants.” This agreement furnished a consideration for the indorsements, and the defendant is liable, unless it is alleged and proved that the consideration failed. The answer avers “ that the plaintiffs have not performed the said agreements. Strictly, this is a statement of a legal conclusion and not of a fact. Yet, at the trial and on the argument, no allusion was made to it. If there had been, an amendment of the pleading might have been allowed. And the point will not be considered, as was not considered that the answer did not show that the agreement was oral.

It is argued, that the non-delivery of the prior notes was not a failure of consideration (Catlin v. Hansen, 1 Duer, 309 ). This case went upon the facts affirmatively alleged in the answer. Judge Campbell said (p. 321), The allegation is, “that Beecher was the holder of the first note and received the note in suit, agreeing to give up the other. The effect of his receipt and agreement was to destroy in his hands the first note.” Judge Bosworth said (p. 326), “Whether the evidence given was competent under the pleadings, and whether the facts set up in

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the answer constituted a defense, even .if true, are as truly different questions that the answer stated that the note in action was delivered to Beecher to take up the other note ; that he agreed to deliver up the other note ; that he refused to deliver up the other note, but kept both ; that if these were the facts, the note in suit was a satisfaction in Beecher’s hands of the first note ; that there was no allegation that Beecher did not in fact hold the first note at the time the second was accepted. The substance was, that from the answer, it appeared that the note became due before it left Beecher’s hand, and therefore neither he nor a subsequent transferee could recover upon it. The present answer states no facts which would call for such an inference. The answer does not show who held the prior notes that were to be delivered up, or when any of them was to fall due. The allegations closest to this are, “that on or about the time mentioned in the complaint, one of the notes was falling due and the plaintiff desired to have it renewedthat a third person, a representative of the plaintiff “ further said that he controlled all the notes outstanding, then in question, including those held by the plaintiff.” The agreement was not confined to the delivery of notes held by the plaintiff. It would have been satisfied if notes held by any one had been delivered. There are some allegations that cause hesitation. On the whole, it should be held, that it does not appear from any allegations of the answer, that the notes that were to be delivered up had been satisfied by the transaction. And the case of Miller v. Ritz (3 E. D. S. 253), is to be followed. It says, “ suppose, after the payment of the judgment recovered below, the defendant should be sued by some third person, who is proved to be the holder of the first note, and to have been such holder at the time of the giving of the second note, how, in such case, could the defendant protect himself against the- payment of both notes ?” The consideration, which has failed did not move to the makers only; it was that for which the indorsers made their contract of indorsements.
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The answer further alleges, that the true history and account of the making and indorsement of the notes, etc., is as follows, and a number of facts are averred to have existed. It will not be necessary to say more than that, whether or not they contain in themselves a defense, they do not neutralize the effect of those parts of the answer that have been already considered on the question of consideration and failure of consideration.

It is doubtful that the further defense stated in the answer is valid. Each defense should be complete in itself, either by explicit averments, or by a reference to the other parts of the pleading. This defense does not aver that the defendant is an accommodation indorser and therefore entitled to take advantage of the nature of the contract between the makers and the plaintiffs, nor indeed is it stated with whom the agreement to surrender was made. On the other hand, the defects of this defense do not destroy the force of the defense earlier pleaded, and its positive averments do not show that the earlier averments as to the consideration or want of consideration, were untrue in fact, even if it were supposed that one defense could be disproved by inconsistent allegations of another defense. It is not meant to be said that the inconsistent allegations may not be used as evidence on the trial. That would permit the defendant to show which was the fact.

The pleading is not very clear or definite, yet it might sustain a defense which would show that the plaintiffs should not recover.

An examination of the answer of defendant Buckley, shows substantially the same kind of defense; that is, a failure of the only consideration upon which the indorsement could rest. The averments are of a rather confused and colloquial kind, but a dissection shows that the answer admits that the notes were renewal notes, afterwards averring that the notes to be renewed were not in fact renewed or offered for renewal.

On the trial, the defendants claimed the right to open the case to the jury and the judge properly gave them

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such right (3 Chitty Pl. 875 ; De Graff v. Carmichael, 13 Hun, 129 ; Hoxie v. Green, 37 How. Pr. 97 ). The defendants thereby did not take the position as admitting that the defendants actually received consideration, but that the presumption from the note and indorsements, as admitted by the answer, was that there was consideration. They were entitled to rebut this presumption by evidence, if they could. The same is true as to the defense of failure of consideration.

The judgment should be' reversed, and a new trial ordered, with costs to abide the event.

O’Gorman, J., concurred.

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