Erastus G. Graves, Respondent, v. Edmund P. Waite, Appellant

Erastus G. Graves, Respondent, v. Edmund P. Waite, Appellant. (Submitted November 18, 1874; decided December 1, 1874.) Where the gravamen of an action is breach of contract, allegations of fraud in the complaint inducing the entering into the contract on the part of the plaintiff, and a demand for damages resulting therefrom, in addition to the demand for the sum to which he is entitled under the contract, do not change or affect the nature of the action or the remedy therein. They are wholly irrelevant; the allegations of fraud are not issuable, and cannot be tried in the action. The latter clause of section 288 of the Code, giving an execution against the person, when the complaint states facts showing one or more of the causes of arrest specified in section 179, applies only to that class of cases in which the facts constituting the cause of arrest are necessary elements of the cause of action. Where the action is for breach of contract, allegations of fraud in the complaint do not authorize such an execution. Ross v. Mather (51 N. Y., 108); DeGraw v. Elmore (50 id., 1) distinguished. The summons in an action forms no part of the pleadings and cannot be resorted to, to aid in the interpretation thereof. If the complaint does not follow the summons, the remedy of the party is by motion. Plaintiff’s complaint alleged, and his evidence tended to show, an agreement upon the part of defendant to procure and deliver to him a certificate for certain shares of the capital stock of a corporation of which defendant was secretary and treasurer, which shares had been reserved and were held by the corporation. It did not appear by the evidence, or otherwise, that any claim was made by defendant that he acted in behalf of the corporation. Held, that although the price agreed to be paid for the stock might have been inadequate, it could not be claimed that the agreement was in fraud of the corporation or its stockholders, and so void. Appeal from judgment of the General Term of the Supreme Court, affirming a judgment in favor of plaintiff, entered upon a verdict, and affirming an order denying a motion for a new trial. (Reported below, 1 N. Y. S. C. [T. & C.], 16.) The summons in this action was for relief. The complaint set forth in substance that defendant was the secretary and treasurer of a corporation duly organized, known as “ The Empire State, Texas and Tinder Lodes Mining Company of Colorado; ” that he agreed, if plaintiff would go in with nine others, in promissory notes to the amount of $10,000, he would procure and deliver to him a certificate for one-tenth of $56,000 of the capital stock of the company, which they had reserved as “ working capital,” and which they had concluded to divide among the signers of such notes. That plaintiff thereupon executed .notes to the amount stated, and subsequently paid his proportion thereof, and that defendant refused to produce and transfer the stock. Intermingled with these allegations were numerous others of various representations on the part of the defendant, as to the condition of the company and of its capital, his authority and ability to procure the stock, etc., which representations were alleged to be false and fraudulent to the knowledge of defendant, and by which plaintiff was induced to enter into the contract and to sign the notes. Plaintiff demanded judgment for the amount of the money paid by him and interest, “ or for such other or different sum as shall indemnify this plaintiff for the damages he has sustained by and in consequence of the wrongful and fraudulent acts of the said defendant. as aforesaid, and for such other and further or different relief or judgment, in respect thereof, as shall be agreeable to equity,” etc. Defendant’s answer admitted the organization of the company, and that he was its treasurer, also, that plaintiff paid his proportion of the notes, and denied all the other allegations of complaint. Upon the trial the plaintiff proved the contract and breach thereof, substantially as alleged in complaint, and defendant’s counsel moved for a nonsuit upon the grounds, among others, that the evidence did not establish a cause of action, that no fraud had been shown, and that plaintiff, knowing what the stockholders paid for their stock, entered into the agreement for the purpose of defrauding such stockholders, by paying an inadequate price for the stock, and that the agreement was a fraud on his part and so void. Further facts appear in the opinion. Scripture & Fowler for the appellant. In-an action where a fraud is the basis of the complaint, there cannot be a recovery as for a breach of contract. (Ross v. Mather, 51 N. Y., 108, 111, 112; Elwood v. Gardner, 45 id., 354, 355; Degraw v. Elmore, 50 id., 4, 5.) If .the complaint in this'case had been presented to the proper officer, an order to hold to bail must have been granted. (Ross v. Mather, 51 N. Y., 111; Code, §§ 179, 188.) The judge at Circuit erred in ordering a verdict. (Smith v. Coe, 11 Alb. L. J., 202 ; Yates v. Alden, 41 Barb., 172 ; Wakeman v. Dalley, 44 id., 498 ; 40 N. Y., 565; De Wolf v. Crandall, 1 Swee., 556.) Plaintiff having failed to prove a scienter cannot recover. (32 Barb., 83; 57 id., 414; 51 N. Y., 111.) Plaintiff having paid more than twenty-five per cent upon the share for which he subscribed, by the resolutions of the company, became a stockholder. (Burr v. Wilcox, 22 N. Y., 551; Adriance v. Roome, 52 Barb., 441; 16 N. Y., 129; 40 How., 346.) Fraud is not to be presumed but proxren; and every presumption consistent with defendant’s innocence is to be made. (Johnson v. Bk. of N. Am., 5 Robt., 554 ; 42 N. Y., 542; Robinson v. Flint, 58 Barb., 100 ; Hubbell v. Meigs, 50 N. Y., 480.) A participator in a fraud cannot recover either at law or in equity. (Satterlee v. Cameau, 7 Robt., 661.) D. M. K. Johnson for the respondent. Where there are no disputed facts in the case the court may instruct the jury, in an absolute form, how they should find. (Bevans v. U. S., 13 Wall., 57; Slade v. McMullen, 45 How. Pr., 52, 55.) [MAJORITY — Allen, J. Per Curiam.] Allen, J. The substantive averments of the complaint were established by undisputed evidence, and there was no question for the jury. The facts alleged and proved by the plaintiff were not controverted by the defendant, and there was no request to submit any question of fact to the jury, or any suggestion that there was any material fact in controversy which should be submitted to the jury, for their determination. The action was in assumpsit for the non-delivery of a certificate for certain shares of the capital stock of a mining corporation, of which the defendant was secretary and treasurer. The promise of the defendant was proved as alleged in the complaint, and the payment by the plaintiff' of the consideration for the transfer, to the amount for which a recovery was had, as well as a refusal by the defendant to perform the agreement on his part. This entitled the plaintiff to the verdict as ordered, unless some of the objections taken by the defendant are tenable. The only difficulties, and the only material exceptions taken upon the trial, grew out of the fact that much irrelevant and redundant matter is incorporated in the complaint. The summons is not in the form prescribed in actions upon contract, and the plaintiff has inserted in his complaint, in addition to the demand for judgment for the specific sum to which he was entitled upon the contract, a demand to recover some other or different sum by way of indemnity for some undefined consequential damages, resulting from the frauds alleged. The plaintiff has stated facts constituting a cause of action upon contract;- but mingled with the allegations of those facts, and running through the complaint, are divers statements of fraud and fraudulent statements and representations of the defendant, made, as alleged, as inducements to the plaintiff to enter into the agreement. It may be assumed that the allegations and statements of fraud on the part of the defendant in making the contract, embodied in an affidavit, would have justified an order of arrest, under section 119 of the Code of Procedure, upon the ground that the obligation of the defendant was incurred by fraud. But they were foreign to the cause of action, and had no proper place in the complaint. They were not issuable,-and could not have been tried in the action. They did not affect the right of the plaintiff to recover for the breach of the undertaking of the defendant, but, if true, were available only to the plaintiff, in a collateral proceeding, as entitling him to an order of arrest, and a remedy against the person of the defendant upon the judgment he might recover. The section of the Code authorizing the arrest of a defendant in a pending action, for any one of the several causes mentioned in it, lias, in connection with section 288, permitting and regulating the issue of executions against the person, received a construction by this court in Elwood v. Gardner (45 N. Y., 349). The allegations of fraud in this case are only material as giving a provisional remed_y before judgment, or affecting the'final remedy after judgment. Section 288 declares that no execution shall issue against the person of a judgment debtor unless an order of arrest has been served as in the act provided, or unless the complaint contains a statement of facts showing one or more of the causes of arrest required by section '179. Orders of arrest may be obtained, pursuant to section 179, for any one of many distinct causes, some of which are identical with the causes of action, as in actions for' fines or penalties, on promises to marry, for money" embezzled or fraudulently misapplied by a public officer, etc., while others are entirely dehors the cause of action, distinct from and collateral to it, as in the case before us, or when the defendant has removed or disposed of his property, "or is about to do so, with a fraudulent intent. In the latter class of cases the existence or non-existence of the facts subjecting the defendant to an arrest, does not affect the cause of action or the right of the plaintiff to recover," while in the former the right of action depends upon the same facts that give the plaintiff the light to an order of arrest and subjects the defendant to imprisonment. It was said in Elwood v. Gardner (supra), and the statement was pertinent to the question then under consideration, that in an action like the present it would be improper to allege in the complaint that the defendant had been guilty of a fraud in incurring the obligation. The ruling was that such allegations were not relevant or pertinent in the statement of facts constituting the cause of action, and that only facts necessary to the cause of action should be stated in the complaint. The latter clause of section 288 giving an execution against the person, when the complaint states facts showing one or more of the causes of arrest under section 179, was held only to apply to that class of cases in which the facts constituting a cause of arrest wmre necessary elements in the cause of action. As the allegations of fraud in the case before us did not affect or give the cause of action, and could not of themselves affect the remedy, they were wholly irrelevant and were not triable in the action. This disposes of the objection to the plaintiff’s right of recovery that the allegations of fraud had not been proved. It was not a cause for a nonsuit. It was also suggested, as a ground for a nonsuit, that the plaintiff’s action was founded upon an attempt by him to obtain valuable shares of the stock of the company for an inadequate price, and in fraud of the other stockholders, he being a stockholder. It is quite probable that had he obtained the stock at the price agreed upon he would have paid for it as much, or more, than the majority of the stockholders; but be that as it may, the transaction and agreement was between the plaintiff and defendant individually, and not with the corporation, and there is nothing upon which to base the proposition that the agreement was unconscionable, on the part of the plaintiffj or a fraud upon the corporation or its members. The evidence given by the president of the corporation, that to his knowledge there was no authority given by parol to the defendant to make the agreement, in behalf of the corporation, was competent. . It was only in respect to parol authority that he was permitted to speak, and was not permitted to testify as to any authority that might have been conferred by resolution of the board of directors or in writing. It was not, upon the evidence given and in the absence of any claim by proof or otherwise, on the part of the defendant, that he acted in behalf of the corporation necessary for the plaintiff to give any evidence upon that subject, but to the evidence given there was no legal objection. The evidence did not affect the result. The case was properly disposed of at Circuit, and the judgment must be affirmed. All concur. Judgment affirmed. Upon a motion subsequently made for reargument, the following opinion was delivered: Per Curiam. Neither Ross v. Mather (51 N. Y., 108), or DeGraw v. Elmore (50 id., 1), were overlooked or disregarded by the court in giving judgment on the appeal. The pleading was brought to the test of the principles heretofore decided by this court in the several reported cases, and although, as was suggested in the opinion, there was much in the narration of the plaintiff’s grievances in the complaint which ought to have been omitted, and could only serve to embarrass, and possibly mislead, we still think that the complaint must be regarded as in assumpsit upon the agreement to deliver the stock, to which the allegations of fraud were wholly collateral. The action was so treated at the Circuit, and this court thought there was no error, in view of the theory upon which the trial proceeded, and the objections and exceptions were taken by the defendant. It may be the complaint was to some extent ambiguous and inartificial, but the present system of pleading is not favorable to the greatest accuracy or precision in the statement of causes of action or of defences, and a liberal interpretation must be given pleadings, when parties have not been misled to their prejudice or injustice done, to sustain verdicts and judgments. The judgments in each of the cases relied upon by the appellant’s counsel (cited supra), turned upon the construction of the pleading under consideration, and if this case had been within the principle of Ross v. Mather, that case would have been followed as authoritative and decisive. We thought a fair interpretation of the complaint in this action distinguished it from that in the case referred to. The summons only serves to bring the party into court,- but does not make a part or aid in the interpretation of the pleadings. If the complaint does not follow the summons, the remedy of the party is by motion in the original jurisdiction. The point now made upon the statute of frauds, is taken for the first time upon the motion, and cannot be considered. The motion must be denied. All concur. Motion denied.