COIT against STEWART

COIT against STEWART. Supreme Court; General Term, Second District, Second Department, 1872. Action on Contract.—Counter-claim. An answer alleging that plaintiff agreed to act as defendant’s agent in the purchase of bonds, and to account for all money coming to his hands, but that after receiving a specified sum, he would hot account, &c., but appropriated the same to his own use, whereby he became indebted, &c'., and demanding judgment in the sum specified, may be regarded as a cause of action on contract; and constitutes a proper counter-claim in an action on contract.* * Compare Elwood v. Gardner (10 Abb. Pr. N. S., 238), and Knapp v. Meigs (11 Id., 405), where a somewhat different rule is applied in case of application for provisional remedies. Appeal from a judgment. William A. Coit sued Joseph B. Stewart in the supreme court, to recover on two promissory notes made by defendant. In the answer, a fourth defense was set up, in substance, as follows: Since in or about the year 1866, the said plaintiff has been continually acting as the broker and agent of this defendant, and conducting negotiations for him in his various business transactions, and acting throughout iu a fiduciary capacity for this defendant, for a compensation; and said plaintiff agreed with this defendant to carry out for this defendant, and as this defendant’s agent and trustee, a certain negotiation, for the purchase of certain bonds, to the amount of about one hundred and seven thousand dollars, of the Alexandria and Fredericksburg Railroad Company, from various holders with whom defendant had negotiated for their purchase; and thereupon, said plaintiff entered upon the said negotiation, as such agent and trustee of defendant, and for defendant’s benefit, and conducted the same to the termination thereof; and the said plaintiff then and there agreed with defendant, well and faithfully to discharge his duties as such agent and trustee, and faithfully to account with and pay over to defendant, for all the moneys, property or securities which might come to the hands of said plaintiff in the course of his said employment; but the said plaintiff, disregarding his duty and agreement, after receiving the moneys, funds and securities of this defendant, to the amount of about eighty thousand dollars or thereabouts, did not,' nor would, account for the same or any part thereof, to or with this defendant, or pay over the same or any part thereof, to him or for his benefit, or at his request, but appropriated the same to his own use and benefit, and thereby became, and was, and still is, indebted to this defendant, in the said sum of eighty thousand dollars, or thereabouts, for the said moneys, funds and securities of this defendant, which, so as aforesaid, came to the hands of, and were received by the said plaintiff, to and for the use of this defendant, and for which the said plaintiff had, so as aforesaid, agreed to account to and with this defendant; whereby an action has accrued in favor of this defendant, against the said plaintiff, to recover from the said plaintiff the sum of eighty thousand dollars, together with the interest thereon, from June 7, 1870. Wherefore, this defendant, by way of counter-claim, demands judgment against said plaintiff, for the said last-mentioned sum, and interest, together with the costs of this action. The plaintiff demurred to this defense, “ which pur- . ports to set up a counter-claim herein,” and alleged as the grounds of said demurrer, that said matters as stated, did not upon the face thereof constitute a counter-claim or defense in this action; in this, to wit: “ 1. The matters set up, if .true, constitute a tort, in the wrongful conversion of the defendant’s property. “2. It is alleged by defendant in said answer that plaintiff acted in said matters in a fiduciary capacity to defendant, as his agent and broker. “ 3. The value of said alleged securities and property are uncertain, and said pretended claim is solely for unliquidated damages.” Judgment on the demurrer was ordered at special term, and defendant appealed to the general term. Lucien Birdseye, for defendant, appellant. I. The matters set up in the fourth defense constitute a “ cause of action arising on contract,” and not out of any tort. 1. Every such allegation as was necessary to constitute a cause of action for a tort or wrong, is seen to be carefully eliminated from the answer. 2. There is a positive averment of an express contract, as well as a statement of facts which create in law an implied contract. There "is, then, an averment of the fact and manner of the breach of this contract, to wit: the refusal to account and pay over, and the appropriation of the defendant’s moneys to the plaintiff’s own use. 3. Such allegations, if in a complaint, would give the party pleading them, such rights as arise in an action ex contractu, and not as in an action arisin'g ex delicto (Austin v. Rawdon, 44 N. Y., 63; Conaughty v. Nichols, 42 Id., 83). II. Even if the allegations demurred to show the plaintiff to have been guilty of a legal wrong, and therefore liable to be sued in an action for the conversion of defendant’s moneys, still defendant may waive that tort and sue on contract (Hinds v. Tweddle, 7 How. Pr., 278, 281; Chambers v. Lewis, 10 Abb. Pr., 206; S. C., 2 Hilt., 591; S. C., affirmed on appeal, 11 Abb. Pr., 210; Hawk v. Thorn, 54 Barb., 164; Roth v. Palmer, 27 Id., 652, and cases cited, p. 655; Kayser v. Sichel, 34 Id., 84; affirmed in court of appeals as Wigand v. Sichel, 33 How. Pr., 174; S. C., 3 Keyes, 120). III. Not only may the party suing as plaintiff waive the tort and sue on contract, but a defendant when sued may also waive the tort and sue upon the contract (International Bank v. Monteith, 39 N. Y., 297). IV. Several cases are cited by the plaintiff to show that a tort cannot be set up as a counter-claim in an action on contract. These cases, or most of them, are well decided, because out of the several torts referred to in these cases no implied contract arose in favor of defendant. Thus in Drake v. Cockroft (4 E. D. Smith, 34), the tort complained of was a trespass and destruction of personal property; not the receipt of a thing of value, enjoyed by defendant, and for which the law implied a promise to pay. So in Edgerton v. Page (14 How. Pr., 116 ; S. C., 1 Hilt., 320; 5 Abb. Pr., 1; affirmed in court of appeals, 18 How. Pr., 359). The tort complained of was negligence in the landlord in allowing filthy water to flow by defective pipes into the premises of defendant, for the rent of which action was brought. The dictum of Woodruff, J., in Mayor, &c. of New York v. Parker Vein S. S. Co. (12 Abb. Pr., 300, 302), if not founded on the frame of the alleged counter-claim, as one stating merely a tort, is overruled by the court of appeals in International Bank v. Monteith, and Wigand v. Sichel, (supra). James Troy, for plaintiff, respondent. I. The action is on contract. authorities are necessary to establish this proposition. The counter-claim is in tort (see 2 Burr. L. Dic., Tort; Bouv. L. Dic., 590; 1 Fonbl. Eq., and article Injury; 3 Black. Com., 117; Code, § 179; Elwood v. Gardner, 10 Abb. Pr. N. S., 238; International Bank v. Monteith, 39 N. Y., 297, 300; Drake v. Cockroft, 4 E. D. Smith, 34; Edgerton v. Page, 14 How. Pr., 116; Mayor v. Parker Vein S. S. Co., 12 Abb. Pr., 300; Edgerton v. Page, 1 Hilt., 320; S. C., 5 Abb. Pr., 1; S. C., 18 How. Pr., 359; Patison v. Richards, 22 Barb., 143; Bennett v. Parker, 16 N. Y., 251). Before the Code a cause of action on the case could not be set up as a set-off, recoupment or counter-claim in an action of assumpsit. The Code, by section 150, now regulates this matter. The section has two subdivisions. It permits to be counter-claimed— 1. A cause of action arising out of the contract or transaction set forth in the complaint, or connected with the subject of the action. 2. In an action on contract any other cause of action arising on contract, when such causes of action existed in favor of a defendant and against a plaintiff at the time of the commencement of the action. A tort cannot therefore be set up as a counter-claim in an action on contract (see 4 E. D. Smith, 34; 1 Hilt., 320; 5 Abb. Pr., 1; 18 How. Pr., 359; DeLeyer v. Michaels, 5 Abb. Pr., 203; 39 N. Y., 383; 22 Barb., 143; 14 How. Pr., 116; 12 Abb. Pr., 300). [MAJORITY — Barnard (J. F.), J.] Barnard (J. F.), J. I think the fourth defense to the plaintiff’s complaint set up onlv a contract. It avers an agreement made between the defendant and the plaintiff as his broker; that by virtue of and under this agreement, the plaintiff, after receiving money and other property of defendant, refused to account to defendant, and appropriated the same to his own use, and thereby became “indebted to this defendant, whereby an action has accrued.”. This is a pure contract (Austin v. Rawdon, 44 N. Y., 63; Conaughty v. Nichols, 42 Id., 83). Even if it was a tort, an action for money had and received has always been permitted when money has been received for converted property. The order should be reversed, with costs. Tappen, J., concurred. Order reversed, with costs