Opinion
June, 1904.
Nash Rockwood, for the appellant.
Edgar T. Brackett, for the respondent.
Where a person with knowledge of all the facts elects to invoke the aid of the court to enforce one of two or more coexisting, but inconsistent remedies, he is bound by his election, and is thereafter barred from resorting to the other. One cannot invoke the aid of the court in affirmance of an entire contract and at the same time or thereafter in disaffirmance thereof. The principles stated are well known and unquestionably established. Assuming that the plaintiff in bringing his action of October 24, 1899, elected irrevocably to affirm the contract with the defendant the question now arises as to whether this action is a disaffirmance of the contract or an act inconsistent with the former action. Subdivision 4 of section 549 of the Code of Civil Procedure provides that a defendant may be arrested as follows: "In an action upon contract express or implied, other than a promise to marry, where it is alleged in the complaint that the defendant was guilty of a fraud in contracting or incurring the liability or that he has since the making of the contract or in contemplation of making of the same removed or disposed of his property with intent to defraud his creditors or is about to remove or dispose of the same with like intent, but where such allegation is made the plaintiff cannot recover unless he proves the fraud on the trial of the action, and a judgment for the defendant is not a bar to a new action to recover upon the contract only."
Such subdivision of said section was not a part of section 549 of the Code of Civil Procedure as originally enacted as the Code of Remedial Justice (Laws of 1876, chap. 448). The section as enacted in 1876 contained three subdivisions, and following said subdivisions it provided as follows: "The cases provided for in this section are described in this act as cases where the right to arrest the defendant depends upon the nature of the action."
Subdivision 2 of section 550 of said act of 1876 provided: "Where it appears from the complaint that the action is to recover damages for the breach of a contract, express or implied, other than a promise to marry, and, by allegations extrinsic to the complaint, that the defendant has been guilty of a fraud in contracting the debt, or incurring the liability, or that he has, since the making of the contract, removed or disposed of his property, with intent to defraud his creditors, or that he is about to remove or dispose of the same with like intent."
The last sentence of said section 549 quoted supra was stricken out by chapter 416 of the Laws of 1877. Chapter 542 of the Laws of 1879 added a 4th subdivision to said section 549 as follows: "In an action upon contract express or implied, other than a promise to marry, where it is alleged in the complaint that the defendant was guilty of a fraud in contracting or incurring the liability. Where such an allegation is made the plaintiff cannot recover unless he proves the fraud, and a judgment for the defendant is not a bar to a new action to recover upon the contract only."
And section 550 was thereby amended by omitting therefrom said provision so added to section 549.
By chapter 672 of the Laws of 1886, sections 549 and 550 were amended to read as they read at this time.
The changes mentioned indicate an intention to authorize allegations in a complaint on contract which were formerly referred to in section 550 as "allegations extrinsic to the complaint," without thereby affecting the nature of the action. Plaintiff brings this action pursuant to subdivision 4 of said section 549. That subdivision refers to and designates the action as one "upon contract express or implied."
Frey v. Torrey ( 70 App. Div. 166) was an action "for money obtained by fraud." The answer was a general denial and a plea of discharge in bankruptcy. It appeared in that action that plaintiff had filed proof of his claim for "money deposited" with the defendant "while acting in the capacity of banker." The defendant claimed that the plaintiff having proved his debt upon contract, waived his right to recover on the ground of fraud. The court, in the course of its opinion, say: "The appellant's contention that the respondent is estopped from prosecuting this action by his election to prove his claim in bankruptcy remains to be considered. A binding election can only be made where a party, with full knowledge of all the material facts, adopts a remedy which is inconsistent with another remedy then open to him. ( Crossman v. U.R. Co., 127 N.Y. 34.) We fail to discover any inconsistency between the remedy pursued by the respondent in the bankruptcy court and that adopted by bringing this action. It does not necessarily appear that the respondent waived the tort by filing proof of his claim in bankruptcy. If not, merely proving the indebtedness which concededly existed and which was induced by fraud, would not be inconsistent with subsequently bringing an action to recover the money obtained by the fraud. ( Stokes v. Mason, 10 R.I. 261; Sheldon v. Clews, supra; Bickford v. Barnard, 8 Allen, 314.) But if the necessary inference from the record be that he waived the cause of action for the tort, still this case may be treated as an action on contract to recover the money on an implied promise to repay the same. The mere fact that it appears to have been alleged that the money was obtained by fraud is not decisive that the action is not upon contract. Subdivision 4 of section 549 of the Code of Civil Procedure classifies an action to recover a debt induced by fraud as an action on contract. The allegation of fraud is essential only for the purpose of obtaining an order of arrest or body execution. ( Ewart v. Schwartz, 48 N.Y. Super. Ct. 390.)"
Frey v. Torrey ( supra) was affirmed in the Court of Appeals ( 175 N.Y. 501) on the opinion in the court below.
The following cases are also authority for saying that this action is one on contract: Bussey McLeod Stove Co. v. Wilkins ( 1 App. Div. 154); McDonough v. Dillingham (43 Hun, 493); Wheadon v. Huntington (83 id. 371).
The Appellate Division, second department, has held that if an order of arrest is not obtained in an action on contract where it is alleged that the defendant was guilty of fraud in contracting or incurring the liability a judgment may be rendered notwithstanding the fraud is not proven, and the court, referring to the provision of subdivisions 2 and 4 of section 549 of the Code of Civil Procedure to the effect that the plaintiff cannot recover unless he proves the fraud, say: "We conceive that this is intended merely as a condition precedent to the right to arrest the defendant and that it has nothing to do with a cause of action where the allegations of fraud are unnecessary as in the case at bar." ( McGuire v. Bausher, 52 App. Div. 276.)
Subdivision 4 of said section 549 seems to be express authority for an action on contract with the right as a collateral and further remedy where the facts warrant it to allege and prove fraud in the inception of the contract and obtain an order of arrest and an execution against the person of the defendant. No previous judgment had been entered against the defendant and the allegations were added to the complaint for the purpose of avoiding the discharge in bankruptcy and also for the purpose of obtaining the further rights afforded by said section 549.
This action is not in repudiation of the contract, but in affirmance thereof, and as it is not inconsistent with the former action, the plaintiff is not barred from maintaining the same. The complaint should not have been dismissed, but the issues joined by the pleadings should have been tried and determined on their merits.
The judgment and order should be reversed and a new trial granted, with costs to the appellant to abide the event.
All concurred; HOUGHTON, J., not sitting.
Judgment and order reversed and new trial granted, with costs to appellant to abide event.