Opinion
1888-04-30
THOMPSON v. HALBERT.
2. Action for conversion of outlawed note. 3. Pleading; evidence admissible under denial of value in conversion.
1. Partial defense, how pleaded; test on demurrer.
If the answer does not state that new matter therein pleaded is set forth as a partial defense, the plaintiff has the right to assume, and the court must assume, that it is pleaded as a complete defense; and upon demurrer it must be tested as such.
2. Action for conversion of outlawed note.
It is not a complete defense to an action for the conversion of a promissory note that a statute of limitations has barred an action on the note itself. A plea of the statute in such case admits the cause of action and questions only its extent and amount, and is not a bar to a recovery.
3. Pleading; evidence admissible under denial of value in conversion.
In an action for the conversion of a promissory note, if proof of the fact that an action thereon is barred by the statute of limitations is admissible at all, it may be proved under a general denial, since the plaintiff must prove the value of the note as the basis of his recovery, and the defendant may prove any facts which affect its value, even to the extent of reducing the recovery to merely nominal damages.
See note on what may be proved under general denial in 20 Abb. N. C. 342.
Appeal by the plaintiff from an interlocutory judgment and order of the supreme court, first department, which reversed an interlocutory judgment and order of the special term, sustaining plaintiff's demurrer to the seventh defense set forth in the answer.
Walter L. Thompson, as receiver in supplementary proceedings of the property of Margaret A. Frost, brought this action against Norton A. Halbert and others for the conversion of two notes in favor of Frost, and the mortgages which secured them. The first cause of action was for the conversion of a note, secured by mortgage upon land in Kansas, dated in 1871, and the complaint alleged that the note was worth its face value, the sum of $300 and interest thereon from its date at 12 per cent. per annum.
The answer contained nine defenses, the seventh defense alleging “as a further answer to the first cause of action,” that by the laws of Kansas, where the maker of the note and mortgage resided and where the land mortgaged was located, the note and mortgage were “barred by the statute of limitations,” and that “no action can now be maintained nor any recovery had thereon.”
To this defense the plaintiff demurred, “upon the ground that it is insufficient in law upon the face thereof.”
The Special Term (VAN BRUNT, J.) sustained the demurrer, holding that the matter alleged was a partial defense only, which, by Code Civ. Pro. § 508,
must be expressly stated to be such, and being pleaded as an absolute defense was demurrable.
Code Civ. Pro. § 508. A partial defense may be set forth, as prescribed in the last section; but it must be expressly stated to be a partial defense to the entire complaint, or to one or more separate causes of action therein set forth. Upon a demurrer thereto, the question is whether it is sufficient for that purpose. Matter pending only to mitigate or reduce damage, in an action to recover damages for the breach of a promise to marry, or for a personal injury or an injury to property, is a partial defense within the meaning of this section.
The General Term (DANIELS and BRADY, JJ.) reversed the decision below and sustained the demurrer, holding that as no informality in the manner of presentation of the defense was stated in the demurrer, nor could be under Code Civ. Pro. § 508, the only question on the demurrer was whether the matter demurred to was sufficient as the statement of an entire or partial defense; and that if the note should be proved to be of no value by reason of the statute of limitations, then the answer contained a complete defense, while if it should be shown or considered to be of some value, then the answer contained a partial defense (Decision reported in 40 Hun, 536).
From the interlocutory judgment and order of the general term plaintiff appealed. Wayland E. Benjamin, for the plaintiff, appellant.
I. If the facts pleaded by a defendant expressly as an answer do not constitute an answer, a demurrer thereto for insufficiency must be sustained, although proof of the facts alleged might reduce the damages recoverable (Bush v. Prosser, 11 N. Y. 347; Newman v. Otto, 4 Sandf. 668; Ayres v. Covill, 18 Barb. 260;Matthews v. Beach, 5 Sandf. 256; 8 N. Y. 173;Hager v. Tibbits, 2 Abb. Pr. [ N. S.] 97; Hathorn v. Congress Spring Co., 44 Hun, 608; Bennett v. Matthews, 64 Barb. 410; Fry v. Bennett, 5 Sandf. 54; Willis v. Taggard, 6 How. Pr. 433; Von Wein v. Macaulay, N. Y. Daily Reg., Nov. 13, 1886; Ryan v. Mayor, &c. of N. Y., 42 Super. Ct. [ J. & S.] 202).
II. To an action by the owner of an unpaid note against a stranger who has converted it, it is not an answer to plead that the statutes of another State have barred an action on the note in the courts of that State (Newcomb v. Ramer, 2 Johns. 420,n.; Connoss v. Meir, 2 E. D. Smith, 314, 315).
III. The fact that the statute of limitations bars an action upon a promissory note against the maker thereof, is in no way available as a defense to an action against third persons for its conversion (Thayer v. Manley, 73 N. Y. 305; Cothran v. Hanover Natl. Bk., 40 Super. Ct. [ J. & S.] 401; Stanton v. Crispell, 9 Hun, 502; Mercer v. Jones, 3 Camp. 477; Potter v. Merchants' Bank, 28 N. Y. 641;Grattan v. Wiggins, 23 Cal. 16; Maddox v. Allen, 1 Metc. [ Ky.] 495; Lord v. Morris, 18 Cal. 482;Dawson v. Callaway, 18 Ga. 573; Biddle v. Moore, 3 Penn. St. 161; Smith v. Hutchinson, 78 Va. 683;Sanger v. Nightingale, 122 U. S. 176; McKinlay v. Gaddy, (S. C.) 2 Southeast. Rep. 497; Booth v. Powers, 56 N. Y. 22; Outhouse v. Outhouse, 13 Hun, 130; Thomas v. Waterman, 7 Met. ( Mass.) 227; Penobscot R. R. Co. v. Mayo, 67 Me. 470). Norton A. Halbert ( W. E. Millard, attorney) for the defendants, respondents, cited: Palmer v. Andrews, 7 Wend. 142;Willard v. Stone, 7 Cowen, 22;Johnston v. Caulkins, 1 John. Cases 116;Bush v. Prosser, 11 N. Y. 347;Lane v. Gilbert, 9 How. Pr. 150;Gilbert v. Rounds, 14 Id. 46;Heaton v. Wright, 10 Id. 79;Harter v. Crill, 33 Barb. 283; Newman v. Otto, 4 Sandf. 668; Spooner v. Keeler, 51 N. Y. 527; Bennett v. Smith, 23 Hun, 50-53; Willover v. Hill, 72 N. Y. 36; Wandell v. Edwards, 25 Hun, 498; Bradner v. Faulkner, 93 N. Y. 515; Starr v. Cragin, 24 Hun, 177; Kennedy v. Stuyley, 14 Johns. 127;Prince v. Conner, 69 N. Y. 608;Ingalls v. Lord, 1 Cow. 240;Booth v. Powers, 56 N. Y. 22;Thayer v. Manley, 73 Id. 305, 308;Potter v. Merchants' Bank, 28 N. Y. 641, 646; Mayer v. Friedman, 7 Hun, 218; Gantz v. Halgate, Daily Reg. Aug. 23, 1883; Muser v. Lewis, 14 Abb. N. C. 333;Romig v. Romig, 2 Rawle, 241; Cothran v. Hanover Nat. Bank, 40 Super. Ct. ( J. & S.) 401; Stone v. Frost, 61 N. Y. 614; Mathew v. Sherwell, 2 Taunton, 439; Wills v. Wells, 2 Moore, 247, 251; Knapp v. Roche, 94 N. Y. 329, 333;Sibert v. Wilder, 16 Kans. 176.
FINCH, J.
This action was brought to recover damages for the conversion by the defendants of two notes and the mortgages which secured them. The first cause of action pleaded, respects a note and mortgage upon land in Kansas, dated in 1871, and as an answer to that the defendants alleged in their seventh defense that by the laws of that State, in which the maker of the note resided, and the land was located, the note and mortgage were barred by the statute of limitations, and that no action could now be maintained thereon. To this answer the plaintiff demurred on the ground that it was insufficient in law on the face thereof. The demurrer was sustained by the special term, but that decision was reversed by the general term on appeal.
We are of opinion that the reversal was erroneous. The facts stated in the answer were not pleaded as a partial defense or in mitigation of damages. Where that is attempted the Code explicitly requires that the answer shall so state, and give notice that the facts relied upon are intended as a partial defense ( Code Civ. Pro. § 508). When no such statement is made the plaintiff has the right to assume, and the court must assume, that the new matter alleged is pleaded as a complete defense, and if demurred to must be tested as such (Matthews v. Beach, 5 Sandf. 256; S. C., 8 N. Y. 173).
Applying that test the answer is insufficient. It merely affects the amount of damages to be recovered by tending to reduce the value of the securities converted.
The decision in 8 N. Y. was on appeal from final judgment after trial had, in which the interlocutory judgment on demurrer, which was affirmed in 5 Sandf., was also brought up for review and the decision approved, though the final judgment was reversed for error at the trial.
It confesses but does not avoid. It admits the cause of action and questions only its extent and amount, and is not a bar to recovery. It is bad, therefore, as a defense, and the special term was right in so holding.
It is not denied that the facts alleged, if admissible at all, may nevertheless be put in evidence for the purpose of affecting or reducing the value of the securities (Booth v. Powers, 56 N. Y. 22). So far as the question of pleading is concerned, they are admissible under the denials of the answer. The plaintiff must prove the value of the articles converted as the basis of his recovery, and what he may prove the defendants denying may disprove. The plaintiff averred the value of the note to be $300, and the accrued interest at 12 per cent. The defendants deny that allegation, and aver that the same had no value, and also deny the alleged conversion. While the allegations of value and no value may perhaps not make a technical issue because needless, yet under the denial of the answer, which puts in issue plaintiff's whole cause of action, the defendants have a right to prove any facts which affect the value of the securities, and possibly to an amount which would reduce the recovery to merely nominal damages, and so as a question of pleading, and although the seventh defense be stricken out, may prove the law of Kansas and show the difficulty and uncertainty of collection (Knapp v. Roche, 94 N. Y. 329, 333). So much the plaintiff concedes. Precisely what useful purpose was served by interposing this demurrer it is therefore difficult to see, but the question is raised and must be correctly decided.
The argument of the general term appears to be that the facts pleaded might induce the jury to find that the securities converted were absolutely valueless, and so the defense become a complete one. It would be more correct to say that the damages would become merely nominal although the conversion would remain and the wrong itself be undefended. An answer does not bar a cause of action and so constitute a defense when it affects merely the measure of damages.
The judgment of the general term should be reversed, and that of the special term affirmed with costs, but with leave to the defendants, upon payment of costs of the demurrer, to plead anew or amend within twenty days after entry and notice of this judgment.