Case ID: ad_131/html/0737-01.html
Source: Caselaw Access Project
Author: {"author": "Laughlin, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Adelheid Welcke and Others, Respondents, v. William C. Trageser and Others, Appellants.
    (No. 2.)
    First Department,
    April 8, 1909.
    Pleading — action to set aside conveyance for fraud and undue influence — motion to strike out irrelevant matter.
    In a suit against a corporation and its directors to set aside a conveyance alleged to have been procured from the grantor, an aged woman, by undue influence and duress, an allegation that the conveyance was procured for no legitimate purpose but was part of an unlawful conspiracy between the individual defendants to obtain ultimate and exclusive control of the corporation, and to secure to it valuable property in fraud of the plaintiffs’ right and for the purpose of depriving them of their rights as stockholders, should not be stricken out. This, because although such allegations are not relevant to the issue as to whether the conveyance was procured by fraud, it may appear upon the trial that the acts tending to show fraud were committed by one defendant only, and his acts may have been done in the execution of a conspiracy with the others, and, hence, the allegation of the conspirac3r is proper.
    
      So, too, allegations that after the transfer the grantor was paid the rent of the property and that the insurance remained in her name should not be stricken out, as they tend to show that the grantor did not understand the nature of the conveyance; that the transfer was concealed, and tend to show fraud or duress.
    But allegations stating the residence of the plaintiffs and that they were not advised of the transfer and similar matters of evidence should be stricken out.
    So, too, an allegation that a legatee under the will of the grantor elected to surrender certain shares of the defendant’s stock and take a legacy should be stricken out where the legatee is not a party to the suit and the facts have no bearing on the cause alleged.
    So, too, when no answer has been served, allegations anticipating a defense of estoppel should be stricken out. This, because that issue is not yet raised and if it were raised plaintiffs could prove facts showing that they were not estopped without pleading that fact and without a reply.
    An allegation that after the conveyance the defendants induced the grantor to transfer certain shares of stock should be stricken out, even though it was done pursuant to a conspiracy to obtaina controlling interest in the corporation.
    In such action allegations that the individual defendants transferred to the plaintiffs the same proportion of stock procured by them from the grantor hy fraud and duress which the plaintiffs would have received under the will of the grantor and that they have not accepted the transfer .of the stock and stand ready to return it are irrelevant and should be stricken out.
    Appeal by the defendants, William C. Trageser and others, from an order of the Supreme Court,' made at the New York Special Term and entered in the office of the clerk of the county of New York on the 29th day of January, 1909, denying the defendants’ motion to strike out certain portions of the complaint and to have the complaint made more definite and certain.
    
      Robert K. Walton [ John S. Parker with him on the brief], for the appellants.
    
      Joseph H. Hayes, for the respondents.
   Laughlin, J.:

The object of this action is to have a conveyance of certain premises described in the complaint, made by Augusta Trageser to the defendant corporation on the 17th day of Hay, 1906, declared fraudulent and void, and to compel a reconveyance of the same for the benefit of her estate to a trustee to be designated by the court, to hold in trust as provided in the 12th paragraph of the will of said Augusta Trageser until it vests in fee simple absolute in the devisees therein named. The three plaintiffs and the two individual defendants are brothers and sisters. The grantor, whose conveyance is sought to be set aside, was their mother. She died on the 21st day of June, 1907, leaving a last will and testament bearing date the 26th day of May, 1903, and a codicil thereto executed on the 21st day of February, 1906. She named her sons, the defendants, her executors. The will and codicil were duly admitted to probate and letters testamentary were duly issued to the individual defendants as executors. By the 12th clause of her will the decedent devised the premises in question to her executors in trust to collect the rents, issues and profits thereof and to pay over the same to five of her children, the plaintiffs and the individual defendants in this action, until a grandson named in the will should attain the age of twenty-one years, at which time the trust was to terminate and the beneficiaries of the income were to take the remainder in equal shares, the executors being empowered, however, to sell and divide the property between the beneficiaries on the death of the grandson before attaining his majority or at an earlier date if they deemed it for the best interests of the beneficiaries. The defendant corporation was founded in 1850 to take over a business established by the father of the individual parties to this litigation. The entire capital stock was issued to their father and mother and to the two sons, the defendants herein. At the time of the execution of the conveyance sought to be set aside in this action all of the capital stock was owned by the mother and the two sons, and they together constituted the entire board of directors. Prior to that time, the company occupied part of the premises under a lease for which they paid decedent a monthly rental of $166.66. The plaintiffs allege that this conveyance was not the free, voluntary act of their mother, who was then eighty years of age, biit was made against her will, in opposition to her intention to retain the property as a source of income for plaintiffs, to whom she had been accustomed to give part of the -rentals ; that it was not needed for the business of the company ; that it rendered nugatory the devise and trust provided for in the 12th paragraph of her will; that the individual defendants took advantage of the business relations and blood relationship existing between them and their mother and dominated and controlled her, “ and by overreaching, undue influence, coercion and compulsion procured from their mother ” the conveyance; that for the purpose of concealing the transaction the company continued to pay rent to their mother, as before, and the insurance policies on the buildings which stood in her name were not changed, and that the individual defendants in thus procuring the execution of the deed by their mother were aware of the provisions of her will with respect to the premises.

The provisions of paragraph 13 of the complaint, to which the motion was directed, alleged that the conveyance was procured for no legitimate purpose, but was part and parcel of an unlawful conspiracy between the individual defendants to obtain the ultimate and exclusive control of the company and to secure to the company valuable property in fraud of the lights of. the plaintiffs, and for the purpose of depriving the plaintiffs of their rights as stockholders of the defendant company. It is not apparent that these allegations are relevant to the issue as to whether the conveyance was induced by fraud or duress ; but since it may appear upon the trial that acts tending to show fraud or duress were committed by one only of the defendants and his acts may have been in the execution of a conspiracy formed between him and his brother, it would be essential to charge the brother with his acts to allege, in substance, that they entered into a conspiracy to commit the acts and, therefore, in that view it cannot be said that these allegations are irrelevant and they should be permitted to stand.

The allegations of the 14th paragraph, with the exception of the 2d sentence, are wholly irrelevant and should be stricken out. The 2d sentence alleges, in effect, that the property was dealt with after the transfer the same as before; that the mother was paid rent as before, and that the insurance remained in her name, which would tend to show that she did not understand the nature and effect of the conveyance, and that the transfer of the property was concealed. These facts may have a material bearing on the fraudulent nature of the transaction or of duress. The other allegations of that paragraph, however, relate to the residence of the plaintiffs and to the fact that they were not advised with respect to the transfer, and to the residence of the insurance broker who represented the mother of the plaintiffs and to the fact that if he had been requested to note the change of interest the plaintiffs would probably have become aware of the transfer. These allegations merely set forth evidence and are not essential facts to be alleged.

The 10th paragraph is manifestly all irrelevant. It relates to the action of a legatee under the will of the mother of the plaintiffs with respect to electing to surrender ten shares of the capital stock in the defendant company and take a legacy of $12,000. The legatee is not a party to the suit and these facts have no bearing on the cause of action attempted to be alleged.

The I7tli paragraph is not material to the plaintiffs’ case. The plaintiffs therein allege facts in anticipation of a defense of estoppel. Inasmuch as no answer has been served, no such defense lias yet been interposed, and should it be interposed the plaintiffs will be at liberty to prove the facts tending to show that they are not estopped from maintaining the action, to rebut the defense without specially pleading it, since such a defense would not call for a reply. The question presented by the motion to strike out allegations of the complaint is whether the allegations are relevant to the cause of action attempted to be set forth, and not whether they may be relevant to an issue which may thereafter be presented by the answer. If these allegations are allowed to stand, the defendants will be required to join issue thereon, thus, perhaps, putting in issue facts which have a bearing only on a possible defense which may not be presented at all and, therefore, they tend to confuse the issue.

The allegations of the 19th and 20th paragraphs are not relevant to the issue. They charge that after procuring the conveyance in question, the defendants likewise induced their mother to transfer to them certain shares of the capital stock of the defendant company. They do allege that this was pursuant to the conspiracy formed by the individual defendants to obtain a controlling interest in the management of the corporation to the detriment of the plaintiffs. If, after inducing their mother to transfer the land, the individual defendants induced her to transfer her stock in the corporation, even though both acts were pursuant to a preconcerted plan to obtain both her land and stock, it is not, I think, material to the issue of fraud or duress in inducing the conveyance of the land, to show that the subsequent steps in the conspiracy relating to the stock were consummated. The making of the conspiracy may, as already observed, become material, but it is not material whether or not it was all executed. The fact that those parts of the conspiracy which were to be executed after the transfer of the land were not executed would be no evidence that the conspiracy was not formed, nor would proof that the acts were done temjl to establish the original conspiracy. Further allegations in one of these paragraphs with respect to the transfer to the plaintiffs by the individual defendants .of the same proportion of the shares of the stock procured from their mother by fraud or duress which the plaintiffs would have received under the will of their mother, and that they have not accepted such transfer of stock, and stand ready to surrender and retransfer them, have no bearing on the issue presented. They at most tend to show that the defendants endeavored to induce the acceptance of those certificates by the plaintiffs and thus hoped to estop the plaintiffs from contesting the assignment of the stock by their mother, but have not succeeded.

It follows that the order should be reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs, with the exception of the provisions of paragraph 13 and the 2d sentence in paragraph Id, which are allowed to stand.

Ingraham, Clarke, Houghton and Scott,. JJ., concurred.

Order reversed, Avith ten dollars costs and disbursements, and motion granted to extent stated in opinion, with ten dollars costs.