Case ID: ny-super-ct_51/html/0088-01.html
Source: Caselaw Access Project
Author: {"author": "Freedman, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

THOMAS M. NICHOLS, Appellant, v. GILMER A. LUMPKIN, Respondent.
    
      Pleading—Information and belief—When demurrer to answer proper.— Gaming contracts—Statute against.
    
    As to whether or not a defendant can properly plead a denial of knowledge or information sufficient to form a belief as to an allegation in the complaint concerning a matter which must necessarily be within his knowledge, quaere.
    
    But such question may not be raised by demurrer, for § 494 Code, only allows a demurrer to a counter-claim or defense consisting of new matter.
    
    The answer to a complaint on promissory notes alleged to have been made in Boston, Mass., set forth that defendant at the time of giving them was engaged in an illegitimate business in Boston, known as the “ bucket shop ” business, consisting of the purchase and sale of stocks, in fractional quantities, on margins, without an actual delivery at any time; that plaintiff was a customer of defendant therein, and the transactions resulting in the giving of the notes, were to plaintiff’s knowledge gambling transactions therein, and illegal and void; that the notes were without other consideration, and therefore illegal and void, and plaintiff knew it, etc.
    
      Held, on demurrer, that though the defense be inartistically drawn and the statements improperly made, yet they must be taken as admitted allegations of fact, and as such are sufficient under 110 U. S. 499; also that defendant must show on the trial that the transactions were void in Massachusetts,
    
      
      Decided December 1, 1884.
    
      Further held, that though under the statutes in regard to betting and gaming, plaintiff may recover his money, this he can do only under the statute, and by disaffirming the contracts,—i. e., the notes.
    Before Sedgwick, Ch. J., Van Vorst and Freedman, JJ.
    Appeal from order and from the judgment entered thereon, overruling plaintiffs demurrers to two separate defenses in defendant’s answer.
    The facts appear in the opinion.
    
      Roger Foster, for appellant.
    A. defendant cannot properly plead a denial of knowledge or information sufficient to form a belief as to an allegation in the complaint concerning a matter which must necessarily be within his knowledge (See Field's Essay on Reforms under the Old Constitution, A. D. 1847, 1 Field's Works, 260 ; and First Report Practice Comm. February 29, 1848 ; note to section 118 ; Practice Comm. December 31, 1849 ; note to section 652, 1 Field's Works, 302 ; Hull v. Wood, 1 Paige 404 ; Scotts v. Hume, Litt. Sel. Cases, [Ky.] 379 ; Taylor v. Luther, 2 Sumner, 228, 331; Harrison Ch. Pr. 181, 102; Cooper's Eq. Pl. 314 ; Nichols v. Jones, 6 How. 355 ; Bliss on Code Pleading, § 326; Maynard v. New York Central Mills, 10 How. Pr. 19 ; Fales v. Hicks, 12 Id. 153 ; Richardson v. Wilson, 4 Sand. 798 ; Edwards v. Lent, 8 Id. 38; Hance v. Remsen, 1 Code R. 204; Robelin v. Long, 40 How Pr. 28 ; Fallon v. Durant, 60 Id. 178 ; Webb v. Foster, 45 Super. Ct. 310). The same rule has been established in other states (San Francisco Gas Co. v. City, 9 Cal. 453 ; Wing v. Dugan, 8 Bush [Ky.] 583).
    The apparent conflict among the authorities can be easily explained. Some of the earlier cases, e. g. Fleury v. Roger (9 How. Pr. 215) ; People v. McComber (15 Id. 186 ; S. C., affirmed, 18 N. Y. 315 ; S. C., 27 Barb. 632); held, that a denial of this sort might be stricken out as sham ; and even that a positive general denial might be thus stricken out, provided it could be shown by affidavits that it was clearly false. Although the reasoning of these cases seems logical, and supported by analogy and authority, they were overruled by Wayland v. Tyson (45 N. Y. 281). The ground of the decision in this case was : That the granting of such a motion would be tantamount to denying the defendant’s right to a trial by jury. This case has been followed as to a motion to strike out as sham an answer like the one in the case at bar (Roby v. Hallock, 5 Abb. N. C. 87). It has, however, been distinguished and limited by Kay v. Campbell (10 Abb. N. C. 85). But the cases holding that an objection to the form of denial, raised by the proper motion or demurrer, will be sustained, remain unshaken. The only case apparently in direct conflict with those authorities that we have been able to find is Snyder v. Bedsell (10 Rep. 217). Only an abstract of that case is given in the report. It appears to have been a special term decision of the city court of Brooklyn. As the facts are not stated, the case as reported has little weight as an authority. In Livingston v. Hanner (7 Bos. 670), although some of the dicta in the opinion seem unfavorable, as judgment was finally ordered in favor of the plaintiff, the judge’s language cannot be considered as overruling the adjudged cases. Grocer’s Bank v. O’Rourke (6 Hun, 18), merely holds that such a denial cannot be stricken out as sham, and that part of an answer camiot be stricken out as frivolous.
    A demurrer was the proper remedy in this case (Fallon v. Durant, 60 How. Pr. 178).
    II. The allegations “that said contracts and transactions were illegal, void and gambling contracts and transactions,” and “that said bills were illegal and void,” are mere conclusions of law, and, therefore, to be disregarded upon the argument of this demurrer (Blake v. Griswold, 68 N. Y. 294).
    The defendant does not state that the money was advanced for gaming purposes. Defendant admits that the transactions contemplated were purchases and sales of stocks. The true test is not whether actual delivery was contemplated, but whether the transaction was a sale or a bet upon prices at other sales (Irwin v. Willar, 110 U. S. 499). But at all events, the law regulating the sale of shares of stock must necessarily be different from other personal property. Shares of stock are intangible, and as such incapable of delivery (Brown v. Bushwick R. R. Co., 75 N. Y. 211). The only delivery that can be made under such a contract is a delivery of certificates. But the legislature has enacted (L. 1858, ch. 134, § 1) that “no contract . . . for the purchase, sale, etc., of any certificate or other evidence of debt due by or from the United States, or any separate State, or of any share or interest in the stock of any bank, or of any company incorporated under any law of the United States, or of any individual State, shall be void or voidable for any want of consideration, or because of the non-payment of any consideration, or because the vendor at that time of making such contract is not the owner or possessor of the certificate or certificates, or other evidence of such debt, share, or interest.” Subsequently sections of this statute repeal the Stock Jobbing Act (1 R. S. 710, §§ 6, 7 and 8). Moreover, it has been held that a broker who carries stock for a customer upon margin can recover his advances and commissions ; even though it have been mutually agreed that no delivery of the certificates be made to the customer, and that the latter should be hable only for the differences (Earl v. Howell, City Ct., G. T., June 30, 1884 ; Thacker v. Hardy, 4 Q. B. D. 685).
    But even conceding that the contracts were void as gambling. contracts, the defense is still bad. The return of this money thus deposited “upon margin,” is merely what the defendant would have been compelled to do, even had no promissory notes been paid (2 R. S. 662, § 9). That we do not refer in our pleading to the statute does not impair our rights. Our acceptance of the notes, thus extending his time to pay this debt, was a valid consideration for his promise to pay their amount. That the transactions are claimed to have taken place in Massachusetts makes no difference. (1) That does not distinctly appear in the answer. (2) There is no allegation in the complaint that such statute was not in force in Massachusetts. (3) But if it be assumed that there is no such statute there in force, it must necessarily follow that the common law prevails there. By the common law gambling contracts were valid (Good v. Elliot, 3 T. R. [D. & E.] 693 ; Hussey v. Crickitt, 3 Camp. 168 ; see also Ormes v. Dauchy, 82 N. Y. 433). (4) But assuming that the contracts were illegal by the laws of Massachusetts, the plaintiff could still maintain this action. He had a right to repudiate the contracts if illegal, and to recover back the money paid in part performance of them (2 Comyn on Contr. 261; Spring Co. v. Knowlton, 103 U. S. 49).
    
      Lionel J. Noah and George F. Gardiner, for respondent.
    I. A general denial is not demurrable. This is true whether the denial is absolute or whether it is made on information and belief. A party has no right to interpose an unqualified denial in a verified answer, unless it is founded upon personal knowledge, but when he has no personal knowledge, but has knowledge sufficient to form a belief, he is not only permitted, but bound at his peril, to deny upon information and belief (Brotherton v. Downey, 21 Hun, 436). Where a complaint alleged the execution by the defendants of an agreement, of which a ' copy was given (not so in this case), they answered that they had no knowledge or information sufficient to form a belief whether or not they executed the agreement. Held, “That the denial was good in form.” See also Snyder v. Beddell, 10 Reporter, 217; Livingstone v. Hummer, 7 Bosw. 670 ; People v. McCumber, 15 How. 186 ; affirmed, 18 N. Y. 315 ; 27 Barb. 632 ; Caswell v. Bushnel, 14 Ib. 393 ; Thorne v. N. Y. Cent. Mills, 10 Hun, 19.
    II. Even were the first defense to the first and second causes of action open to criticism standing alone, it is not so considering the answer as a whole. The second defense to the first and second causes of action is explanatory of the first, and qualifies and explains why the first defense was not positively made. This form of denial has been often approved.
    III. The question is not whether the facts stated in that portion of the answer which is demurred to are properly or improperly stated, whether the answer is artistically or in artistically drawn, whether there are too many or too few facts stated, but simply is whether the facts as stated being true, or any of them constitute a defense.
   By the Court.

Freedman, J.

The complaint contains three causes of action : two upon promissory notes, and the third upon an account stated.

The answer sets up two distinct and separate defenses to the first two causes of action, and denies the account stated.

The plaintiff separately demurred to each of the defenses to the first two causes of action for insufficiency, but no question was raised as to the sufficiency of the defense to plaintiff’s third cause of action.

The demurrers of the plaintiff were overruled with costs, and from the order and judgment entered thereupon, the present appeal is taken.

Each of the first two causes of action proceeded upon a promissory note alleged to have been executed by the defendant to the plaintiff as payee at Boston, Mass., on the 8th day of October, 1879.

The first defense to both of said causes of action is as follows, viz : “First, That he (viz., the defendant) has no knowledge or information sufficient to form a belief as to whether he made the promissory notes as alleged in the first and second causes of action in said complaint contained, or any promissory notes.”

By demurring to this defense on the ground of insufficiency, the plaintiff sought to raise the question whether under the Code of Civil Procedure a defendant can properly plead a denial of knowledge or information sufficient to form a belief as to an allegation in the complaint concerning a matter wMch must necessarily be within his knowledge.

The authorities upon this point appear to be conflicting, and the probabilities are that the question will remain in doubt until it is settled by an express adjudication of the court of appeals. This being so, I feel reluctant to pass upon the point, unless to do so is absolutely necessary.

In my judgment no such necessity exists. Section 494 of the Code of Civil Procedure, which confers upon a plaintiff the right to demur, provides as follows : “The plaintiff may demur to a counter-claim or a defense consisting of new matter, contained in the answer, on the ground that it is insufficient in law upon the face thereof.” It is not every defense, therefore, to which a plaintiff may demur, but only to a defense consisting of new matter contained in the answer. The words “consisting of new matter ” are words of limitation.

As the defense now under consideration does not consist of new matter, but of a denial, the plaintiff mistook his remedy by demurring, even if his contention as to the insufficiency of the denial should be otherwise well founded.

The same rule prevailed prior to the Code of Civil Procedure. Under the Code previously in force it was repeatedly held, that an answer which set up no new matter, but merely denied the allegations of the complaint, was not demurrable, no matter how defective the form of the denial was (Smith v. Greenin, 2 Sandf. 702 ; Maretzeck v. Cauldwell, 2 Rob. 715 ; Ketcham v. Zerega, 1 E. D. S. 553 ; Lund v. Seaman’s Savings Bank, 37 Barb. 129 ; Rice v. O’Connor, 10 Abb. 362).

Plaintiff’s demurrer to the first defense to the first two causes of action was therefore properly overruled.

The second defense to the notes sued on, consists of a statement of facts setting forth the transaction and the circumstances upon which, and under which, the notes (believed to be the notes sued upon, but which the answer styles due bills), were made by defendant to plaintiff ; that the defendant at that time was engaged in an illegitimate business in the City of Boston, called the bucket-shop business, consisting in the purchase and sale of stocks, in fractional quantities upon margins, without an actual dedelivery of the stocks at the time of the purchase or sale thereof, or at any other time ; that in said business the plaintiff was a customer of the defendant; that the transactions resulting in the giving of the notes were, to the knowledge of the plaintiff, gambling transactions in the course of such business, and illegal and void ; that the notes were without any other consideration, and therefore illegal and void, and that plaintiff knew it, &c.

This statement must be accepted as containing allegations of matters of fact which stand admitted by the demurrer, and the question therefore is, not whether the facts are properly or improperly stated, or whether the defense is artistically or inartistically drawn, but whether the facts as stated, taken together and treated as true, constitute a defense.

In my judgment they are sufficient to constitute a defense within the principles laid down in Irwin v. Williar, (110 U. S. 499), and cases there cited. If upon the trial it should become necessary for the defendant upon whom the burden of proof in this respect rests, to establish the illegality of the notes under the laws of the state of Massachussetts, he must do so by competent proof as to what, as matter of fact, the law of that state governing the case is.

The plaintiff insists, however, that even if the contracts which resulted in the giving of the notes, were nuff and void, the defense is still bad, because under the statute of New York concerning betting and gaming (1 R. S. 662, § 9 ; 6th Ed. vol. II. p. 918), the money invested by the plaintiff with the defendant might be recovered back. Several answers may be made to this proposition. It is sufficient to say, however, that in such a case the plaintiff was bound to disaffirm the contracts and to sue under the statute. This he has not done. The action proceeds upon the notes which were received in furtherance of illegal and void contracts, and consequently is in affirmance of the contracts.

For the reasons stated, plaintiff’s demurrer to the second defense to the first two causes of action was also properly overruled.

The judgment and order appealed from should be affirmed, with costs, with leave, however, to the plaintiff to withdraw the demurrers upon payment of the costs of the judgment and of this appeal.

Sedgwick, Ch. J, and Van Vorst, J., concurred.