Case ID: ad_98/html/0568-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Parker, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Hudson River Power Transmission Company, Appellant, v. United Traction Company, Respondent.
    
      A statement in a complaint that a contract was “ ready .do be produced when and where this court may direct” does not, where the complaint is demurred to, incorporate therein a copy of the contract annexed to the answer—the admission by a demurrer to an answer, held to apply only to the test of the answer demurred to, not to the test of the complaint — breach of a contract to furnish an electric current— sufficiency of allegations as to its performance by the plaintiff—sufficiency of allegations as to its performance by the defendant in counterclaims set up in the answer — sufficiency of a defense excusing payment by the defendant of money required by the contract — defense of unlawful combination, breach of contract, etc.
    
    Where the complaint in an action brought to recover damages for the breach of a contract alleges that the parties, on or about August 1, 1901, “ entered into a contract in writing bearing date on that day ready to be produced when and where this court may direct,” such reference to the contract does not operate to make part of the complaint, for the purpose of determining whether the same was demurrable, a copy of a contract annexed to the defendant’s answer which the defendant alleges in the answer is the same one to which the complaint refers.
    An admission of the truth of the statements contained in a pleading is implied upon a demurrer to such pleading, only for the purpose of testing the sufficiency of that pleading. It does not bar the demurring party from disproving •such statements upon the trial nor from disputing them when his own pleading is being analyzed to determine its sufficiency.
    In an action brought by a power company against a traction company to recover a balance alleged to be due for electrical energy furnished to the traction company during the month of August, 1903, it appeared that the parties had entered into a contract by the terms of which the power company undertook to furnish the traction company, for a period of ten years, with a certain amount of electrical energy for each year for the sum of $70,000 annually, payable in monthly installments.
    The contract provided that “if, by reason of accident, lack of water, or other matter beyond its control, the power company shall at any time be unable to furnish the electrical energy continuously in accordance with the terms of this agreement,” compensation for the deficiency should be made by deducting certain specified sums for the monthly payments, which deductions were fixed as liquidated damages for such failure on the part of the power company.
    The contract also provided that the power company should also deliver to the traction company all the electrical energy, in excess of the amount above required, that the power company could produce at its water power plant, provided that the traction company should not be obliged to receive in any one day “ excess electrical energy ” amounting to more than 500 horse power. Provision was also made for the amounts and times and manner of ascertaining and paying for the same hy the traction company.
    The 3d paragraph of the complaint contained an allegation of full performance of the contract on the part of the plaintiff, hut the 4th paragraph thereof contained a statement that the plaintiff had delivered all the electrical energy that it was required to deliver during the month of August, 1903, “less certain small deficiencies.” The 4th paragraph then proceeded to state that the traction company estimated and fixed the amount of such deficiency at the rate provided for in the contract and that such adjustment was accepted hy the power company.
    
      Held, that as it appeared that the deficiencies mentioned in the 4th paragraph of the complaint were of the kind for which the contract permitted deductions to he made and for which deductions had actually been made, the statement in the 4th paragraph of the complaint that such deficiencies existed did not qualify or render nugatory the allegation in the 3d paragraph of the complaint that the plaintiff had made full performance of the contract;
    That such allegation of full performance covered the delivery of the surplus energy which the plaintiff was required to deliver under the contract.
    The defendant, in the ninth defense contained in its answer, set forth the contract between the parties and alleged that the traction company had been entitled, since July 1, 1902, to have delivered to it by the plaintiff, in addition to the electrical energy provided for in the first portion of the contract, all the excess energy that the plaintiff’s plant was capable of producing; that during the month of August, 1903, the plaintiff produced a large amount of such excess energy, which, in disregard of its contract obligations, it refused to deliver to the traction company; that, by reason of such refusal, the traction company suffered damages to the amount of §1,073.20, which it sought to recover as a counterclaim.
    
      Held, (Chester and Houghton, JJ., dissenting), that as the contract, in terms, provided that it was an entire contract and that each stipulation thereof was part of the consideration for every other stipulation thereof, the traction company could not maintain an action against the power company for the breach of any of the power company’s obligations, unless the traction company had fully performed all the obligations which it had assumed; that there being no allegation to that effect in the ninth defense, such defense was demurrable.
    £n the tenth defense, which was pleaded as a counterclaim, the traction company set forth the contract sued upon and then alleged that at midnight on September 10, 1903, the power company had ceased to deliver any “ electrical energy ” whatever to the traction company, and had ever since willfully refused to deliver it and had wrongfully continued to violate all of its obligations under the contract; that the traction company had at all times fully performed the contract on its part; that performance of the contract by the power company would have proved very profitable to the traction company, because the price for electrical energy which it was to jiay under the contract was much less than that for which it could otherwise procure it; that, by reason of such breach, the traction company had suffered damages to the amount of §1,369,444.44, which amount it set up as a counterclaim,
    
      
      Held (Pabkeb, P. J., dissenting), that a demurrer interposed to the tenth defense on the ground of insufficiency should be overruled.
    The eleventh defense contained in the answer, which was not pleaded as a counterclaim, stated facts which were claimed to excuse the defendant’s default in not paying the amount which the contract required the defendant to pay on September 10, 1903, for the electrical energy delivered in August, 1903. It averred that the defendant had always been ready and willing to perform the contract on its part and that it now offered to proceed with and perform the same; that it had not rescinded the contract and that it refused so to do.
    
      Held, that such defense was not demurrable.
    The twelfth defense, as summarized by Pabkeb, P. J., alleged, among other things, the existence of an unlawful combination between the plaintiff and two other persons. It further alleged that the plaintiff had broken contract “A” at midnight on September 10,1903, to defendant’s great and serious injury. It did not state in such defense what contract “A” was, nor whether the defendant had performed on its part.
    
      Held (Parker, P. J., dissenting), that such defense was not demurrable.
    Appeal by the plaintiff, the Hudson River Power Transmission Company, from an interlocutory judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Saratoga on the 4th day of April, 1904, upon the decision of the court, rendered after a trial at the Saratoga Special Term, overruling the plaintiff’s demurrer to certain counterclaims and defenses contained in the defendant’s answer.
    The plaintiff, “ the Hudson River Power Company,” brings this action against the defendant, “ the United Traction Company,” to recover damages for a breach of contract entered into and bearing date August 1, 1901. The defendant interposed a long answer, consisting of twelve separate defenses. To the 9th, 10th, 11th and 12th of such defenses the plaintiff demurred separately, substantially on the ground that it was insufficient in law upon the face thereof. Upon the trial of such demurrers the defendant attacked the plaintiff’s complaint upon the ground that it. did not state a cause of action. The trial judge so held, and, therefore, overruled the demurrers. From the interlocutory judgment entered thereon this appeal is taken.
    
      Richard Lockhart Hand and Henry W. Williams, for the appellant.
    
      J. S. Landon, E. L. Fursman, Albert Hessberg and Patrick C. Dugan, for the respondent,
   Parker, P. J.:

I do not concur with the trial judge in his construction of this complaint.

It states that the power company and the traction company, on or about August 1, 1901, “ entered into a contract in writing, bearing date on that day, ready to be produced when and where this court may direct, whereby,” etc., and then proceeds to give the substance of the agreement therein, as it understands it; sets forth wherein it claims the traction company has broken the same; states the balance due for energy ” delivered thereunder, and seeks to recover such balance and damages suffered on account of such breach.

The defendant has annexed to its answer a copy of a contract which it alleges therein is the same one to which the complaint refers.

Upon the trial it argued that because of the statement in the complaint, above quoted, that such contract was ready to be produced when and where the court ordered, the contract so annexed to its answer must be deemed annexed to the complaint, and must be read as a part of the complaint; and that, when so read into the complaint, the facts appearing in such complaint did not warrant a recovery. The trial judge so held. It is not claimed that the complaint, on its face, and as it states the contract to be, fails to state a cause of action. Concededly it is a good complaint and not demurrable, unless facts which appear in the copy of the contract annexed to the defendant’s answer are to be added to the averments in the complaint.

Manifestly the production of such copy by the defendant is not a production of the eonf/ract by the plaintiff. It is not in court upon the plaintiff’s response to the order of the court. It is produced by the defendant, and it may or may not be a correct copy of the contract upon which the plaintiff brings this action.

The defendant, however, having averred in the answer that it is the same contract, it is claimed that it must now not only be so considered, but that all its provisions must be deemed averments of the complaint.

But an admission of the truth of the statements contained in a pleading is implied upon a demurrer only for the purpose of testing the sufficiency of that .pleading. It does not concede their truth for any other purpose. It does not bar the one who demurs from disproving them upon the trial nor from disputing them when his own pleading is being analyzed to determine its sufficiency. For the purpose of construing the defenses to which the plaintiff has demurred, all the statements of fact in them contained are to be taken as true, but that by no means operates to transfer such statements, or facts, to the complaint and make them a part thereof. The sufficiency of the complaint should, therefore, be determined upon the facts which are alleged therein, and those only should be considered.

But assume that every provision contained in the contract was specifically set forth in the complaint, it would still in my judgment sufficiently set forth a good cause of action against the defendant.

By that contract the power company undertakes to furnish to the traction company for a period of ten years a certain specified amount of “electrical energy” for each year, and which yearly amount is specifically distributed among the several months of the year in varying proportions, and for which the traction company agrees to pay the sum of $70,000 annually, such payment to be distributed among the several months of the year in certain specified sums, and to be made on or prior to the tenth of each succeeding month. The performance of the contract was to commence on July 1, 1902.

It was further provided by the 4th article of the contract that “ if, by reason of accident, lack of water, or other matter beyond its control, the power company shall at any time be unable to furnish the electrical energy continuously in accordance with the terms of this agreement,” the deficiency so arising in the energy furnished for any month should be compensated for by deducting from the amount agreed to be paid for such month a sum equal to three thousand six hundred and fifty-three ten-thousandths of a cent per horse-power hour for the amount of such deficiency during the period of its occurrence, and such amount was fixed as liquidated damages for the failure on the plaintiff’s part.

It was further provided by the 6th article of the contract that the power company should also deliver to the traction company all the electrical energy, in excess of the amount above required, that the power company could produce at its water power plant, provided that the traction company should not be obliged to receive in any one day “ excess electrical energy ” amounting to more than 500 horse power. Provision was also made for the amounts and times and manner of ascertaining and paying for the same by the traction company.

With the contract so annexed, the contention is as follows: In order to recover against the traction company for a breach of this contract the plaintiff must show, and hence must aver in the complaint, a full performance on its part. The 3d paragraph contains an allegation to that effect, but the 4th paragraph contains a statement that it delivered all the energy that it was required to deliver during the month of August, 1903, “ less certain small deficiencies.” By the 4th article of the contract deficiencies to a certain extent, viz., such as occurred through matter beyond the control of the power company, were permitted, and provision was made for a money compensation for the same. And if it appeared in the complaint that such deficiencies occurring in August were of the kind so permitted, then their existence would not necessarily modify the averment in the 3d paragraph and be a concession that full performance had not been made. In that event both averments might be consistent. And so in the original complaint, it being left to appear that such a money compensation might be made for all deficiencies, a concession of non-pei'formance could not be claimed from the averments in its 4th paragraph. But, now that the full terms of such 4tli article are found in the complaint, a clear admission appears in its 4th paragraph that default was made in furnishing the requisite amount of energy ” for August, inasmuch as it is nowhere alleged that such deficiencies were occasioned by means beyond the power company’s control. And hence the complaint is claimed to be insufficient because it appears therefrom that the plaintiff, not having fully performed on its part, is not entitled to recover the damages which it claims.

But the same 4tli paragraph of the complaint shows that this argument should not prevail. It proceeds to state that the traction company estimated and fixed the amount of such deficiencies at the rates provided therefor in the contract at the sum of $210.26 ; that the power company accepted and allowed it upon the $4,670.84, which the contract required the traction company to pay for said month of August; and that the balance only, viz., $4,460.58, is the amount for which such company made default on September tenth, and for which this action seeks to recover.

It is apparent, therefore, that the certain small deficiencies ” conceded to exist in that paragraph were of the kind referred to in the 4th article of the contract. They were of the kind for which compensation could he made by the method and at the rate fixed in the contract. The complaint shows that such compensation at such rate was actually made and adjusted by the parties hereto, and the claim for the balance due to plaintiff is made up on such adjustment. Clearly such an averment is entirely consistent with the allegation of full performance contained in the 3d paragraph of the complaint. That general allegation is not in the least contradicted or qualified by the allegations of paragraph 4, even though it is not specifically stated therein that such deficiencies were of the kind referred to in the contract.

The further claim that no averment of the delivery of all the surplus “ energy,” referred to in the 6th article of the contract, is contained in such complaint is not correct. It is fully covered by the allegations contained in the 3d paragraph, above referred to.

I conclude that the criticism of the complaint is not sustained, and that it becomes necessary to examine the demurrers to the several defenses, each on its own merits.

As to the 9th defense, it sets forth the contract between the parties, and claims that by its terms the traction company had been entitled ever since July 1,1902, to have delivered to it by the plaintiff, in addition to the electrical energy provided for in article 1 of such contract, all that the plaintiff’s water power plant therein referred to was capable of producing. It then proceeds to aver that during the month of August, 1903, it produced a large amount of such excess energy, which, in disregard of its obligation, it sold and delivered to other parties, and failed and refused to deliver it to the traction company. That by reason of such refusal to deliver such additional electric energy during August, 1903, the traction company suffered damage to the amount of $1,073.20, and it asks to recover such damages as a counterclaim in this action. These are all of the material allegations contained in such defense.

It appears in the 16th article of the contract that the agreement is an entire contract, each stipulation thereto being a part of the consideration for every other.” It further appears in such contract that payment for such excess of electrical energy was to be made at the end of each year, and that the traction company shall notify the power company by mail each day of any “ excess of energy used.”

This contract being entire, and each stipulation being dependent upon every other, evidently the traction company could not recover against the power company for a breach of any of its obligations unless it had fully performed all the obligations which it had assumed on its part. There being no allegation to that effect in this 9th defense, no right to recover damages against the plaintiff for a breach of the contract is stated therein.

Moreover, this defense is pleaded solely as a counterclaim, and for the same reasons as hereinafter stated with reference to the 10th defense, as well as for the above reason, the demurrer thereto was well taken.

The 10th defense is also pleaded entirely as a counterclaim. It sets forth the contract and then charges that at midnight on September 10, 1903, the power company had ceased to deliver any “electrical energy” whatever to the traction company, and had ever since willfully refused to deliver any, and wrongfully continued to violate all the obligations of the contract on its part. It then avers that the traction company has at all times fully performed the contract on its part. It then avers that performance of the contract by the power company would have proved very profitable to the defendant, because the price for “ electrical energy ” which it was to pay under the contract was much less than it could otherwise procure it; and that, therefore, by reason of such breach, it had suffered damages to the amount of - $1,369,444.44, and it asks to recover that amount as a counterclaim against the plaintiff.

The plaintiff claims that in an action brought by it to recover damages against defendant for a breach of the contract on its part, the facts above pleaded" cannot be used to sustain a counterclaim in defendant’s favor. The demand which such facts would create in favor of defendant would not “ tend in some way to diminish or defeat the plaintiff’s recovery.” (Code Civ. Proc. § 601.) Evidently if the facts therein stated are true and the plaintiff has failed to perform the contract as therevn alleged, it cannot maintain this action; and so the very facts which are relied upon as necessary to create this counterclaim operate as a full and complete defense to the plaintiff’s claim in this action, and show that it never existed. So that, if the plaintiff’s claim can be established, the counterclaim must fail; and, if the counterclaim is proved, the plaintiff’s claim cannot exist. Such conflicting claims cannot coexist, and hence the one does not tend to diminish or defeat the other. (Bellinger v. Craigue,31 Barb. 534; City of Schenectady v.Furman, 61 Hun, 171; Prouty v. Eaton, 41 Barb. 409; Walker v. Am. Cent. Ins. Co., 143 N. Y. 167. See, also, Reilly v. Lee, 85 Hun, 315; affd., 155 N. Y. 691.)

For this reason the counterclaim stated in the 10th defense is not well pleaded and the demurrer should be sustained.

As to the 11th defense, it is not pleaded as a counterclaim. It states facts claiming to excuse the defendant’s default in not paying the amount required by the contract to be paid by the defendant by September 10, 1903, for the “ energy ” delivered in August previous ; avers that it has always been ready and willing to perform the contract on its part, and now offers to proceed with and perform the same. It also states that' it has not rescinded the contract and refuses so to do.

I am of the opinion that the facts therein stated tend to establish an equitable defense against the plaintiff’s claim that the defendant had rescinded and abandoned the contract in its entirety, and that, if established, would warrant equitable relief, at least against the claim for the prospective profits demanded in the complaint. I think a defense to that extent is set out, and hence the demurrer thereto was correctly overruled.

The 12th defense, although it charges an unlawful combination between the plaintiff and two others, seems to contain no facts which even tend towards a defense to the plaintiff’s demand in this action, or towards a counterclaim thereto, other than the fact that the plaintiff had broken contract A,” so called, at midnight on September tenth to defendant’s great and serious injury. It does not tell in this 12tli defense what contract “ A ” was, nor whether the defendant had performed on its part. I cannot discover that it sets forth any defense, nor any facts constituting a counterclaim. Certainly no more than were contained in the 9th and 10th defenses which we have seen above are both demurrable.

My conclusion is that the demurrer to the 11th defense set up in this answer was properly overruled, and that the demurrers to the 9th, 10th and 12th defenses should have been sustained.

My brethren, however, while they concur in my conclusions and in my reasoning concerning the 9th and 11th paragraphs set up in the answer, do not agree with me concerning the 10th and 12th paragraphs therein contained. As to such counterclaim and defense they are of the opinion that the demurrer to each shonld be overruled ; and the judgment of this court is rendered accordingly.

Interlocutory judgment reversed and demurrer sustained as to the 9th defense and overruled as to the 10th, 11th and 12th defenses in the answer, with leave to the plaintiff to reply to such counterclaims, the demurrer to which has been here overruled, and with leave to the defendant to amend the 9th paragraph of its answer as it may be advised. No costs to either party.

All concurred, except Parker, P. J., who voted to sustain the plaintiff’s demurrer as to the 9th, 10th and 12th defenses; and Chester and Houghton, JJ., who voted to overrule the demurrer as to all the defenses demurred to.