Case ID: ad_139/html/0116-01.html
Source: Caselaw Access Project
Author: {"author": "JLaughlin, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Joseph J. Jermyn, Respondent, v. Frederick F. Searing and Others, Copartners, Composing the Firm of Searing & Company, etc., and the Empire Trust Company, Appellants.
    First Department,
    June 24, 1910.
    Practice — discontinuance — extra allowance — costs — pleading— affirmative relief.
    Where in a suit for the cancellation of an agreement on the ground of false representations and failure of consideration a defendant to which the agreement had been assigned as security for the loan to a partnership, which was a party to the agreement and the members of which are made defendants, sets up in its answer certain separate defenses for the" money loaned" on the faith of said agreement, and pleads all the facts necessary to constitute a counterclaim against the plaintiff, both on the theory that the firm acted as his agent and that' the money was loaned in good faith in reliance on his subscription to the agreement, but pleads such facts only as a defense and fails to ask for any relief other than the dismissal of - the complaint, and it appears that this defendant has spent or will spend much money in the defense of the action; that plaintiff is a non-resident; that the defendant would be put. to great expense and inconvenience by the trial of the issues in another jurisdiction and that the action, which has been pending for a long time, involves a large amount of money, the plaintiff should not be permitted to discontinue the suit without'.the payment of an extra allowance, as provided in. subdivision 2 of section 3253 of the Code of Civil Procedure, in addition to the taxable costs.
    
      It seems, that if the defendant obtains leave to amend its answer so as to "plead its defenses as a counterclaim and to ask for affirmative relief, the motion for permission to discontinue should be denied.
    The other defendants', who formed the firm to which the money was loaned, are justified in appealing from an order permitting the suit to be discontinued, since they are interested in the enforcement of the counterclaim.
    Separate appeals by the defendants, Frederick F. Searing and others, copartners, etc., and the defendant, Empire Trust Company, 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 FTew York on the 25th day of March, 191Ó, granting the plaintiff’s motion for a discontinuance of the action on payment of a separate bill of costs to the defendant Empire Trust Company and the defendants Searing, George and Phillips.
    
      William D. Guthrie [Thomas F. Gilroy, Jr., with on the brief], for the appellant Empire Trust Company.
    
      
      Edward J. Welch, for the appellants Searing and others.
    
      Montgomery Hare [ William R. Barbour with him on the brief], for the respondent.
   JLaughlin, J.:

This action, was commenced by service of the summons on the Empire Trust Company on the 12th day of January, 1909. It is a suit in equity for the cancellation of an agreement between the defendants composing .the firm of Searing & Co. and the plaintiff and others who became subscribers thereto. The date of the agreement is blank as to the month and day, but the year 1907 is filled in, and it was signed by the plaintiff in the month of February of' that year. The agreement' contemplated the formation of a corporation to be known as the Delaware and Eastern Railway Company, and the object of the agreement, which may be termed a syndicate agreement, was the purchase of $6,000,000 of bonds of the company with a view to using the proceeds for the construction of the line of railroad from Hancock to Schenectady in the State of Hew York, and for acquiring the stock and bonds of the Hancock and East Branch Railroad Company and the Schenectady and Hargaretville Railroad Company, and all the rights, privileges and franchises of those companies, and also the Delaware and Eastern Railroad Company, which had then been constructed and was being operated. The plaintiff subscribed for bonds of the par value of $200,000. The action is based on allegations that the plaintiff was induced to become a subscriber to the syndicate agreement on false representations and on the ground of -failure of consideration- and abandonment of the enterprise. The syndicate agreement was assigned to the Empire Trust Company as security for a loan of $150,000 made by it to the firm of Searing & Co. The answer of the Empire Trust Company put in issue the material allegations of the' complaint, and set up five separate and distinct defenses, in which it is alleged that there is due and owing from the plaintiff to the Empire' Trust Company the sum of $150,000 for money loaned to the subscribers of the syndicate agreement and the firm of Searing & Co. This claim is made both on the theory that said firm was the agent of said subscribers in procuring said loan, and also upion the theory that the money was loaned in good faith on said agreement and in reliance on plaintiff’s subscription thereto and the material facts tending to show liability upon each theory are alleged.

The plaintiff is a resident of the State of Pennsylvania, and a considerable part of his time is. spent in Texas. The defendants George and Searing are also non-residents of the State and reside in New Jersey. Pending the action a receiver of the firm of Searing & Co. has been appointed in bankruptcy proceedings in the southern district of Hew York, and also' for the Delaware, and Eastern.Railway Company, which was organized as contemplated. It was shown that the Empire Trust Company lias already expended the sum of $5,350 for counsel fees and disbursements in the defense and preparation for the trial of this action, and that it has incurred additional like obligations which will probably exceed the sum of $4,000. It further appears that the appellants would be greatly inconvenienced and put to extraordinary expense in the trial of the issues in another jurisdiction, and that it might be impossible to make personal service of process upon all the parties in another jurisdiction.

The only ground assigned for the discontinuance of the action is the fact that the defendants were pressing the case for trial at a time when it was inconvenient for the plaintiff to remain in attendance upon the trial. The Empire Trust Company has not in form pleaded a counterclaim, nor has it demanded any affirmative relief. Its only demand for relief is that the complaint be dismissed with costs. All of-the essential facts to constitute a counterclaim for a recovery against the plaintiff for the indebtedness which it alleges is due and owing to it from him are pleaded. As the pleading stands, however, these facts are. merely pleaded as - a defense-and if the plaintiff should default in appearing on the trial no affirmative relief could be awarded against, him: As the pleading stands; therefore, the plaintiff cannot he compelled to litigate any of the issues, nor can any judgment be rendered against him other than for a dismissal of the complaint with costs, without an amendment of the answers or his appearance upon the trial. If, therefore,' neither answer be amended by an appropriate demand for affirmative relief, the court' should allow the plaintiff to discontinue the action on such terms as justice requires. The circumstances of this case, however, are snch that the taxable costs and. disbursements will not adequately indemnify the defendant company. The necessary amendment to its pleading to warrant a recovery against the plaintiff is scarcely more than a mere formality, since it has pleaded all the material facts, and if the action went to trial and the plaintiff appeared, it doubtless would have no difficulty in obtaining.the amendment upon the trial or a suspension of the trial to enable it to obtain it at Special Term. It has evidently prepared for the trial upon the theory that it would be permitted not only to prove its cause of action against the plaintiff as' a defense but to recover thereon as well. The action has been pending for a long time, and it involves liability for a large sum of money. The record, therefore, shows a state of facts on which'plaintiff should in no event be permitted to discontinue the action without paying an extra allowance limited by section 3253, subdivision 2, of the Code of Civil Procedure for counsel fees and expenses in addition to the taxable costs, because if the case were brought to trial the defendants might have obtained such extra allowance, for it is apparent that it is a difficult and extraordinary case within the meaning of said section of the Code of Civil Procedure. (Kilmer v. Evening Herald Co., 70 App. Div. 291; Matter of Waverly Water Works Co., 85 N. Y. 479. See, also, People v. Bootman, 180 N. Y. 1.) If the defendant company or the other defendants obtain leave to amend their answer by inserting appropriate allegations to make it clear that a counterclaim for the amount of said indebtedness is pleaded or that the party or parties so amending is or are entitled to affirmative relief, then we are of the opinion that the facts are such that the action should be tried in this jurisdiction, and that the plaintiff’s application for a discontinuance of the action should be denied. (Matter of Butler, 101 N. Y. 309; Geenia v. Keah, 66 Barb. 249 ; Kruger v. Persons, 52 App. Div. 50 ; Price v. Price, 21 id. 597, 599; Washington Glass Co. v. Benjamin, 43 N. Y. St. Repr. 352 Wilder v. Boynton, 63 Barb. 547.) The other appellants were likewise justified in opposing the motion and in appealing from the order on the ground that they are interested in the enforcement of the counterclaim of the Empire Trust Company against the plaintiff, and their trustee in bankruptcy will be entitled, if he so desires, to intervene in behalf of the creditors of the firm.

It follows, therefore, that the order should be reversed, with ten dollars costs and disbursements,. and the motion remitted to the Special Term for a rehearing in accordance with the. views herein expressed.

Ingraham, P. J., McLaughlin, Scott and Dowling, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion remitted to Special Term for rehearing in accordance with . . . Í opinion. •