Case ID: ad_44/html/0348-01.html
Source: Caselaw Access Project
Author: {"author": "Rumsey, J.: Barrett, J. : Ingraham, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Isaiah Fuller and Harvey J. Donaldson, Respondents, v. Ferdinand A. Straus and Adelaide Ballin, Individually and as Executors, etc., off Jacob Ballin, Deceased, Appellants, and Moritz Ballin and Louis Ballin, Respondents.
    
      Confession of judgment—characterizing the interest of a deceased, partner in a firm, as " on deposit as a loan.”
    
    A confession of judgment which states that “prior to and on the 1st day of December, 1890, the above-named plaintiffs, as such executor and executrix respectively, had on deposit as a loan and advance with the said defendants and Julius P. Baumann, who together constituted the firm of Ballin Brothers, doing business in the city of New York, the sum of thirty thousand dollars,” is not shown to he false or insufficient under section 1274 of the. Code of Civil Procedure, by proof that the plaintiffs never actually “had on deposit as a loan and advance with the said defendants” §30,000, but that in fact the plaintiffs, whose testator had been a member of the firm of Balliu Brothers, had permitted their testator’s interest to remain in the firm, and that on December 1, 1890, the parties agreed that §30,000 was the amount due to the estate.
    Ingraham, J., dissented.
    
      Semble, that a confession of judgment is valid where it states facts which would be sufficient if stated in a complaint.
    Appeal by the defendants, Ferdinand A. Straus and another, individually and as executors, etc., of Jacob Ballin, deceased, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Mew York on the 21st day of March, 1899, upon the decision of the court, rendered after a trial at the Mew York Special Term, setting aside a confession of judgment made by Moritz Ballin and another, composing the firm of Ballin Brothers, to Ferdinand A. Straus and Adelaide Ballin, as executors, etc., of Jacob Ballin. deceased.
    
      Charles Strauss, for the appellants.
    
      Frank Walling, for the respondents.
   Rumsey, J.:

The plaintiffs, as judgment creditors of the firm of Ballin Brothers, brought this action to set aside a. confession of judgment made by the members of the firm to the executors of Jacob Ballin. Upon the trial the learned justice at Special Term held that the confession was false and untrue, and that because of such falsity it was fraudulent as to the plaintiff, and he directed a judgment setting it aside. From that judgment this appeal is taken. The statement upon which the confession was entered is as follows :

“ Prior to and on the 1st day of December, 1890, the above-named plaintiffs, as such executor and executrix respectively, had on deposit as a loan and advance with the said defendants and Julius P. Baumann, who together constituted the firm of Ballin Brothers, doing business in the city of Mew York, the sum of thirty thousand dollars; that the said defendants as such copartners, together with said Julius Baumann, agreed to pay $5,000 during the year 1891, and $5,000 during every year thereafter until the whole sum should be fully paid, and also agreed to pay interest thereon at the rate of six per cent, per annum. That since said date the said defendants have paid to the plaintiffs $20,000.00 on account of the said sum of $30,000 in various installments, and also the interest thereon, to November 1st, 1896, leaving due and owing on the 1st day of November, 1896, by the said defendants as such copartners to the said plaintiffs, the said sum of ten thousand dollars, with interest from Novembér 1st, 1896, the whole of which is now justly due and owing with .interest as aforesaid, and which amounts together to the siim of ten thousand and sixteen 67-100 dollars, the payment of which latter sum has been duly demanded by the plaintiffs of the defendants, but no part of which has been paid.”

The facts are, that in April, 1887, Jacob Baffin, who was then one of the firm of Baffin Brothers, died, leaving-¿he two appellants here his executors. They qualified, and in the month of December, 1887, they had a settlement with the other members of the firm of Baffin Brothers, at which time it was found that there was due to the estate of Jacob Baffin something over $32,000 ; and an arrangement was made between the parties so that that amount should not- be withdrawn from the firm, and the executors were promised a certain proportion of the profits of the firm, as a. consideration for permitting it to stand there. It was agreed, however, that after the 1st day of December,.1888, the executors;might withdraw it. They did not take any steps to do so until the 1st of December,' 1890, at which time they made a contract with the firm by which it was agreed that there was then standing to the credit of the estate of Jacob Baffin $30,000, and that the amount might remain with the firm of Baffin Brothers “ upon the following conditions: ” That the firm of Baffin Brothers agreed to pay to the executors six per cent interest in monthly installments, and $5,000 on the principal sum each year until the -whole amount of $30,000 should all be paid. The sum of $5,000 a year and interest was not paid as provided by the defendants’ agreement, and on the lltli day of November, 1896, the judgment was entered upon this confession for the sum of $10,016, with costs and disbursements.

The plaintiffs complain in the first plape that nothing was due upon this agreement at the time this confession was made. This is manifestly incorrect. That there was owing from the firm of Baffin Brothers to the executors of Jacob Baffin the sum of $30,000 oh the 1st of December, 1890, cannot be denied. That sum they were entitled to have paid to them at that time. They consented that it might stand unpaid only upon the condition that certain payments should be made as specified in the contract. So long as those payments were so made the debt was not payable, but just as soon as the debtors failed to pay according to the contract, the condition was broken, and the creditors were in a situation to say that the amount should no longer, remain in the firm. When they said that, and when the other parties had agreed to it, the amount then unpaid became due, and the confession was proper in that regard.

It is claimed, too, that the confession of judgment was actually false, in that the executors had not had at any time on deposit as a loan or advance with the firm of Ballin Brothers the sum- of $30,000, as stated in the agreement of the. 1st of December, 1890; and .it was because of this alleged falsehood that the learned court below held that the confession was, as a matter of law, fraudulent as against the plaintiffs. By section 1274 of the Code of Civil Procedure, the statement upon which a confession of judgment is based must state concisely the facts out. of which the debt arose. This is required, so that any person interested in the confession of judgment, either as a creditor or as a subsequent incumbrancer, may inform himéelf by a-resort to the statement itself as to precisely the consideration upon which the judgment is based. Whenever the facts stated in the confession are such as to afford that information, it must be held that the confession is sufficient.

In the case of Critten v. Vredenburgh (151 N. Y. 539) the confession stated that the debt was for money loaned and advanced to the plaintiff and property sold, and it stated a resulting indebtedness, and the court held that as it fairly appeared from the statement what the origin of the- debt was, that the statement was sufficient, and the judgment was valid.

In the case of Freligh v. Brink (22 N. Y. 419) the statement alleged an indebtedness upon a promissory note, giving the-date and the amount for which the note was originally made, and adding “ that amount of money being had by the defendants of the plaintiff ; ” and the court held that- the statement was sufficient. When it appeared that the note was given for so much money, and that a certain amount, which was less than the amount advanced upon the note, was justly due from the debtor, it was sufficiently shown that the money was due by the debtor under a contract to repay it.

In The Flour City National Bank v. Doty (41 Hun, 16) the confession was stated to be upon certain promissory notes, describing them, and the statement continued that those notes were given to the plaintiff for moneys loaned and lent to the defendant. It was held in that -case that the statement was not sufficient, because the precise amount of money loaned was not made to appear. A comparison of that case with the case of Freligh v. Brink (supra) will show, not only the reason for the strictness with which the courts have held that certain information must be put into the state"ment, but also the extent to which that rule must be followed. In the case at bar the particular objection is that $30,000. was not on deposit as a loan or advance. It must be conceded that that amount of money was never' physically taken out of the-pockets of the executors of Jacob Baffin and handed over to the firm of Baffin Brothers; but the executors of Jacob Baffin actually had. that amount of money due them from the firm of Baffin Brothers, which they were entitled presently to receive, so that they were in a situation to insist, at the particular time when the contract was made,' that this sum of money should be actually taken from the assets of Baffin Brothers and paid over to them ; and if that had been done, and the identical money, immediately on being paid, had been returned by the executors of Jacob Baffin to the firm of Baffin Brothers upon their same agreement to repay it that was made here, there can be no doubt that it Would have been strictly-true, in fact as well as in law, that they liad there on deposit as a loan or advance the sum of $30,000. The fact that they did not insist upon their right to have' the money actually paid over to them in specie, for the purpose of paying it immediately back again, did not, in the slightest degree, affect the truth of their statement that they had there a loan and advance to that amount. If they bad been paid in the checks of Baffin Brothers, which had been deposited in bank to the credit of the executors, and they had in return at once given their check to - the Baffin Brothers for the same amount which had been deposited in the same bank to the credit of Baffin Brothers, so that one check offset the other, the transaction would actually have constituted .a loan. Did it make any difference that, instead' of going through that formality, they accepted the situation as it stood, and made a contract based upon their actual legal rights ? When they were entitled to have the $30,000 and permitted it to stay there, it was clearly loaned, and if they had taken for it a note upon an agreement to pay more than six per cent interest, it would clearly have been a usurious note.

The case in that regard is not unlike that of American Copper Co. v. Lowther (38 App. Div. 134). The plaintiff there had agreed to lend to another corporation “ $25,000 in cash,” and ■defendants had guaranteed its payment, but the principal debtor made default and the defendants were sued on their guaranty. It ■appeared that, instead of actually advancing to its debtor “ $25,000 in cash,” the plaintiff had credited the debtor with a prior loan of $3,000, and only paid $21,000 in cash, and the defendant sureties, .set up this alleged modification of the contract and claimed that it •discharged them. The court held that the transaction was not a modification of the agreement to advance $25,000, but was a performance of it; because the legal effect of the credit was the same .as though the sum of $3,000 had been actually paid by the plaintiff .and at once returned to it in satisfáction of the debt.

The real rights of the parties were precisely expressed by the ■contract that they made, reciting, in substance, that they had on ■deposit as a loan with that firm that sum of money; and the strict rule even as to confessions of judgment is not so hypercritical that when the statement represents the substantial truth of the matter between the parties, as the law looks at it, it will be set aside as false. The Code of Civil Procedure requires that the complaint shall contain a plain and concise statement of the facts constituting the cause •of action. It is quite clear that if this confession had been, stated in the form of a complaint it would have been sufficient, as actually stating the facts constituting the cause of action.

In the case of Mather v. Mather (89 N. Y. St. Repr. 973) it was said that such a statement of facts as is required by the Code in a complaint was a sufficient compliance with that requirement of section 1274 .of the Code which says that the statement on which the confession of judgment is made must state concisely the facts out of which the debt arose.

It is not necessary to go to that extent to support this statement,, although it is not unfair to infer that whatever would be such a plain and concise statement of the facts constituting the cause of action as would be sufficient in a complaint, would constitute a concise statement of the facts such as would support a confession of judgment. Whatever necessarily, arises by implication of law from the situation of the parties may be a fact as well as though it represented an actual transaction, and when the parties have done that which in law constitutes a certain thing, it is clearly not false to speak of it as that thing; so that if they have between themselves so" transacted their business that the result of the whole transaction is a loan of money, they cannot be accused of falsity in saying so-in so many words, and not stating the actual transactions which led up to the legal implication.

For these reasons the statement was, as we think, sufficient, and the learned judge erred in holding that it was false and.untrue, and.,, therefore, the judgment must be reversed and a new trial granted, with costs to the appellants to abide the event.

Van Brunt, P. J., Barrett.and McLaughlin, J., concurred jIngraham, J., dissented.

Barrett, J. :

I concur here with Mr. Justice Rumsey. There is no question of the sufficiency of the statement; and a discussion upon that, head is foreign to the real issues. The complaint proceeds wholly upon two charges: First, that the statements made in the confession were, as matter of fact, false and untrue, and were so made for the purpose of ■ hindering, delaying and defrauding plaintiffs in the collection of their demand. Second, that the sum for which the judgment was confessed was not in fact due. In other words, the action proceeded upon the specific charge that the judgment was “ fraudulently confessed.” There is no suggestion anywhere in the case of an attack upon the confession because of insufficiency in the statement.

Whether we treat the facts proved as evidencing a loan of money by the retiring partner to the new firm, or as a deposit, the substantial fact is that the amount for which the judgment was confessed was honestly due: And it is hypercritical to dwell upon the legal characterization of the transaction. It.certainly cannot with justice be asserted that a statement which erred, if at all, in the legal effect of undoubted facts was false and fraudulent. That would be to confuse inaccuracy of definition or insufficiency of detail with untruth. ■

There can be no doubt, treating this case secundem allegata et probata, that the judgment was wrong and should be reversed.

Ingraham, J.

(dissenting):

I am unable to concur with Mr. Justice Rumsey. By section 1274 of the Code it is provided that to confess a judgment, “ A written statement must be made and signed by the defendant to the' following effect: * * *

“ 2. If the judgment to be confessed is for money due or to become due, it must state concisely the facts, out of which the debt arose ; and must show, that the sum confessed therefor is justly due, or to become due.”

This provision requires that the statement shall “ state concisely the facts, out of which the debt arose,” not a legal conclusion from facts that are not. stated. It is, therefore, not sufficient to state the particular obligation which represents the debt. Thus, it has been held that “it is insufficient to make a general statement that'the indebtedness arises upon a promissory note, setting forth and describing the same,” the court saying: “ ISTo one can determine from this statement the exact amount of money loaned for- which each of the said notes was given which constitute the basis of the alleged indebtedness for which the judgement was confessed. * * * The statute looks not to the evidence of the demand, but to the facts in which it originated; in other words, to the consideration which sustains the promise.” (Flour City Bank v. Doty, 41 Hun, 76.) And Judge Earl says in Wood v. Mitchell (117 N. Y. 441): “ The concise statement of facts out of which the indebtedness arose is required so that any party interested may be able to investigate the matters and thus ascertain whether the confession of judgment was accurate, honest and bona fide.” Thus, under this statute the facts out of which the indebtedness arose must be sufficiently definite to enable a person interested to determine that the sum for which the judgment was confessed was really an existing indebtedness, and is thus different from a pleading.^ The Code requires that a complaint must contain a plain and concise statement of the facts.constituting a cause of. action, but the provision of this statute is quite different. Here it is the facts out of which the indebtedness arose which must be stated , and not the facts which constitute the cause of action. Applying this test to the statement in question, I do not think that it complies with tile statute. There is no statement of the facts out of which the debt arose. It is stated that prior to and on December 1, 1890, the plaintiffs had on deposit as a loan and advance with the' defendants and Julius P. Baumann, who together constituted the firm of Ballin Brothers, doing business in the city of Hew York, the sum of $30,000. This is a statement óf an indebtedness, not a statement of the facts out of which the indebtedness arose. • The time when the deposit was made is not stated. ■ Ho information of the amount of the deposit or the conditions of the deposit is given. The statement upon which the judgment was confessed in Wood v. Mitchell (supra) was much more specific, but in that case' the court said: “ If this statement should be held sufficient, the statutory requirement would be substantially nullified.” It seems to me that the case of Critten v. Vredenburgh (151 N. Y. 539) and the other cases cited in the prevailing opinion are clearly distinguishable. In each of these cases the statement alleges the existence of an obligation . for the payment of money and states, the consideration »for which such obligation was given. Thus, in Critten v. Vredenburgh (supra) the statement alleged the existence of a stated account, the consideration of which was money borrowed and merchandise sold to the defendant, This was held to be sufficient. In this case, however, there is no statement of such an obligation, but a simple statement that upon a day named an indebtedness existed in favor of the plaintiffs against the defendants- for money as a loan and advance. There is nothing here from which one interested could ascertain whether or not there was such an indebtedness.

Hor do I think, upon the facts proven, that this was a true statement of the nature of the obligation for which the judgment was confessed. Here the plaintiffs had been in partnership with the defendants, and on a certain day named, upon an accounting, it was ascertained that the plaintiffs’ interest in the copartnership property amounted to the sum of $30,000. It would appear that such sum was the interest in the firm to which the plaintiffs were entitled at the dissolution of the copartnership. The contract contemplated that this amount of money, the plaintiffs’ interest in the copartnership, should be withdrawn by installments. It might be said that that was a loan of money by the retiring partner to the new firm, but I do not see how this can in any way be said to be a deposit of money. It was not shown that this firm was then able to pay the money to the plaintiffs, or that the firm had at that time such sum of money in its possession. It seems to me that it gave an entirely erroneous idea of the real substantial transaction to describe it as a deposit of money. And one reading this statement would readily infer that, at the time named, the plaintiffs had deposited with the firm a sum of money, and there certainly was no such deposit.

I think that the judgment was right and that it should be affirmed.

Judgment reversed and new trial granted, with costs to appellants to abide the event.