#### William H. Eckert, Plaintiff, *v.*Brace M. Gallien, Defendant.

(Supreme Court, New York Special Term,

August, 1898.)

Conversion — Counterclaims, improper under Code Civ. Pro., § 501 — Perm of demurrers to counterclaims demanding affirmative judgments— Code Civ. Pro., •§§ 490, 496.

■ In an action for the conversion of, the plaintiff’s moneys, intrusted as alleged, to the defendant for investment in the stock.of a corporation proposed to be organized by the defendant out of á partnership in which he was a member, counterclaims demanding affirmative judgments, were interposed; first, that after the payment of the sum in question, as alleged, on the plaintiff’s subscription to the stock, he failed to pay a large balance due, by reason of which, with his consent, the coloration was abandoned and he agreed that the payment might remain in the business of the partnership until such time as its business would permit a withdrawal of the payment, which time never arrived; second, that the defendant subsequently became the sole owner of the partnership and the plaintiff became an employee and that he violated the latter contract by engaging in other business, by failing to return moneys collected and by settling accounts for less than the amount. due; and, third, for goods sold and for others not returned. The plaintiff demurred to each counterclaim on the ground that “ It is not of the character specified in section 501 of the Cbde of Civil Procedure ”.

*486Held, that the counterclaims were improper, as none of them stated-a cause of action arising out of.the contract or transaction set forth in' the complaint, or connected with the subject of the action. That the form of the demurrer was insufficient under sections 490 pad 496 of the Code of Civil Procedure, as the particular defects in the counterclaims were not specifically pointed out, as required in a demurrer to a counterclaim which demands an affirmative judgment.

Demubbeb to counterclaims pleaded in defendant’s answer.

Esselstyn, Ketcham *&*Safford (Henry B. Ketcham, of counsel), for plaintiff.

Scherer *&*Downs (Daniel E. Lynch, of counsel), for defendant.

Laughlin, J.

This is an issue of law arising on plaintiff’s demurrer to three counterclaims pleaded in the answer, not merely as -.an offset, but with a demand for an affirmative .judgment. It is conceded that the complaint is in tort to recover $750, paid to the defendant as agent for the plaintiff, and in trust to invest in stocks of a corporation to be organized by the defendant for the purpose of purchasing and conducting the business then being carried on by the J. G. Dickson Manufacturing Company. It is further alleged that the defendant converted to his own use the money so paid to him by the plaintiff. The answer denies the material allegations of the complaint, and in the first count alleges, in substance, that the said $750' were paid by plaintiff oñ a subscription to $30,000 stock of such proposed new corporation, and that owing to the plaintiff’s failure to pay the balance of such subscription the formation of a ne*w corporation was, by his consent, abandoned, and that he thereupon agreed that the money so paid in by' him should-remain in the business of said manufacturing company until such time ,as said business would permit of its withdrawal, which time never arrived. For a second and separate defense and counterclaim the answer alleges that the defendant became sole proprietor of such company, which was a copartnership, and that the plaintiff entered his employ and violated his contract of employment by neglecting the defendant’s business and engaging in "other business. That as such employee he collected money for the defendant and failed to account therefor, and settled accounts owing to the defendant for less than was owing thereon, by which the defendant claims to have suffered damages in the sum of $2,000.

*487The plaintiff demurs to. this counterclaim on the ground that *“*It is not of the character specified in section 501 of the Code of Civil Procedure.”

Por a third and separate defense and counterclaim the defendant alleges that the plaintiff, as such employee, received goods returned by defendant’s customers of the value of $100, for which he failed to account.

The third defense and counterclaim is for goods sold and dec livered by the defendant to the plaintiff of the value of $58.42.

The demurrers to the second and third counterclaims are in the same language as that interposed to the first.

The action is in tort and none of the counterclaims state a cause of action arising out of the contract or'transaction set forth in the complaint or connected with the subject of the action.

They are, therefore, not proper counterclaims in such an action. The proposition is too plain for argument and needs only the citation of section 501 of the Code of Civil Procedure. It is claimed, however, on the part of the defendant, that the demurrer is a nullity, in that it is stated in the language in subdivision 4 of section 495 of the Code of Civil Procedure, and does not distinctly specify the objections to the counterclaim and point out specifically the particular defect relied upon, as required by sections 490 and 496 of the Oode. There is a conflict of authority on this question. In Grange v. Gilbert, 10 Civ. Pro. 98, it was held that such a demurrer was sufficient, but in the late case of Weeks v. O’Brien, 20 Misc. Rep. 48, it was held that a demurrer in this form was insufficient, and while this decision was reversed upon another ground, there is a *dictum*in the opinion (25 App. Div. 208) to the effect, I think, that the defect should'be more specifically pointed out.

This ground of demurrer is not similar to any of the grounds of demurrer to a complaint which may be stated in the language of the Code. Section 496 of the Code provides that the mode of specifying the objection in a demurrer to a counterclaim where an affirmative judgment is demanded, is the same as where a demurrer is taken to a complaint, and section 490), prescribing the mode of specifying an objection in a demurrer to a complaint in those cases, where it is not sufficient to quote the language of the Oode, provides that the objection must point out specifically the particular defect relied upon. It is evident, upon an examination of section 501 of the Code, which prescribes what is essential to a counterclaim, that there are only three defects that could ordinarily be relied upon to *488defeat a counterclaim, namely (1) that it does not tend to defeat or ' diminish the plaintiff’s.recovery; (2) that it does not state a cause of action in favor of defendant against plaintiff arising out of the contract or transaction set forth in the complaint, or connected with . the subject of the action; or (3) that if the action be on contract it does- not state a cause of action on contract in favor of defendant against plaintiff existing at the commencement of the action. The cases where the objections to the complaint are required to he stated . more specifically than in the language of the Oode are such that it would generally be difficult for the other party' and for the court to know .for a certainty the precise point intended to be raised by the demurrer. I cannot conceive of a case where there would be any difficulty in determining the precise objection to a counterclaim if the objection were allowed to he stated as stated, in this demurrer, and yet it cannot be said that the demurrer points out specifically the particular defect relied upon. I am, therefore, constrained to. . follow the later decision, although the question is not free from doubt. The objection that the counterclaim is not one allowed by law in the action is not waived by the plaintiff’s failure to demur ■ thereto. Westervelt v. Ackley, 62 N. Y. 508; Smith v. Hall, 67 id. 48; People v. Dennison, 84 id. 280; Lipman v. Works, 128 id. 58-63; Stevens v. Orton, 18 Misc. Rep. 539.

In view of these rulings no injustice will result from requiring a plaintiff to point out in his demurrer to a counterclaim the specific . defect relied upon. The demurrer is overruled, with costs to' the defendant to abide the event of the action, and with leave to the plaintiff to reply within twenty days.

Demurrer overruled, with costs to abide event, with leave to plaintiff to reply within twenty days.