Case Name: The People of the State of New York, Appellant, v. John F. O'Brien and George C. Kellogg, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1913-05-07
Citations: 157 A.D. 119
Docket Number: 
Parties: The People of the State of New York, Appellant, v. John F. O’Brien and George C. Kellogg, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 157
Pages: 119–128

Head Matter:
The People of the State of New York, Appellant, v. John F. O’Brien and George C. Kellogg, Respondents.
Third Department,
May 7, 1913.
Fraud—pleading — complaint in action to recover moneys alleged to have been fraudulently procured from State under contracts to furnish coal to State prisons—judgment upon the pleadings denied — when acceptance by agent of State no defense.
A complaint in an action by the People, which alleges, first, that the defendants, who furnished a certain quantity of coal to a State prison between certain dates, fraudulently represented to the warden of said prison and to the agents of the State that the coal was pea coal, knowing that a certain quantity of it was not pea coal but of an inferior quality and worth less, and that the said agents, relying upon said false representations, made payments for pea coal; second, that the defendants, after them bid to furnish egg anthracite coal to a State prison had been accepted, with intent to defraud the People wrongfully induced the agents and wardens to enter into written contracts for the delivery of grate coal, which was inferior and cheaper than egg coal, and that, pursuant to said contracts, they delivered a certain quantity; that defendants wrongfully and unlawfully presented claims to the agents of said prison for coal so furnished and received pay therefor in excess of the value of coal furnished, for which the plaintiff demands judgment; third, that between certain dates the defendants delivered to a State prison a certain quantity of grate coal, the same being of an inferior quality and of a value less than egg coal, and during said period presented to the agent and warden claims for egg coal, knowing that such claims were false and fraudulent, and that said defendants thereby obtained, without authority, money belonging to the State to a certain amount, states facts sufficient to constitute a cause of action, and an order granting an application by the defendants for judgment upon the pleadings should be reversed.
• The acceptance of the coal by an agent of the State is no defense if such acceptance was induced by the fraudulent representations of the defendants or if the agent or warden was in collusion with the defendants. Kellogg and Woodward, JJ., dissented, with memorandum.
Appeal by the plaintiff, The People of the State of New York, from an order of the Supreme Court, made at the Albany Special Term and entered in the office of the clerk of the county of Albany on the 24th day of December, 1912, and also from a judgment entered in said clerk’s office on the same day pursuant to said order.
Thomas Carmody, Attorney-General, and James A. Parsons, Deputy Attorney-General, for the appellant.
Boyal Corbin [Edgar T. Brackett of counsel], for the respondents.

Opinion:
Smith, P. J.:
Defendants made application pursuant to section 547 of the Code of Civil Procedure for judgment upon the pleadings. While an answer has been served its allegations cannot be considered in determining the question at issue. The order for judgment has been made upon the ground that the complaint fails to state facts sufficient to constitute a cause of action, and that ground presents the only question here for consideration.
The complaint assumes to assert three causes of action. The defendants were furnishing coal to the Clinton State Prison at Dannemora, Clinton county. From October, 1903, until Hay, 1910, they furnished 32,943 tons of coal. This coal they fraudulently represented to the warden of the State prison as pea coal, knowing that of the amount 16,133 tons were not pea coal but were of an inferior quality and worth one dollar a ton less than pea coal. The said agents relying upon said false representations made payments of said claims as and for pea coal. These are the facts which the plaintiff alleges as constituting its first cause of action. Upon proof of these facts standing alone the plaintiff would he entitled to the judgment of the court for the damages sustained. The money was procured by the fraudulent representations of the defendants, relied upon by the agent of the State who had authority to act. All the elements of fraud are, therefore, included in the statement of this cause of action.
In the second cause of action it appears that the defendants were furnishing coal to the Sing Sing Prison in the State of New York; that between April, 1901, and June, 1908, proposals were advertised for by the Department of Prisons for the furnishing of egg anthracite coal for use at said prison; that pursuant to said advertisements the defendants bid four dollars and seventy-five cents per gross ton, and said bid was accepted by the Prison Department as being the lowest bid. It is further alleged that with intent to defraud the People of the State the defendants wrongfully induced the agents and wardens of said Sing Sing Prison to enter into written contracts with the defendants for the delivery of grate coal, which was a coal of inferior and cheaper grade, and of a value of thirty-five cents per ton less than egg coal, and that pursuant to said contract the defendants did deliver to the said Sing Sing Prison grate coal to the amount of 11,085 tons. It is further alleged that the defendants from time to time wrongfully and unlawfully presented claims to the agents of said prison for coal so furnished, and wrongfully and unlawfully received pay therefor at the rate of four dollars and seventy-five cents per ton, which was thirty-five cents per ton in excess of the value of the coal so furnished, and for this thirty-five cents per ton the plaintiff demands judgment. It is not directly alleged that this grate coal was furnished in substitution for the egg coal for which the bids were made. It is so treated, however, by counsel and by the Special Term, and perhaps this is fairly inferable from the facts stated. Nor is it explicitly alleged that the agents of the prison wrongfully colluded with the defendants to furnish an inferior coal as a substitute for the better coal to which they were entitled at the same rate. The facts, however, unexplained, would warrant necessarily an inference that there was collusion between the defendants and the agent of the State. To accept coal of an inferior quality for a better coal to which the State was entitled at the same price, is so at variance with the duty of the agent of the State that his consent thereto, unexplained, imports a disregard of his duty and a connivance with the defendants in obtaining from the State an unfair advantage: In my judgment, therefore, the facts alleged in the second cause of action entitled the People to relief.
The questions arising as to the third cause of action present more difficulty. That is a cause of action to recover an over payment for coal furnished at the Sing Sing Prison under a contract to deliver 5,000 tons of egg anthracite coal at $4.95 per gross ton. It is alleged that between the 1st day of May, 1909, and the 1st day of May, 1910, the defendants delivered to said Sing Sing Prison 6,050 tons of grate coal, the same being a coal of an inferior quality, and of a value at that time of fifty-five cents less per ton than egg coal, and from time to time during said period presented to said agent and warden claims for egg coal. It is further alleged that the claims so presented were knowingly false, fraudulent and unlawful, in that.the coal furnished was not egg coal, but was grate coal, and of an inferior quality, and of a value at that time of fifty-five cents per ton less than egg coal. Further, that said defendants well knew that said claims were false, fraudulent and unlawful, and said defendants wrongfully caused and induced said agents and wardens to pay false and fraudulent claims, and thereby obtained and received, and have ever since kept and retained without authority, money belonging to the State to the. amount of $3,32Y.50. In this cause of action, as in the second cause of action, there is no allegation that the grate coal was delivered in substitution for the egg anthracite, for which the contract was made; but, as in the second cause of action, it has been assumed by the court and by counsel that such was the fact, and so will be here assumed. It is not specifically alleged in this cause of action that the agent of the State relied upon the fraudulent claims of the defendants in making these payments. It is alleged, however, that they falsely and fraudulently represented that the coal was egg coal, while in fact it was not egg coal, but was of an inferior quality, and that they wrongfully and fraudulently induced the wardens to pay such false and fraudulent claims. The court should give the pleading a fair interpretation, and the complaint should probably be deemed fairly to allege that the agents and wardens of prisons were induced to make payment of said claims by the fraudulent representation of the defendants that the coal delivered was egg coal, as specified in the contract. If the agent and warden of the prison had knowledge that the defendants were not furnishing the coal stipulated for in the contract, they were impliedly in collusion with the defendants in not insisting upon the rights of the State, and in making payment as for the better coal. If through the fraud of the defendants the agent or warden was misled and thereby induced to make full payment therefor, the State should clearly recover back the excessive value paid. So that upon either horn of the dilemma, whether the agent colluded with the defendants, or whether innocent and misled, upon the statement of facts as appear in the complaint the plaintiff is entitled to relief. The questions presented by the allegations of the answer are not here for consideration. The learned justice at Special Term (78 Mise. Rep. 679) has held the complaint insufficient, upon the ground that the State officers are presumed to have done their duty, and to have examined and accepted this coal as in full compliance with the contract. His opinion indicates that if collusion were averred between the defendants and the agent a different question might be presented. If, as stated above, however, the acceptance of the coal were induced by the fraudulent representations of the defendants, or if upon the other supposition the agent having full knowledge of the rights of the State and having sacrificed the interests of the State, his collusion with the defendants may be deemed to be impliedly averred, the acceptance is no defense to the claim of the State.
I recommend, therefore, that the order and judgment be reversed, with costs, and that the motion for judgment be denied, with ten dollars costs.
All concurred, except Kellogg, J., dissenting in memorandum, in which Woodward, J., concurred.