Case Name: George M. Newgent and Weston S. Newgent, Appellants, v. Irving Alsberg, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1916-07-10
Citations: 173 A.D. 878
Docket Number: 
Parties: George M. Newgent and Weston S. Newgent, Appellants, v. Irving Alsberg, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 173
Pages: 878–880

Head Matter:
George M. Newgent and Weston S. Newgent, Appellants, v. Irving Alsberg, Respondent.
First Department,
July 10, 1916.
Partnership — action for damages for being induced by fraud to enter into partnership agreement — prior suit for dissolution and accounting not a bar.
In an action at law to recover damages alleged to have been sustained by being induced by false and fraudulent representations on the part of the defendant to enter into a copartnership with him, a judgment in a prior suit in equity by the plaintiffs against the defendant for a dissolution of the copartnership and an accounting, under which the plaintiffs were held liable to the defendant, is not a bar, because the fraudulent representations alleged in this action were not necessarily involved in the suit in equity.
Even if the fraudulent representations might have been interposed as a counterclaim in the suit in equity, the plaintiffs were under no obligation to do so and were , entitled- to reserve them and- sue in a separate action. . - -
The suit ior dissolution of the partnership was not so connected with the action for damages for being led into the agreement as to impose any obligation upon the plaintiffs to interpose the present cause of action as a defense.
Appeal by the plaintiffs, G-eorge M. Newgent and another, 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 New York on the 30th day of March, 1916, granting defendant’s motion for judgment on the pleadings consisting of a complaint, answer and demurrer thereto, and also from the judgment entered in said clerk’s office on the 3d day of April, 1916, pursuant to said order, with notice of an intention to bring up for review an interlocutory judgment entered in said clerk’s office on the 18th day of January, 1916, overruling plaintiffs’ demurrer to certain separate defenses contained in the answer.
George H. D. Foster, for the appellants.
Isaac N. Jacobson, for the respondent.

Opinion:
Scott, J.:
This is an action at law to recover damages because the plaintiffs, as they allege, were induced by false and fraudulent representations on the part of defendant to enter into a copartnership with him whereby as they say they suffered considerable loss. The separate defenses involved in this appeal set up as a plea in bar a judgment in an action in equity heretofore brought by defendant against plaintiffs for a dissolution of the copartnership and an accounting. That action proceeded to judgment, a dissolution was ordered and the plain-stiffs were found liable to defendant for several thousand dollars each. The contention of defendant now is that- the matters here alleged in this complaint, to wit, the fraudulent representations, by which plaintiffs were induced to enter into the copartnership, were necessarily involved in the former action and that the judgment in that action is a bar to this action. We do not think that this is tenable. In the first place it is doubtful whether this cause of action for damages:.-for false representation could have been set up as a-counterclaim in the action for an accounting upon the copartnership agreement. The plaintiffs do not undertake to repudiate that agreement; they do not attack it as having been invalid, but •they affirm it and say that they were led to enter into it in consequence of false representations which entitle them to damages.
But even if the matter as pleaded in this action might have been interposed as a counterclaim in the prior action the plaintiffs were not under any obligation to so interpose it, but were entitled to reserve it to be sued upon as a separate cause of action. This has been held in many cases. (Brown v. Gallaudet, 80 N. Y. 413; Honsinger v. Union Carriage & Gear Co., 175 id. 229; Meyerhoffer v. Baker, 121 App. Div. 797.) The cause of action for dissolution of the partnership was not so tied up with the action for damages for being led into the agreement as to impose any obligation upon these plaintiffs to interpose the present cause of action as a defense in that action. They had the right to reserve it and to bring it on in an action which they themseves could control and not in one which the present defendant could control and direct as plaintiff. Furthermore, this cause of action is one at law and the former action was one in equity. If these plaintiffs were seeking to set aside the copartnership and to recover upon the ground that it was void from the beginning and to recover something that they had contributed or paid under it, I fhink the former adjudication would probably have been a bar to this action, because it would be inconsistent with the cause of action set forth in that action, but we have no such state of affairs here. The plaintiffs are not attacking the copartnership agreement as void, but they admit it is valid. The damages are not for having been led into an invalid and void agreement, but for having been wrongfully led into a valid and good one.
The judgments and order appealed from must be reversed, with costs and disbursements to appellant, and the demurrer sustained.
.Clarke, P. J., McLaughlin, Dowling and Davis, JJ., concurred.
Judgment and order reversed, with costs, and demurrer sustained, with costs.