Case Name: HUGH D. COTHRAN, et al., Plaintiffs and Respondents, v. THE HANOVER NATIONAL BANK OF NEW YORK, Defendants and Appellants
Court: New York Superior Court General Term
Jurisdiction: New York
Decision Date: 1876-02-07
Citations: 8 Jones & S. 401
Docket Number: 
Parties: HUGH D. COTHRAN, et al., Plaintiffs and Respondents, v. THE HANOVER NATIONAL BANK OF NEW YORK, Defendants and Appellants.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 40
Pages: 401–406

Head Matter:
HUGH D. COTHRAN, et al., Plaintiffs and Respondents, v. THE HANOVER NATIONAL BANK OF NEW YORK, Defendants and Appellants.
I. DAMAGES.
1. Chose in action, convebsion of.
(a) Promissory note, bill of exchange, cbe.
1. Measure of damages prima fade is the amount due upon it.
(a) Mitigation, insolvency.
1. In mitigation of damages it may be shown to be of little or no value by reason of the insolvency of the parties, or for any other cause.
H. SUPPLEMENTAL ANSWER. MOTION FOR LEAVE TO' SERVE.
1. Defense.
(a) What may be properly allowed to be set up by supplemental answer.
1. In an action for damages for the conversion of a chose in action, facts showing it to have been of little or no-value at the time of the conversion, may be allowed to be so set up in mitigation of damages.
3. Laches.
If the defendant is ignorant of the matters at the time of his answer, and moves without delay after discovering them, he is not guilty of laches.
3. Falsity, when motion not to be denied by season of ALLEGATION OF.
(a) Where the opposing papers deny insolvency, but it appears that the draft, the parties to which were claimed to have been insolvent, was not paid at maturity, and other matters appeared tending to show insolvency, a ease is presented for a disposal of the question by trial.
Before Curtis, Sedgwick, and Van Vorst, JJ.
Decided February 7, 1876.
Appeal from an order denying defendants’ application for leave to file a supplemental answer.
The action is for the conversion of a draft, dated July 1, 1873, drawn by McWilliams & Co., on and accepted by the Cornwall Iron Works, for two thous- and six hundred and seventy-five dollars and twenty-one cents, at ninety days after date, to the order o«T the drawers, and by them endorsed. The allegations of the complaint are, that the plaintiffs being owners of the draft so accepted, endorsed it in blank, and sent it to defendants for discount; that the defendants did not discount the draft, and have not returned it to plaintiffs, and that before its maturity the draft came into the hands of a purchaser in good faith and for value, and plaintiffs thereby became liable to pay it. By its answer defendants admitted that it received the draft and did not discount it, but delivered it in good faith to one Maguire, whom it believed to have authority to receive it. It also denied the conversion, and the alleged facts by which plaintiffs claimed to have been made liable by reason of their endorsement.
In April, 1875, defendants having learned that the plaintiffs had been adjudged bankrupts, moved for leave to plead the fact of transfer of the cause of action by virtue thereof to the assignee in bankruptcy. On the adoption of the action by the assignee in bankruptcy, the motion was denied. Thereafter the action was continued by the assignee, in the name of the plaintiffs.
On facts alleged to be newly - discovered, the defendants applied for leave to interpose a supplemental answer, and from the order denying" that application, this appeal is taken.
Tracy, Olmstead & Tracy, attorneys, and Charles E. Tracy, of counsel for appellants, urged :
I. It was shown by affidavit, not controverted, that at the time ■of making its answer, the defendants were ignorant of the facts stated in the proposed supplemental answer.
II. The insolvency of the makers and acceptors of "the draft clearly might be proved in mitigation of •damages (Sedgwick on Damages, 488 ; Ingalls v. Lord, 1 Cowen, 240). That the draft had not been actually paid -by any one of the parties thereto, and had not been proved in bankruptcy against the plaintiffs, were ■also facts admissible in mitigation of damages. For if proven, the plaintiffs could only recover on one of two grounds; first, that they had been deprived of their claim upon the draft, in case it was good in their hands as against the other parties; or, second, that by •reason of their endorsement of the draft, they had •come under liability to a third party. In neither case ■could the plaintiffs recover the full amount of the draft; in the first, they could recover only what they had lost, because that was the value of the draft; in ■the second, only the dividend which the assignee in bankruptcy should pay, because the plaintiffs’ cause •of action is his, and his damages are not greater than the dividend in bankruptcy to the third party. These last two facts, if proven, reduce the cause of action to one for nominal damages only.
III. New matter constituting a partial defense must be pleaded, even though it be only in mitigation of damages (McKyring v. Bull, 16 N. Y. 308 ; Bush v. Prosser, 11 Id. 347 ; Joland v. Johnson, 16 Abb. 239 : Beckett v. Lawrence, 7 Abb. N. S. 403 ; Wehle v. Haviland, 42 How. Pr. 399, 407).
IV. Ordinarily the court will not try the truth or falsity of the supplemental answer upon such a motion, and it never does, unless it is clearly a sham ■pleading. The fact that the draft had not been paid •at maturity by either of the parties is admitted, and no reason is shown for its non-payment; presumpt ively, therefore, the parties were not able to pay, and were insolvent (In re Bininger, 7 Blatchford, 264; Herrick v. Borst, 4 Hill. 652).
Anderson & Man, attorneys, and Frederick H. Man, of counsel for respondents, urged
I. The first matter in defense sought to be pleaded by the supplemental answer, viz., that all parties to the draft were insolvent at and before its maturity, is disproved. In this aspect of the case, the motion was properly denied (Morel v. Garelly, 16 Abb. Pr. 269).
II. The second matter in defense sought to be pleaded by the supplemental answer, viz., that plaintiffs had been adjudged bankrupts, and that the draft had not been proved as a debt against their estate (they being liable on it by reason of their endorsement), does not constitute any defense at all. First. If plaintiffs have not been discharged in the bankruptcy proceedings, they would be still liable on their endorsement of the draft. No allegation is made as to their .discharge in the proposed supplemental answer. Second. It clearly appears that plaintiffs paid full value to McWilliams & Co. for the draft; they have, therefore, by the alleged conversion of it by defendants, lost actual property, and whether they are liable or not as endorsers, is immaterial. In this aspect also of the case, the motion was properly denied (Morel v. Garelly, supra).
III. There is palpable laches on the part of defendants in delaying this motion until now. The complaint was verified August 28, 1874; the amended answer was verified November 25th, 1874, eleven months before this motion was made.
IV. Leave to serve a supplemental pleading is a matter of discretion, and that discretion may be exercised, and the motion for leave denied, on the above grounds, and also where the new matter desired to be set up does not constitute a good cause of action, or a good defense (Morel v. Garelly, 16 Abb. 269 ; Holyoke v. Adams, 59 N. Y. 233). And where the papers show a case for the exercise of discretion, the court, on appeal, will not interfere with the discretion exercised at special term (Holyoke v. Adams, 59 N. Y. 233).

Opinion:
By the Court.—Curtis, J.
The proposed supplemental answer alleges the insolvency of the makers, acceptors, and endorsers of the draft at the time of the alleged conversion. Also that the draft had not been actually paid by either of the parties thereto; and that no claim against the plaintiffs' estate upon the draft has been proved in bankruptcy.
The suit is brought to recover damages for the alleged conversion of a chose in action. Where it is brought to recover for the conversion of a security, as in the present case, the measure of damages is the amount due upon it. But when the draft is of little or no value, by reason of the insolvency of the parties to it, or for any other cause, it is held that the defendants should be allowed to reduce its valuation by evidence of such facts, in mitigation of damages (Potter v. Merchants' Bank, 28 N. Y. 641; Ingalls v. Lord, 1 Cow. 240).
The defendant seeks to reduce its liability by showing that the draft was of no value at the time of the alleged conversion, by reason of the matters stated in. the supplemental answer.
If the defendants were ignorant of these facts at the time their answer was made, and, after the discovery of them, proceeded without delay to apply for leave to plead them in a supplemental answer, then this application appears to come within the scope and terms of the 177th section of the Code.
The uncontroverted affidavit of the defendants' cashier alleges such ignorance at the time when de fendants' answer was made, and also that he has only recently discovered the facts alleged in the proposed supplemental answer.
The affidavits, on the part of the plaintiffs, deny the alleged insolvency of the parties to the draft, but in view of the failure to show any payment of the draft at maturity, and other matters appearing in the papers, it can not be assumed that the facts alleged in the proposed supplemental answer are false, and that the application should be denied for that reason. On the contrary, it presents a question to be disposed of upon the evidence that may be presented at the trial of the issues.
The order appealed from should be reversed, with costs to defendants to abide the event of the action.
Sedgwick and Van Vorst, JJ., concurred.