Case Name: Plant City Steel Corporation, Respondent, v. National Machinery Exchange, Inc., Appellant
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1969-01-15
Citations: 23 N.Y.2d 472
Docket Number: 
Parties: Plant City Steel Corporation, Respondent, v. National Machinery Exchange, Inc., Appellant.
Judges: 
Reporter: New York Reports
Volume: 23
Pages: 472–478

Head Matter:
Plant City Steel Corporation, Respondent, v. National Machinery Exchange, Inc., Appellant.
Argued November 13, 1968;
decided January 15, 1969.
Michael Permut, Morris Permut and Stephen II. Finkelstein for appellant.
I. Trial Term was in error in permitting plaintiff ,to elect its remedy under section 15-501 (subd. 3) of the General Obligations Law without first determining which party to the executory accord did not perform the settlement agreement according to its terms. (Pfleiderer v. De Veaux, 3 Misc 2d 252.) 11. Trial Term was in error in absolving plaintiff of its duty to perform the settlement agreement predicated upon a finding of fraud in the original contractual understanding between the parties, since such an application of the rule would be a virtual prohibition against the compromise of fraud actions. (McMichael v. Kilmer, 76 N. Y. 36; Adams v. Sage, 28 N. Y. 103; Baker v. Spencer, 47 N. Y. 562; Feeter v. Weber, 78 N. Y. 334; Smith v. Ogilvie, 127 N. Y. 143.) 111. Assuming arguendo that plaintiff was entitled to elect its remedy pursuant to section 15-501 (subd. 3) of the General Obligations Law, it was entitled, as a matter of substantive law, either to assert its rights under the original causes of action for breach of warranty and loss of profits or assert its rights under the stipulation of settlement; but could not pursue and present to the court the settled causes of action embraced within the stipulation and the cause of action to recover upon the stipulation of settlement itself. (Elliott v. Prockter Prods., 282 App. Div. 761, 306 N. Y. 629; Pfleiderer v. De Veaux, 3 Misc 2d 252.) IV. Defend ant’s counterclaims stand admitted by plaintiff’s failure to reply thereto and defendant is entitled to judgment thereon. (Putnam v. Interior Metal Mfg. Co., 225 N. Y. 37; Irving Trust Co. v. Leff, 253 N. Y. 359; Anglo & London-Paris Nat. Bank v. Jacobson Co., 196 App. Div. 51; Smith v. Snowber, 198 App. Div. 820.)
Clarence Fried and Richard I. Wolff for respondent.
I. Trial Term adjudged that plaintiff was always ready, willing and able to perform its obligations under the settlement agreement. (Lodati v. Lodati, 268 App. Div. 1003; Monaghan v. May, 242 App. Div. 64; Inman v. Binghamton Housing Auth., 3 N Y 2d 137.) II. Defendant’s contention that plaintiff should have elected prior to pleading to proceed either upon its breach of warranty cause of action or its breach of the settlement cause of action is ill founded as a matter of law. (Lumber Mut. Cas. Ins. Co. of N. Y. v. Friedman, 176 Misc. 703; Elliott v. Prockter Prods., 282 App. Div. 761.) III. Defendant cannot rely upon the doctrine of election of remedies because it was never raised in defendant’s answer as an affirmative defense. (Lumber Mut. Cas. Ins. Co. v. Friedman, 176 Misc. 703.) IV. Defendant’s first and second counterclaims were in substance simply affirmative defenses. (Calagna v. Green, 281 App. Div. 1033; Dorsey v. Abernathy, 30 Misc 2d 707.)

Opinion:
Keating, J.
Plant City Steel Corporation answered an advertisement in a trade publication placed by National Machinery Exchange, Inc., a dealer in used industrial machinery. National had advertised for sale a Kane and Roach, No. 23, Horizontal Angle Roll machine, and upon National's request forwarded to Plant City a picture of the machine which described its capacity. The machine was represented to be able to bend metal angles, leg out, of 6 inches by 6 inches by 1 inch. The price asked for the machine was $16,000.
Plant City negotiated for the purchase of the machine. The documents of sale contained a warranty that the machine would perform as specified in the advertisement. After Plant City installed the machine it attempted to roll a piece of flat bar 6 inches by 1 inch. The metal bar shattered the tooling of the machine. The tooling was repaired and another metal bar placed in the machine. Again the tooling was shattered. The plaintiff procured a capacity chart for this particular machine and discovered that it could not perform the operations warranted by National. The maximum capacity of the machine purchased could only bend angle legs of metal bars up to 5 inches by 5 inches by % inch. Plant City's manager telephoned National and disclosed the problem, noted National's breach of contract and demanded repayment of the purchase price, together with installation and freight charges. National refused. The president of the plaintiff corporation thereafter visited National's office and renewed the company's demand. After being rebuffed once again, Plant City instituted an action to recover its expenditures for the machine.
After issue had been joined in this litigation, the parties entered into a written stipulation of settlement. Under the terms of the settlement, the defendant agreed to pay the plaintiff $13,000 upon the return of the machine. The plaintiff warranted the machine would be returned in the same condition it was when received. The machine subsequently was returned, but the defendant refused to accept delivery claiming it was not in the same condition as when originally delivered.
Thereafter, the plaintiff made a motion for leave to serve a supplemental complaint in the original action setting forth as an additional cause of action the breach of the written stipulation agreement. The defendant did not oppose the motion, and it was granted. The causes of action stated in the supplemental complaint were the original breach of contract and loss of profit plus the breach of the executory accord.
Section 15-501 (suhd. 3) of the General Obligations Law provides : "If an executory accord is not performed according to its terms by one party, the other party shall be entitled either to assert his rights under the claim, cause of action, contract, obligation, lease, mortgage or other security interest which is the subject of the accord, or to assert his rights under the accord. ' ' The statute does not specify when the aggrieved party must make his election. Only one decision has addressed itself to this particular issue. In Elliott v. Prochter Prods. (282 App. Div. 758) it was held that a " [p]laintiff may not join a cause of action for breach of contract and a cause of action based on an alleged settlement of the cause of action for breach of contract." The court held that this result was dictated as a matter of sub stantive law. It stated: " The alternatives are not to be presented in a pleading bnt represent a choice which must be made by the plaintiff in advance of pleading." The court, therefore, ordered the plaintiff to make an election between the two causes of action in an amended complaint. The decision upheld the defendant's contention that such an election had to be made. We dismissed the appeal taken from this order as nonfinal (306 N. Y. 629). The question of when an election must be made has, therefore, never been decided by this court.
The trial court in the present action permitted the plaintiff to make its election after all the evidence had been adduced by both parties. The court reasoned that, since the defendant had not opposed the plaintiff's motion for leave to serve a supplemental complaint, the order permitting the pleading of the breach of the executory accord along with the contract action became the law of the case. The trial court, confronted with the different causes of action in the complaint, required the defendant to defend both the accord and the contract claims and did not require the plaintiff to elect which remedy he wanted to pursue at trial since the court could not determine after the plaintiff's case who had breached the executory accord.
The Appellate Division, First Department, affirmed because " the defendant did not object to the pleading of the inconsistent causes [and] under the special circumstances here, must be deemed to have waived whatever right it may have had before the trial to compel the plaintiff to make an election between the alleged inconsistent causes. ' ' The decision, however, announced its belief that the holding in Elliott (supra) was still viable.
The requirement imposed in Elliott that a plaintiff must elect before trial, as a matter of substantive law, between pursuing the accord or the underlying claim, is needlessly wasteful of judicial time, contrary to the liberal pleading requirements presently in effect, and not required by the language of the provision or its statutory history. The Legislature, in providing for the enforcement of executory accords, recognized that a party to such an agreement should be able to sue on the underlying claim if the other party to the accord breached the agreement. The aggrieved party was given a two-pronged remedy. He could choose to prosecute his original claim or pursue the accord. The Legislature, however, did not specify when the election should be made. CPLR 3014 explicitly provides for pleading alternatively and hypothetically in setting forth causes of action. Though this type of pleading may occasionally result in confusion to the defendant, he is protected from any prejudice by the court's power to sever causes of action and order separate trials or to require an orderly presentation of issues at trial. The spirit of the pleading provisions contained in the CPLR clearly indicates that procedural niceties are not ends in themselves, but only means to substantive justice. There is no need to force a plaintiff to. elect between hypothetical or alternative causes of actions at the pleading stage. (See Grant Co. v. Uneeda Doll Co., 19 A D 2d 361, affd. 15 N Y 2d 571; 3 Weinstein-Korn-Miller, N. Y. Civ. Prac., pars. 3014.11, 3014.12.)
It is clear that, in those instances in which an executory accord is present, a party can only prevail in an action on the underlying claim if the accord has been breached by the other party. The practice prescribed in Elliott is needlessly wasteful because it ofttimes will require the institution of two actions. If the plaintiff's initial decision as to which action he should pursue is incorrect, he will be forced to begin another action to seek recovery. Since the plaintiff cannot recover on the original claim if the defendant has neither breached nor repudiated the accord, this issue will necessarily be raised by the defendant in any action pursued by the plaintiff to recover on the original claim. (See Goldbard v. Empire State Mut. Life Ins. Co., 5 A D 2d 230.) If the accord is raised as an affirmative defense it will, if meritorious, bar any recovery. However, the plaintiff will still be able to institute another action at a later time to recover under the terms of the accord. The first action would not foreclose the plaintiff from instituting a second suit on the theory of an election of remedies. (See Smith v. Kirkpatrick, 305 N. Y. 66.)
Therefore, even though the plaintiff is seeking entirely different forms of relief, the two claims are interdependent. Success in the contract cause of action depends upon the breach of the accord. The proper procedure in respect to a trial of these issues requires the court to determine the accord issue. If the accord has been breached the plaintiff can make his election. (See Neco Distrs. Corp. v. Wilkoff, 7 A D 2d 903.)
Since in this case both the trial court and the Appellate Division have found that the accord was breached by the defendant, the plaintiff was privileged to pursue either the original claim or the accord. The plaintiff chose the contract action. The defendant at no time contended that it was surprised or unfairly deprived of an opportunity to produce relevant proofs with respect to the claims in issue.
Accordingly, the order of the Appellate Division should be affirmed.
Chief Judge Fuld and Judges Burke, Scileppi, Bergan, Breitel and Jasen concur.
Order affirmed.