Case Name: Vlasta Novotny, an Infant, by Marie Novotny, Her Guardian ad Litem, Respondent, v. Theodore Kosloff, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1913-12-05
Citations: 159 A.D. 478
Docket Number: 
Parties: Vlasta Novotny, an Infant, by Marie Novotny, Her Guardian ad Litem, Respondent, v. Theodore Kosloff, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 159
Pages: 478–483

Head Matter:
Vlasta Novotny, an Infant, by Marie Novotny, Her Guardian ad Litem, Respondent, v. Theodore Kosloff, Appellant.
First Department,
December 5, 1913.
Contract — action for breach of contract induced by fraud — section 539, Code of Civil Procedure, construed — recovery on proof of breach.
The word “ liability,” as used in subdivision 4 of section 549 of the Code of Civil Procedure relating to the right of arrest in civil actions and providing for an arrest “in an action upon contract, express or implied * * * where it is alleged in the complaint that the defendant is guilty of a fraud in contracting or incurring the liability,” means a liability flowing from a breach of the contract upon which the action is based and not a liability for deceit in inducing the contract.
Hence, a plaintiff who alleges that a contract was induced by fraud may recover on proving a, breach thereof; he need not rescind the contract and bring his action for damages for the deceit.
Ingraham, P. J., and Scott, J., dissented, with opinion.
Appeal by the defendant, Theodore Kosloff, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 3d day of February, 1913, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 10th day of February, 1913, denying defendant’s motion for a new trial made upon the minutes.
Jacob Manheim, for the appellant.
Roger Foster, for the respondent.

Opinion:
Hotchkiss, J.:
I think the result the learned presiding justice has reached overlooks the language and intent of subdivision 4 of section 549 of the Code of Civil Procedure, which reads: " In an action upon contract, express or implied, where it is alleged in the complaint that the defendant was guilty of a fraud in contracting or incurring the liability." It seems to me that the "liability" thus referred to is that flowing from a breach of the contract on which the action is based, and is not a liability for deceit in inducing the contract. The situation is somewhat anomalous, but as shown by the notes to section 549 (Bliss New York Anno. Code [Gth ed.], § 549), the so-called Throop Code, enacted in 1876 (Laws of 1876, chap. 448), separated the cases where the right to arrest depended exclusively on the nature of the action from those where such right depended on extrinsic facts, placing the former in section 549 and the latter in section 550, and expressly provided in cases of the latter class for excluding allegations of such extrinsic facts from the complaint. (See Laws of 1877, chap. 416, § 1, subds. 101, 102, for amendments.) In 1879 (Laws of 1879, chap. 542) section 549 was amended by requiring the allegations of fraud to be inserted in the complaint in all actions of the class described in subdivision 4. (See, also, Laws of 1886, chap. 672.) The reason for this change is not difficult to understand. It arose from the abuse of orders of arrest which were secured and upheld on affidavits merely; the amendment gave the defendant the benefit of a jury trial on what was usually the question of greatest practical importance in such cases, namely, whether a body execution should or should not issue; and, in order to protect the plaintiff in the ultimate recovery of his debt, it was further provided by the same subdivision that " a judgment for the defendant is not a bar to a new action to recover upon the contract only."
In the light of the foregoing, I do not see how it is possible for one to have his action " upon contract," if in order to hold the defendant " guilty of a fraud in contracting or incurring the liability," he must rescind the contract and bring his action for damages.
The judgment and order should be affirmed, with costs.
Clarke and Dowling, JJ., concurred; Ingraham, P. J., and Scott, J., dissented.