Gen. Inv. Co. v. Interborough Rapid Transit Co.

Decision Date27 February 1923
Citation235 N.Y. 133,139 N.E. 216
CourtNew York Court of Appeals Court of Appeals


Action by the General Investment Company against the Interborough Rapid Transit Company. Judgment for plaintiff was affirmed by the Appellate Division of the Supreme Court, First Department (200 App. Div. 794,193 N. Y. Supp. 903), and defendant appeals.


See, also, 234 N. Y. 536, 138 N. E. 437.Appeal from Supreme Court, Appellate Division, First department.

A. H. Cole and James L. Quackenbush, both of New York City, for appellant.

Elijah N. Zoline, of New York City, for respondent.


[1] The appeal by defendant herein brings up for review a judgment of the Appellate Division entered upon an order which affirmed a summary judgment granted at Special Term in favor of plaintiff under rule 113, Rules of Civil Practice. In view of the argument of counsel in his brief as well as oral that the stated rule is invalid in that in infringes upon the constitutional right of defendant to trial by jury, preliminary to a discussion of the question presented it is essential that reference be made to the pleadings of the parties in so far as the same have material bearing on the questions presented. Paragraphs 1 and 2 of the complaint allege the corporate existence of plaintiff and defendant, and are admitted in the answer. Paragraph 3 of the complaint alleges that on the 1st day of September, 1920, defendant for a valuable consideration, and for value received, made, issued, and delivered a series of promissory notes of $1,000 each, wherein and whereby it promised to pay on September 1, 1921, to the bearer thereof, or, if registered, to the registered holder thereof, at the office of J. P. Morgan & Co., New York, the sum of $1,000 on each of said notes and interest thereon at the rate of 7 per cent. per annum payable annually. That allegation of the complaint was not denied, therefore stands admitted.

The fourth paragraph of the complaint alleges that plaintiff is, and was on the date of the maturity, the owner and legal holder of five of said notes, payable to bearer, referred to in paragraph 3; the serial numbers of said notes being as follows: M1000, M15516, M15519, M15520, M15521. That upon the maturity of said notes the same were duly presented for payment at the place where, by the terms of the same, the notes were made payable, payment thereof demanded and refused, and no part of the principal of said notes has been paid.

Answering the allegations contained in paragraph 4 of the complaint, defendant admits that five promissory notes payable to bearer, the serial numbers thereof being as follows: M1000, M15516, M15519, M15520, and M15521, were presented for payment upon maturity at the place where the same were made payable by the terms thereof, that payment was refused, and that no part of the principal of said notes has been paid; and alleged that said notes are a part of a series of notes of this defendant outstanding in the aggregate amount of $33,400,000, ‘but except as herein specifically admitted it denies any knowledge or information sufficient to form a belief as to each and every allegation in said paragraph contained.’

Separate defenses were set out in the answer at great length and considered in the opinions of the justice at Special Term as well also in the opinion of the Appellate Division, both courts holding that the alleged facts were insufficient to constitute a defense to the action, and with such conclusions we are in accord.

The sole denial by defendant to the allegations of the complaint was of any knowledge or information sufficient to form a belief that plaintiff is, and was on the date of maturity, the owner and legal holder of the five notes, the subject of the action. For a period of years the Codes regulating procedure in this state have provided that the answer of a defendant must contain ‘a general or specific denial of each material allegation of the complaint controverted by the defendant, or of any knowledge or information thereof sufficient to form a belief,’ and such provision is now embodied in section 261, Civil Practice Act.

Notwithstanding the fact that this court held that an answer may be pronounced frivolous which denies any knowledge or information sufficient to form a belief of matters largely of record, where the means to obtain information were within the control of defendant or presumably within his knowledge (Dahlstrom v. Gemunder, 198 N. Y. 449, 92 N. E. 106,19 Ann. Cas. 771;Kirschbaum v. Eschmann, 205 N. Y. 127, 98 N. E. 328), under the Code of Civil Procedure the rule prevailed that the general issue could not be stricken out as sham (Wayland v. Tysen, 45 N. Y. 281) and that a verified pleading may not be stricken out as sham when it contains a denial of any material allegation of the complaint (Thompson v. Erie R. R. Co., 45 N. Y. 468), although shown by affidavits to be false and that an answer is not frivolous, unless it appears on mere inspection to be bad (Cook v. Warren, 88 N. Y. 37). The answer in the instant case is free from the defects assigned in the decisions under the former Codes of Procedure. It could not be stricken out as sham under section 538 of the Code of Civil Procedure, nor could judgment be given thereon as frivolous under section 537 of the Code of Civil Procedure.

While the form of denial adopted by defendant in this case was authorized by the earlier Codes of Procedure and at the present time by the Civil Practice Act, it has never been consistent with the administration of justice that such form of denial should be utilized in bad faith or for mere purpose of delay frequently disastrous to honest creditors. The Legislature having had under consideration the enactment of the present Civil Practice Act, provided for a convention representing the judiciary and the bar to consider and adopt Rules of Civil Practice in lieu of existing rules relating to the Code of Procedure, which rules to be adopted should be consistent with the Judiciary Law (Consol. Laws, c. 30) and Civil Practice Act, and which should be binding upon the courts, justices, and judges thereof except the Court for the Trial of impeachments and the Court of Appeals. Such convention was held and Rules of Practice formulated, adopted, and filed in the office of the secretary of state as required by such law. Rule 113 of the Rules of Practice provides a new remedy to be applied in the cases specified therein to dilatory answers which were held to be good in form under the earlier Codes of Procedure. The rule reads:

Rule 113. Summary Judgment. When an answer is served in an action to recover a debt or liquidated demand arising,

‘1. On a contract, express or implied, sealed or not sealed, or

‘2. On a judgment for a stated sum;

‘the answer may be struck out and judgment entered thereon on motion, and the affidavit of the plaintiff or of any other person having knowledge of the facts, verifying the cause of action and stating the amount claimed, and his belief that there is no defense to the action; unless the defendant by affidavit, or other proof, shall show such facts as may be deemed, by the judge hearing the motion, sufficient to entitle him to defend.’

Under this rule plaintiff was within the limited class of cases which permitted it to obtain judgment summarily without proceeding to the trial of the action.

[2] A defendant may in all cases successfully oppose an application for summary judgment under the rule by satisfying the court by affidavit or otherwise that he has a real defense to the action and should be allowed to defend. In order that a plaintiff shall succeed on such a motion, it must appear from the moving papers and answering affidavits that the defense or denial interposed is sham or frivolous. If a defendant adduces facts upon the hearing of the application which constitute an apparent defense, he should be allowed to defend. Such is the law in England under a like rule of the Supreme Court of Judicature (English Practice Act, Annual Practice 1922, rule 3, page 13-Order 14, page 150-notes page 151 and following; Halsbury's Laws of England, vol. 18, pp. 190, 192, 194; Wallingford v. Mutual Society, 5 Law Reports, Appeal Cases, 685, 1879-1880) and a conservative guide for adoption by our courts.

In the present case the plaintiff noticed a motion at Special Term, based upon the pleadings and an affidavit of one Quirk, secretary of plaintiff, that the answer be stricken out and judgment entered pursuant to rule 113, Rules of Civil Practice, in favor of plaintiff and against defendant as demanded in the complaint.

The affidavit of Mr. Quirk stated that he was secretary of the plaintiff, that he had personal knowledge of the facts set forth in his affidavit; that prior to the commencement of this action plaintiff had purchased in the open market for value the five notes referred to in the complaint, the subject of this action, specifying the serial numbers of the notes, and has since been the owner and holder of the notes and each of them, and, the same are, and at all times since the purchase thereof by the plaintiff have been, in its actual physical possession, and the original notes will be produced by plaintiff upon the hearing of the motion; that he personally presented the notes for payment to J. P. Morgan & Co.; that they were counted and inspected by the representatives of that firm, who informed him that they did not have funds to pay the principal and refused payment thereof, but said that the coupons for the semiannual interest thereon due September 1, 1921, would be paid and thereupon defendant detached such coupons and delivered them to Morgan & Co. and received the check of that company in payment for them, and reasserted that the plaintiff is and...

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