Levine v. Behn

• Decision Date: 05 March 1940
• Citation: 25 N.E.2d 871,282 N.Y. 120
• Parties: LEVINE et al. v. BEHN et al.
• Court: New York Court of Appeals Court of Appeals

282 N.Y. 120

25 N.E.2d 871

LEVINE et al.

v.BEHN et al.

Court of Appeals of New York.

March 5, 1940.

Appeal from Supreme Court, Appellate Division, First Department.

Stockholders' derivative action by Louis Levine against Sosthenes Behn and others, directors of the National City Bank of New York, to recover money paid out of bank's funds. From a judgment of the Appellate Division, 257 App.Div. 156, 12 N.Y.S.2d 190, entered May 23, 1939, which affirmed a judgment for defendant-respondents, entered upon an order of Special Term, 169 Misc. 601, 8 N.Y.S.2d 58, granting a motion by defendants for summary judgment and dismissing the complaint on the merits, plaintiff appeals.

Reversed, and defendants' motion denied. Arthur G. Warner and David L. Stehr, both of New York City, for appellants.

Robert Nias West, John R. Henry, and Guy Cary, all of New York City, for respondents.

SEARS, Judge.

The plaintiffs are stockholders of the defendant The National City Bank of New York. The defendants, other than the bank, were the directors of the bank at the time the transactions mentioned in the complaint occurred, and the executor of one such director who had died. The action is a derivative one in which the plaintiffs seek to recover for the bank a large sum of money by reason of the alleged wrongful, willful, reckless and negligent acts of the individual defendants in paying out of the bank's funds the sum of $725,000 in settlement of a claim against the bank in favor of the receiver of another banking institution, namely, the Harriman Bank, which, as plaintiffs allege, the directors knew or could and should have known was palpably unfounded. Answers have been interposed by the defendants containing general denials of the material allegations of the complaint which are amplified by specific statements of fact in conflict with the allegations of the complaint. The answers contain no other affirmative defenses. The defendants have moved for summary judgment under the fifth paragraph of rule 113 of the Rules of Civil Practice which reads as follows: ‘Where an answer is served in any action setting forth a defense which is sufficient as a matter of law, where the defense is founded upon facts established prima facie by documentary evidence or official record, the complaint may be dismissed missed on motion unless the plaintiff by affidavit, or other proof, shall show such facts as may be deemed by the judge hearing the motion, sufficient to raise an issue with respect to the verity and conclusiveness of such documentary evidence or official record.’

The plaintiffs contend that inasmuch as the answers contain no affirmative defense but only denials, direct and inferential, a motion for summary judgment is unauthorized by the rule. The case does not fall within any of the eight classes enumerated in the first paragraph of the rule. Authority to make the motion must, therefore, be found in the language quoted from the rule. Lederer v. Wise Shoe Co., 276 N.Y. 459, 12 N.E.2d 544. The controversy wages over the meaning of the word ‘defense.’ The plaintiffs urge that the word ‘defense’ must be confined in application to an affirmative defense, in the nature of avoidance. In support of their position they refer to the use of the words ‘denials or defenses' in the second paragraph of the rule as demonstrating a differentiation between negative and affirmative matter in an answer. They direct attention also to the phrasing of section 261 of the Civil Practice Act where the contents of an answer are stated to be (1) denials of material allegations of the complaint, and (2) ‘a statement of any new matter constituting a defense.’ The plaintiffsalso assert that the phrase ‘where an answer * * * setting forth a defense which is sufficient as a matter of law,’ is peculiarly applicable to allegations of new matter and, if referable to denials, is awkward and redundant.

The defendants, on the other hand, contend that the word ‘defense’ in the quoted language must be given a broad meaning in order to carry out the general intention of the rule, and must be construed to include denials as well as statements in avoidance, They argue that the quoted language would have little purpose unless a broad interpretation were given to the word inasmuch as rule 107, which was in effect before the quoted language was added to rule 113, would under the construction urged by the plaintiffs cover substantially the same field;...