Penn-Ohio Steel Corp. v. Allis-Chalmers Mfg. Co.

• Decision Date: 31 March 1959
• Docket Number: ALLIS-CHALMERS,PENN-OHIO
• Citation: 7 A.D.2d 441,184 N.Y.S.2d 58
• Parties: STEEL CORPORATION, Joseph B. Montgomery, Jr., Samuel E. Magid, John G. Baker, Plaintiffs-Appellants, v.MANUFACTURING COMPANY, Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 58

184 N.Y.S.2d 58

7 A.D.2d 441

PENN-OHIO STEEL CORPORATION, Joseph B. Montgomery, Jr. Samuel E. Magid, John G. Baker, Plaintiffs-Appellants, v. ALLIS-CHALMERS MANUFACTURING COMPANY, Defendant-Respondent.

Supreme Court, Appellate Division, First Department.

March 31, 1959.

David Brady, New York City, of counsel (O'Connor & Farber, New York City, attys.), for appellants.

Harold R. Medina, Jr., New York City, of counsel (Stephen E. O'Neil, New York City, with him on the brief, Cravath, Swaine & Moore, New York City, attys.), for respondent.

Before BOTEIN, P. J., and BREITEL, FRANK, McNALLY, STEVENS, JJ.

MARTIN M. FRANK, Justice.

Special Term held the complaint herein to be insufficient and granted the motion to dismiss with leave to replead.

In 1948, according to the complaint, the plaintiffs and the defendant entered into an agreement which provided, in part, for the purchase by the latter of a substantial amount of the corporate plaintiff's preferred stock and a specified quantity of steel ingots. In 1949, negotiations to terminate the agreement, conducted in good faith and at 'arm's-length', resulted in a settlement and a new agreement. In 1954 and 1955, the Internal Revenue Service, in connection with its audit of the plaintiffs' tax return for 1949, examined the defendant, which furnished the Service with certain information, memoranda and records.

The plaintiffs allege that the defendant failed to disclose relevant information, material and records and that the data it did furnish the Internal Revenue Service did not truly reflect the nature of the transaction between the parties, but rather was false and misleading and suggested that the settlement had been a sham and a fraud. As a result, the plaintiffs were indicted for income tax evasion. The indictment was later dismissed.

The pleading states that: 'The action of the defendant in furnishing false and misleading information, and in giving false and misleading testimony, was deliberate and intentional; it was without warrant or justification; it was without knowledge of or notice to the plaintiffs.' Although it is charged that the acts were 'intentional and deliberate', it is not alleged that they were done with the intention to harm the plaintiffs and were solely motivated by that intention. It likewise appears that no actual or special damages are pleaded.

The parties to the litigation agree that the complaint does not charge a conventional tort, such as malicious prosecution or defamation. Under the circumstances, the defendant argues, the only theory upon which to predicate the action is prima facie tort and under the rules of pleading applicable thereto, the complaint is insufficient.

On the other hand, the plaintiffs take the position that the action is not one for prima facie tort, because such an action in this context, they say, would be based upon a truthful statement made maliciously or with an intention to inflict harm, whereas, here the alleged statements were untrue.

Whether the cause of action pleaded should or should not be denominated as one for a prima facie tort is of no moment, for the plaintiffs' right to maintain it does not hinge upon a label. Knapp Engraving Co. v. Keystone Photo Engraving Corp., 1 A.D.2d 170, 172, 148 N.Y.S.2d 635, 637.

It seems inadvisable to lump all malicious and intentional harms into a grab bag labelled 'prima facie tort', especially since it is impossible to tabulate the infinite varieties of misconduct that give rise to actionable wrongs. It is generally accepted that 'There is no necessity whatever that a tort must have a name. New and nameless torts are being recognized constantly'. (Prosser, Torts, 2d Ed., p. 3.)

What is important is that there must be the infliction of intentional harm, resulting in damage, without legal excuses or justification. See Aikens v. State of Wisconsin, 195 U.S. 194, 204, 25 S.Ct. 3, 49 L.Ed. 154; Rager v. McCloskey, 305 N.Y. 75, 81, 111 N.E.2d 214, 217; Ruza v. Ruza, 286 App.Div. 767, 769, 146 N.Y.S.2d 808, 810; Knapp Engraving Co. v. Keystone Photo Engraving Corp., supra, 1 A.D.2d 170, 172, 148 N.Y.S.2d 635, 637.

The utterance or furnishing of false and misleading information may be actionable if done maliciously or with the intention to harm another, or so recklessly and without regard to its consequences, that a reasonably prudent person should anticipate that damage to another will naturally follow. It has been occasionally suggested that such an action is within the orbit of prima facie tort. There is no valid support in law for the suggestion. The tort of injurious or intentional falsehood finds its genesis in legal history long, long before the comparatively recent development in the area of intentional harms, which possibly have been misdescribed as 'prima facie torts'. It may well be that much of the difficulty encountered in these cases emanates from the indiscriminate use of labels. If, therefore, one must be attached, perhaps other terms such as 'injurious falsehood' (86 C.J.S. Torts § 48; Salmond, Torts, 11th Ed., pp. 703-704), or an 'action for damage resulting from intentional falsehood' (Rager v. McCloskey, 305 N.Y. 75, 80, 111 N.E.2d 214, 217) may be better.

Usually, the utterance of a truth does not provide a basis for redress and imports no wrongdoing, and consequently is not actionable unless, as in prima facie tort, the sole motivation is the intentional infliction of harm resulting in damage. 'The remedy is invoked when the intention to harm, as distinguished from the intention merely to commit the act, is present, has motivated the action, and has caused the injury to plaintiff, all without excuse or justification.' Ruza v. Ruza, supra, 286 App.Div. 767, 769, 146 N.Y.S.2d 808, 811. That is not so, however, when the medium that inflicts harm resulting in damage is an untruth. By its very nature a false statement intentionally made is wrongful. If it inflicts material...