Schank v. Schuchman

• Decision Date: 14 July 1914
• Parties: SCHANK et al. v. SCHUCHMAN.
• Court: New York Court of Appeals Court of Appeals

212 N.Y. 352

106 N.E. 127

SCHANK et al.

v.SCHUCHMAN.

Court of Appeals of New York.

July 14, 1914.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by George E. Schank and others, surviving partners trading under the firm name of James A. Hearn & Son, against George Schuchman. From an order of the Appellate Division (157 App. Div. 926,142 N. Y. Supp. 573)affirming an order (141 N. Y . Supp. 242) denying plaintiffs' motion for judgment on the pleadings, plaintiffs appeal by permission; the Appellate Division certifying the question, ‘Does the amended complaint herein state a cause of action against the defendant?’ 158 App. Div. 939,143 N. Y. Supp. 1121. Order affirmed, and question answered in the negative.

H. Snowden Marshall, of New York City, for appellants.

Lawrence B. Cohen, of New York City, for respondent.

CARDOZO, J.

The plaintiffs bought of the defendant wagons and parts of wagons, and also employed him to make repairs. Their dealings continued for nearly four years. In that period the plaintiffs paid for repairs $39,626.66 and for new wagons or fittings $6,027.48, a total of $45,654.14. During all that time, two men, in the plaintiffs' service, were charged with the duty of inspecting purchases and repairs, and payment was not made till they had furnished their certificate of approval. It is charged in the complaint that they received from the defendant a bonus or commission of 10 per cert. of the bills which they approved. It is charged that the payment was made to them ‘with intent to influence their action in relation to the business of the plaintiffs.’ When these wrongs came to the plaintiffs' knowledge, they could no longer restore to the defendant the benefits received from him. The work could not be restored: It had been incorporated into the wagons which had since then been worn out or destroyed. The wagons and parts of wagons could not be restored: they also were worn out and useless. The plaintiffs say that in this predicament every dollar paid by them to the defendant during the years of their dealings must be repaid without deduction or condition. They ask that all the transactions be set aside; that the contracts under which the payments were made be declared to be void, and that the defendant be required to repay all moneys which he has received, with interest from the dates of payment.

[1] This action is not the first in which the plaintiffs have sought redress from the defendant for the wrongs stated in their complaint. Its form, however, has been varied. In an earlier action, in the First Department, they sued the defendant at law for money had and received. They then alleged that he had not only bribed their servants, but had also overcharged them, and that the payments were in excess of the fair value of the defendant's wares and services. The Appellate Division for the First Department overruled a demurrer to that complaint, but held that the plaintiffs' right of action was limited to the recovery of any difference between the value which they had received and the money which they had paid. Hearn v. Schuchman, 150 App. Div. 476,135 N. Y. Supp. 52.

The plaintiffs then discontinued that action, and began the present one in another department. They left out of this complaint the averment that there was a discrepancy between the value and the price. They stated, on the contrary, that since the work was under the exclusive supervision of their dishonest agents, they had no means of determining whether there was such a discrepancy or not. They also recast their prayer for relief by demanding a decree of rescission; and the semblance of an action in equity rather than one at law has thus been given to their pleading. We speak of its form in that regard as a semblance, for we think it is nothing more. The plaintiffs seem to have tried to make out a right of action in equity; but whatever rights they have, we think are purely legal. They do not need at this time the aid of equity. There is nothing at this time for equity to undo. There is no trust to be impressed; no accounting to be decreed; no fiduciary relation to be declared; no instrument to be surrendered. Equity will not entertain an action to declare the rescission of an executed transaction unless a decree announcing the rescission is essential to the suitor's protection. This necessity may arise from the fact that the transaction, if left apparently outstanding, would affect the title to real estate. It may arise where the defrauded party has been induced to become a stockholder in a corporation, so that there is need, not merely to recover what was paid for the shares, but also to sever relations with other stockholders and creditors. Bosley v. Nat. Machine Co., 123 N. Y. 550, 555,25 N. E. 990. It may arise, under a great variety of other conditions, where the transaction in one or more of its elements is still executory. Davis v. Rosenzweig Realty Operating Co., 192 N. Y. 128, 133,84 N. E. 943,20 L. R. A. (N. S.) 175, 127 Am. St. Rep. 890. If, however, nothing executory remains, an action to declare a rescission, even though fraud is proved, does not lie as of course.

‘It is not in every case of fraud that relief is to be administered in a court of equity, and it is a well settled rule that wherever a matter respects only a sale of personal chattels, and lies merely in damages, the remedy is at law only. If this had been a sale of a horse to the plaintiff procured by fraud, it would not have been proper for her to resort to an equitable action for relief, because an action at law would furnish her an ample remedy, and give her all the relief to which she could, under any circumstances, be entitled.’ Bosley v. Nat. Machine Co., supra; Buzard v. Houston, 119 U. S. 347, 352, 7 Sup. Ct. 249, 30 L. Ed. 451.

In the case at hand the transactions have been fully executed. The plaintiffs are simply seeking to get back a sum of money paid under a contract, not affecting real estate, which they have elected to declare a nullity. To render that relief effective it is not required that a court of equity should anathematize the closed transactions. The cause of action is at law, and the legal remedy is adequate. Bosley v. Nat. Nachine Co., supra; United States v. Bitter Root Dev. Co., 200 U. S. 451, 26 Sup. Ct. 318, 50 L. Ed. 550;Equitable Life Assurance Society v. Brown, 213 U. S. 25, 50, 29 Sup. Ct. 404, 53 L. Ed. 682;Curriden v. Middleton, 232 U. S. 633, 34 Sup. Ct. 458, 58 L . Ed. 765.

[2] The present action, like the earlier one, is therefore in reality for money had and received. That is always the legal remedy available where a defrauded purchaser, waiving the tort, elects to rescind and to reclaim his payments. Rothschild v. Mack, 115 N. Y. 1, 8,21 N. E. 726. The action for money had and received is based, however, upon equitable principles. The plaintiffs must show that it is against good conscience for the defendant to keep the money. Moses v. Macferlan, 2 Burr. 1005. They do not show this, where they have consumed...