Schenck v. State Line Tel. Co.

• Decision Date: 03 June 1924
• Parties: SCHENCK v. STATE LINE TELEPHONE CO. et al.
• Court: New York Court of Appeals Court of Appeals

238 N.Y. 308

144 N.E. 592

SCHENCK

v.STATE LINE TELEPHONE CO. et al.

Court of Appeals of New York.

June 3, 1924.

Action by Christian Schenck against the State Line Telephone Company and others. An order of the Special Term granting defendant's motion for judgment on the pleadings (121 Misc. Rep. 1,200 N. Y. Supp. 772) was reversed by the Appellate Division of the Supreme Court (207 App. Div. 454,202 N. Y. Supp. 378), which certified questions, and defendants appeal by permission.

Questions answered, and order affirmed.

The Appellate Division certified the following questions:

(1) Is defendant entitled to judgment on the pleadings?

(2) Did the plaintiff make an irrevocable election by bringing a prior action for damages by reason of the alleged fraud of defendants, and by so doing is he bound thereby and estopped from maintaining the present action?

Appeal from Supreme Court, Appellate Division, Second department.

Benjamin Reass, Hugo Hirsh and Emanuel Newman, all of New York City, for appellants.

Samuel Seabury, Edward E. McCall and Harry G. Stevens, all of New York, for respondent.

CARDOZO, J.

Plaintiff in January, 1910, sold real estate in New York to the State Line Telephone Company, a domestic corporation, induced thereto by representations now charged to have been fraudulently made. In June, 1922, he began an action at law against the corporation and its agents to recover damages for the fraud. In the following October, after service of the defendants' answer, which set up with other defenses the six-year statute of limitations, be discontinued the action for damages, though not till the cause had been placed upon the calendar for trial. He then began this suit in equity for a judgment of rescission with a reconveyance of the land and an accounting for the profits. At law the term of limitation applicable to a sale in 1910 is six years from the date of the commission of the wrong. Miller v. Wood, 116 N. Y. 351, 22 N. E. 553. The amendment of the statute in 1920 assimilating the rule at law to the rule in equity has been held to be inapplicable to rights of action already barred. Hopkins v. Lincoln Trust Co., 233 N. Y. 213, 135 N. E. 267. In equity the right of action accrues upon the discovery of the facts constituting the fraud. The defendants now move for judgment on the pleadings. Their position is that the sale has been irrevocably affirmed. They argue that this result must follow whether the plaintiff's disability to rescind is to be traced in its origin to an election of remedies or to a choice between substantive rights by ratification or adoption. This position, sustained at the Special Term, was overruled at the Appellate Division. The case comes here after the allowance of an appeal.

[1] An election of remdies presupposes a right to elect. Henry v. Herrington, 193 N. Y. 218, 222,86 N. E. 29,20 L. R. A. (N. S.) 249. It ‘is simply what its name imports; a choice, shown by an overt act, between two inconsistent rights, either of which may be asserted at the will of the chooser alone.’ Bierce v. Hutchins, 205 U. S. 340, 346, 27 Sup. Ct. 524, 51 L. Ed. 828. If in truth there is but one remedy, and not a choice between two, a fruitless recourse to a remedy withheld does not bar recourse thereafter to the remedy allowed. As to this, there is nothing of uncertainty in the decisions in New York. Henry v. Herrington, supra; Morris v. Rexford, 18 N. Y. 552;Kinney v. Kiernan, 49 N. Y. 164, 169;Strong v. Strong, 102 N. Y. 69, 73,5 N. E. 799;Baird v. Erie R. R. Co. 210 N. Y. 225, 232,104 N. E. 614;McNutt v. Hilkins, 80 Hun, 235 29 N. Y. Supp. 1047;Koke v. Balken, 15 App. Div. 415,44 N. Y. Supp. 426. Judgments similar in effect have been rendered by courts elsewhere. Snow v. Alley, 156 Mass. 193, 195, 30 N. E. 691.Corbett v. B. & M. R. R. Co., 219 Mass. 351, 107 N. E. 60, 12 A. L. R. 683; Int. R. & S. Corp. v. Vanderpoel, 127 Minn. 89, 148 N. W. 895;Clark v. Heath, 101 Me. 530, 532, 64 Atl. 913,8 L. R. A. (N. S.) 144;Standard Oil Co. v. Hawkins, 74 Fed. 395, 20 C. C. A. 468, 33 L. R. A. 739;Barnsdall v. Waltemeyer, 142 Fed. 415, 420, 73 C. C. A. 515;Bistline v. U. S., 229 Fed. 546, 548, 144 C. C. A. 6; Bierce v. Hutchins, supra; Friend v. Talcott, 228 U. S. 27, 37, 33 Sup. Ct. 505, 57 L. Ed. 718.

[2] The plaintiff thought he had a remedy at law, and so thinking sued for damages. In truth he had no such remedy, for, irrespective of his knowledge of the fraud, his right of action for damages had been barred by lapse of time. The defendants have blocked his recourse to a remedy which he had not. They now say that because of his mistake, he must be held to have renounced forever the remedy he had. ‘There would be no sense or principle in such a rule.’ Holmes, J., in Snow v. Alley, supra.

The defendants stress the recent decision of the United States Supreme Court in U. S. v. Oregon Lumber Co., 260 U. S. 290, 43 Sup. Ct. 100, 67 L. Ed. 261. There the government brought suit to annul a patent, and prosecuted the suit to judgment after the defendant had pleaded in bar the statute of limitations applicable to such cases. This was held an election barring a later action at law to recover damages for the fraud. We are not required to determine whether upon like facts we would follow that decision, which was accompanied by a strong dissent. The majority opinion concedes that a different result would have been reached if the plaintiff, after the warning given him by the answer, had discontinued the first suit instead of pursuing it to final judgment. 260 U. S. at pages 297, 301, 43 Sup. Ct. 100, 67 L. Ed. 261. Here the plaintiff did not wait for judgment, but discontinued during or before the trial. Repentance, for all that the pleadings show, followed swiftly upon warning. The Oregon Lumber Case, though its ruling were accepted, would not touch the case at hand.

[3][4][5] The argument is made that prosecution of the former action, if indecisive as a choice of remedies, is conclusive as a ratification or adoption of a voidable transaction. The distinction is one not infrequently obscured, and yet important to be heeded. Often what is spoken of in opinions as a choice between remedies is in reality a choice of ‘an alternative substantive right.’ Brandeis, J., in U. S. v. Oregon Lumber Co. supra, at page 307 (43 Sup. Ct. 106); cf. Robb v. Vos, 155 U. S. 13, 15 Sup. Ct. 4, 39 L. Ed. 52;Conrow v. Little, 115 N. Y. 387, 22 N. E. 346,5 L. R. A. 693;Fowler v. Bowery S. Bank, ...