Shindler v. Lamb

• Court: New York Supreme Court
• Writing for the Court: HENRY CLAY GREENBERG
• Citation: Shindler v. Lamb, 25 Misc.2d 810, 211 N.Y.S.2d 762 (N.Y. Sup. Ct. 1959)
• Decision Date: 20 October 1959
• Parties: David L. SHINDLER, Plaintiff, v. Edmund F. LAMB, B. George Ulizio, Morris Gotthilf, Charles Gottlieb, Joseph Mercadante and Thomas L. Perkins, Defendants.

Page 762

211 N.Y.S.2d 762

25 Misc.2d 810

David L. SHINDLER, Plaintiff, v. Edmund F. LAMB, B. George Ulizio, Morris Gotthilf, Charles Gottlieb, Joseph Mercadante and Thomas L. Perkins Defendants.

Supreme Court, Special Term, New York County, Part I.

Oct. 20, 1959.

Willkie, Farr, Gallagher, Walton & FitzGibbon, New York City (Mark F. Hughes, Vincent R. FitzPatrick, Louis A. Caraco, New York City, of counsel), for defendants Lamb, Mercadante and Perkins.

HENRY CLAY GREENBERG, Justice.

This is an action to recover damages, for fraud and conspiracy to defraud, against six individuals, three of whom were, at the times complained of, officers and directors of Webrib Steel Corporation (herein 'Webrib'). The damages claimed in this action are reasonable counsel fees, disbursements and expenses incurred by plaintiff to recover the sum of $164,000 paid by him to Webrib in proceedings in the United States District Court, and interest for the period of deprivation of the use thereof.

The three defendants above mentioned move to dismiss the complaint: (a) pursuant to Rule 106, subd. 4 of the Rules of Civil Practice for insufficiency, 'because it does not allege damages recoverable in this action'; (b) pursuant to Rule 107, subd. 4 on the ground that there is an existing final judgment of a court of competent jurisdiction determining the causes of action between the parties hereto; and (c) pursuant to Rule 107, subd. 6 on the ground that the claim set forth in the complaint has been released.

Webrib had filed in 1956 a petition for an arrangement under Chapter XI of the Bankruptcy Act (11 U.S.C.A. § 701 et seq.) in the United States District Court and was allowed to continue in possession of its property. In 1957, Webrib was authorized by order of the Referee of that court to borrow the sum of $164,000 to be secured by a mortgage on its assets and a certificate of indebtedness upon the terms set forth in a certain contract. Plaintiff was brought into the deal by the individuals who were ostensibly negotiating to make the loan to Webrib and it was he who advanced said sum on May 14, 1957. By petition dated May 20, 1957, filed with the Referee, setting forth the misrepresentations which are alleged in the present complaint, plaintiff sought to rescind the transaction and obtain the return of his money. It was finally determined by the District Court that the chattel mortgage be rescinded as to plaintiff and that the $164,000 be returned to him. An appeal taken by Webrib to the United States Court of Appeals was withdrawn by stipulation dated June 6, 1958, which provided that the sum of $159,500 be returned to plaintiff and that the sum of $4,500 be retained to the credit of Webrib, and an order to that effect was entered in the District Court.

In moving to dismiss the present complaint for insufficiency, insofar as it demands counsel fees and expenses, the three defendants rely on the general rule that, in the absence of any contractual or statutory liability therefor, attorneys' fees and expenses incurred in litigating a claim, aside from the usual court costs, are not recoverable as an item of damages, either in that suit or in a suit subsequently brought.

But there is a well-recognized exception to the rule. If, through the wrongful act of his present adversary, a person is involved in earlier litigation with a third person in bringing or defending an action to protect his interests, he is entitled to recover the reasonable value of attorneys' fees and other expenses thereby suffered or incurred (Jones v. Morgan, 90 N.Y. 4; Hynes v. Patterson, 95 N.Y. 1; Boyles v. Burnett, 213 Mo.App. 288, 249 S.W. 719; Turner v. Zip Motors, Inc., 245 Iowa 1091, 65 N.W.2d 427, 45 A.L.R.2d 1174; Ritter v. Ritter, 381 Ill. 549, 46 N.E.2d 41; see, also, 45 A.L.R.2d, Annotation, 1183-1198; 25 C.J.S. Damages § 50c; 15 Am.Jur., Damages, § 144; Restatement, Torts, § 914).

With regard to the recoverability of interest in this action, the loss incurred in the deprivation of the use of plaintiff's moneys is also treated as a legal consequence of defendants' alleged original wrongful act and recoverable as an item of damages. The true measure of damage in an action for fraud is indemnity for the actual pecuniary loss suffered as the direct result of the fraud, and this embraces interest for the period of deprivation of the property fraudulently obtained. Reno v. Bull, 226 N.Y. 546, 124 N.E. 144; Flamm v. Noble, 296 N.Y. 262, 72 N.E.2d 886, 171 A.L.R. 812. Defendants urge the applicability of the rule that the receipt by a creditor of the principal debt, or a part thereof as payment of the...