Susquehanna S.S. Co. v. A.O. Andersen Co.

• Decision Date: 21 January 1925
• Citation: 239 N.Y. 285,146 N.E. 381
• Parties: SUSQUEHANNA S. S. CO., Inc., v. A. O. ANDERSEN co., i/nc.
• Court: New York Court of Appeals Court of Appeals

239 N.Y. 285

146 N.E. 381

SUSQUEHANNA S. S. CO., Inc.,

v.A. O. ANDERSEN co., i/nc.

Court of Appeals of New York.

Jan. 21, 1925.

Action by the Susquehanna Steamship Company, Inc., against A. O. Andersen & Co., Inc. From a judgment of the Appellate Division (208 App. Div. 26, 203 N. Y. S. 568), affirming judgment entered on verdict of a jury for plaintiff, defendant appeals.

Reversed, and new trial granted.

See, also, 195 App. Div. 161, 186 N. Y. S. 338; 208 App. Div. 786, 203 N. Y. S. 580; 208 App. Div. 787, 203 N. Y. S. 955.

Hiscock, C. J., and McLaughlin and Andrews, JJ., dissenting.Appeal from Supreme Court, Appellate Division, Second Department.

Herman S. Hertwig and John A. McManus, both of New York City, for appellant.

Nathan L. Miller and Alvin C. Cass, both of New York City, for respondent.

CARDOZO, J.

Plaintiff's assignor chartered the steamship Lydia to one Crotois for a term of about six months, beginning September 28, 1919, at a monthly hire of $59,380, payable in advance. This action is brought upon a contract made or alleged to have been made by the defendant and the owner of the steamship whereby defendant in consideration of an assignment of the charter party promised, as an original obligor, to make payment of the hire. A balance of $167,446.10 due at the commencement of the action was reduced by allowances and set-offs to $11,000, for which amount, with costs, a judgment has been recovered.

[1] The contract between the owner and the defendant is embodied in two letters.

On September 12, 1919, defendant wrote to the Lydia Steamship Company, plaintiff's assignor, as follows:

‘Referring to charter party for the steamer ‘Lydia,’ between yourselves as owners and J. E. Crotois, as charterers, and in consideration of your assigning the hire on the same to us, we hereby agree to pay to you on account of said hire on Thursday, the 18th of September, 1919 ($50,000) fifty thousand dollars, and the balance of the two first months hire on arrival of steamer in Newport News in condition to load coal. Further hire monthly in advance at rate mentioned charter party.

‘It is understood that in case the amount advanced by us should exceed money due by charterers, you will refund same.

‘Yours very truly,

A. O. Andersen & Co., Inc.,

‘V. Reinmann, Vice Pres. & Gen'l Manager.

‘P. S.-It is further agreed that we will pay the balance of the first two months hire on delivery in New York, instead of arrival of steamer in Newport News, if required by you.

‘V. R.’

The following was the reply:

‘Sept. 12, 1919.

‘A. O. Andersen & Co., Inc., 50 Broad St., New York City-Gentlemen: Referring to your today's letter, we hereby agree to the condition mentioned in same, and assign the hire as due under charter party, between ourselves and Mr. J. E. Crotois, to yourselves, and compensation of the payment as mentioned in your letter, subject to refund if not due under charter party.

‘Yours very truly,

‘Lydia Steamship Corp.,

‘VR:LR

‘Sec'y & Treas.’

The defendant insists that this contract is misinterpreted when it is read as an assumption by the defendant of the obligations of the charterer. In the defendant's view, it is simply a promise to accommodate the owner by advancing the monthly hire, subject to a promise by the owner to refund the deficiency, if, upon recourse by the defendant to the charterer, collection and reimbursement shall be found to be impossible. We agree with the courts below that, if this was the meaning, there is no expression of it in the writing. The owner's promise is to refund if the advances are in excess of what the charterer shall owe. The defendant would have us transform this into a promise to refund if the advances are in excess of what the charterer can pay. That would be to remake the contract rather than construe it. The words are not without an office and a value when their natural meaning is ascribed to them. Wind and weather made it impossible to know in advance just when the charter party would end. The vessel might return before the end of the month, or she might be delayed; there might be ‘overlap’ or ‘underlap.’ If the return was earlier than expected, the payment in advance would be in excess of what was due. Under the contract as written this excess would be refunded.

[2][3] The question remains whether error was committed in excluding evidence of mistake. The defendant alleges in its answer ‘for a sixth separate defense’ that by the true agreement between the parties it was to be reimbursed by the owner for any advances not collected from the charterer; that ‘the letter as signed as aforesaid fails by mutual mistake of the parties, or by mistake on the part of the defendant and fraud on the part of the Lydia Steamship Company, Inc., to state the true agreement of the parties as alleged in the foregoing paragraph, if its legal effect is, as claimed in the amended complaint, to impose on this defendant an absolute obligation to pay the plaintiff the said Crotois charter hire’; and that, ‘by reason of the premises, the defendant is entitled, if the legal effect of said letter of September 12, 1919, is as alleged by the plaintiff, to have the said letter corrected so that it will express the true agreement of the parties as aforesaid.’ Judgment is demanded dismissing the complaint and for ‘such other and further relief in the premises as to the court may seem just.’ On the trial the defendant attempted to prove the conversations preceding and accompanying the signing of the contract. The trial judge excluded the evidence upon the ground that antecedent conversations were merged in the writings. Defendant's counsel then reminded the court that there was ‘a claim here for reformation,’ and that the evidence was ‘admissible under that defense if under no other.’ The ruling was not changed. Some point having been made that there should have been ‘a counterclaim in equity,’ defendant's counsel asked that, if there was any objection to the form of the plea of reformation, the plaintiff be directed to state it to the end that the defendant might have an opportunity to amend. The direction was not given.

We think the defendant's answer may fairly be construed as setting forth a counterclaim in addition to a defense, if a counterclaim be necessary. The statement that ‘the defendant is entitled to have the said letter corrected so that it will express the true agreement’ is equivalent to a demand that it be corrected by the court accordingly. True, the description of a counterclaim as a defense has been held to dispense with the need of a reply, since otherwise a pleader by his own misdescription might set a trap for his adversary. Acer v. Hotchkiss, 97 N. Y. 395, 408, 409;Equitable Life Assurance Society of the United States v. Cuyler, 75 N. Y. 511;Bates v. Rosekrans, 37 N. Y. 409, 412. To obviate such dangers the plaintiff must have the benefit of any denials or defenses that a reply could have stated. When that is done and the stage of trial is reached without previous motion challenging the pleading, an answer may be read in accordance with its substance rather than the label of its headings. Acer v. Hotchkiss, supra; National Gum & Mica Co. v. MacCormack, 124 App. Div. 569, 109 N. Y. S. 286.

In the determination of the case before us we rest our judgment upon a broader ground, since there is room for the contention that the defendant stood upon the defense and made no point that its answer was to be read as something else. The question is fairly here whether the facts establishing the need for reformation, even if not stated as a counterclaim, make out an equitable defense. The plaintiff produces a writing which in form is a contract, and asks the judgment of the court that it be enforced according to its terms. The defendant answers that enforcement is inequitable because fraud or mutual mistake has brought about the result that the writing is not a true expression of the meaning of the parties. This is good as a bar, and does not cease to be good because the defendant, if it had so chosen, might have asked for something more. There is no dearth of subtle discussion as to the effect of mistake in advance of reformation. Cook, Equitable Defenses, 32 Yale Law Journal, 645; Pomeroy, Remedies and Remedial Rights, § 87 et seq.; Hinton, Equitable Defenses under Modern Codes, 18 Mich. L. R. 717. Much of it is an echo of precedents and distinctions formulated in an era when there was no such thing as an equitable defense in a trial at common law. Now, ‘a defendant may set forth in his answer as many defenses and counterclaims, or both, as he has, whether they are such as were formerly denominated legal or equitable.’ Civ. Prac. Act, § 262; Code Civ. Pro. § 507; Code of Procedure, § 150. A discussion of equal subtlety has centered upon the distinction between equitable defenses and equitable counterclaims. We have no need at this time to retrace and follow its refinements. They have been made irrelevant, or largely so for the courts of this state by a series of early decisions which placed our law of pleading, in this respect at least, upon a broad and simple basis. With us, the rule is that--

‘Under the head of equitable defenses are included all matters which would have before authorized an application to a Court of Chancery for relief against a legal liability, but which at law could not have been pleaded in bar.’ Mandeville v. Reynolds, 68 N. Y. 528, 545;Dobson v. Pearce, 12 N. Y. 156, 62 Am. Dec. 152.

The application of this test makes it immaterial that, in the absence of judicial declaration of the existence of the defendant's equities, a legal liability would exist. The judicial declaration may be had as an incident to the litigation of a defense with the same effect as if incidental to the litigation of a counterclaim. All that is necessary is that the equities when established be destructive of the plaintiff's right. There are repeated restatements of the rule and...