Tishman Realty & Const. Co. v. Schmitt

• Decision Date: 16 March 1972
• Parties: TISHMAN REALTY AND CONSTRUCTION CO., Inc., et al., Plaintiffs, v. Agnes B. SCHMITT, individually and as Administratrix of the Estate of Alfred J. Schmitt, Deceased, Defendants.
• Court: New York City Court

Page 174

330 N.Y.S.2d 174

69 Misc.2d 584

TISHMAN REALTY AND CONSTRUCTION CO., Inc., et al., Plaintiffs, v. Agnes B. SCHMITT, individually and as Administratrix of the Estate of Alfred J. Schmitt, Deceased, Defendants.

Civil Court of the City of New York, New York County Special Term Part 1.

March 16, 1972.

Rosenman, Colin, Kaye, Petschek, Freund & Emil, New York City, for plaintiffs.

Walter J. Holzka, New York City, for defendants.

MARTIN EVANS, Judge.

Plaintiff moves for an order striking the jury demand of the defendant, Agnes B. Schmitt, on the ground that defendant, in this type of action, has no right to trial by jury.

The complaint in long form alleges that one of the plaintiffs acting as agent for the other plaintiffs gave.$19,000 to a law firm to hold in escrow for certain purposes; that the money was deposited in a bank; that one Schmitt, a member of the firm, wrongfully withdrew $14,103.18 from the escrow fund and converted it to his own use; of this $14,103.18 wrongfully withdrawn, $5,764.64 was used by him for the payment of Federal and State income taxes which were the joint and several obligations of Schmitt and of the defendant Agnes B. Schmitt, his wife.

As a conclusion, the plaintiff alleges that by reason of the foregoing, the defendant, Agnes B. Schmitt, owes the plaintiffs $5,764.64 with interest from a specified date for which plaintiffs seek judgment against this defendant.

Parenthetically, it appears that Schmitt died in February 1969, his estate is insolvent and there has been a partial settlement by plaintiff with the law firm, the action against it then being discontinued. At this juncture plaintiff looks solely to the widow of the wrongdoer. No claim is made that his acts were done with her knowledge or consent.

The defendant law firm, prior to the discontinuance, interposed a demand for trial by jury. It is clear that this jury demand insured to the benefit of all defendants and the discontinuance of the action against the defendant law firm did not have the result of a withdrawal of a right to a jury trial if such right existed in the remaining defendant.

Plaintiff bases his motion on the ground that the action is one in equity and no jury is allowed in an action of this nature. Defendant claims the action is simply for money had and received, as to which a jury is allowed.

That plaintiff states a cause of action is clear; less clear is the particular compartment into which the Court is required to place it for the purpose of determining whether defendant is entitled to a jury trial of the issues.

For proper analysis the problem should be viewed from both historical and the eclectic or utilitarian points of view.

The scope of the action of money had and received has gradually been expanded to embrace many cases formerly cognizable in courts of equity. It is described in Roberts v. Ely, 113 N.Y. 128, 20 N.E. 606 in the following words: 'Whenever one person has in his possession money which he cannot conscientiously retain from another the latter may recover it in this form of action, subject to the restriction that the mode of trial and the relief which can be given in a legal action are adapted to the exigencies of the particular case, and that the transaction is capable of adjustment by that procedure, without prejudice to the interests of third persons.'. However, this form of action is limited to instances where money, or its equivalent have been received, Clearview Gardens First Corp. v. Weisman, 206 Misc. 526, 134 N.Y.S.2d 288, and it will lie against any person who participates in the tort and accepts its fruits but not if neither money or its equivalent have been received. Gottfried v. Gottfried, 269 App.Div. 413, 56 N.Y.S.2d 50, and an action for moneys had and received does not lie for moneys paid to the use of defendant. 27 Cyc. of Law and Procedure (1907) 865; Claycomb v. McCoy, 48 Ill. 110; Ford v. Keith, 1 Mass. 139.

Neither can this action be considered as an action for moneys paid to the use of defendant, a form of the early common law actions of assumpsit, since no request for such payment by the defendant has been alleged, Chitty, Pleadings (1837) 112; Chase's Blackstone (1877) p. 712; nor can such a request be implied in this case.

Plaintiff's theory on this motion, although not expressed beyond the claim that an action based on unjust enrichment is an equitable action as to which a jury is not permitted, seems to be based on the claim that subrogation of the plaintiff to the position of defendant's paid creditor should be permitted.

A court of equity had power to '. . . prevent the unjust enrichment of a defendant not only by enforcing a constructive trust or enforcing an equitable lien, but also where the plaintiff's property has been used by him or by another in discharging an obligation by permitting the plaintiff to be subrogated to the position of the obligee. . . . Where the plaintiff's money is used in discharging a debt of the defendant under such circumstances that the plaintiff is entitled to subrogation, he can enforce such rights as the creditor had prior to payment of the debt.' IV Scott on Trusts, Section 464, page 3115.

'Where the wrongdoer uses the claimant's money in paying the debt of a third person, the claimant is entitled to be subrogated to the rights of the creditor unless the third person is in the position of a bona-fide purchaser . . . Accordingly, he can maintain a quasi-contractual action at law against the third person for money paid to his use, or by a proceeding in equity he is entitled to be subrogated to the right of the creditor.' Scott on Trusts, supra, Sec. 514.3, page 3284.

Subrogation, a doctrine of Roman or Civil Law which was adopted by courts of equity, is founded on principles of justice and equity. It '. . . is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice, equity and good conscience should pay it. It is an appropriate means of preventing unjust enrichment.' 83 C.J.S.Subrogation § 2 p. 582.

'Where one person discharges an obligation owed by another to a third person under such circumstances that he is entitled to subrogation and the third person had a claim entitling him to preference over the claims of other creditors he is entitled to a similar preference, except where the right of a creditor to priority was merely personal to him. Thus if by statute a tax imposes a personal liability upon the taxpayer, and the taxing authority is entitled to a preference over other creditors of the taxpayer, a person who by mistake pays the tax is entitled to be subrogated to the position to the taxing authority and thereby to obtain priority over other creditors of the taxpayer. The other creditors have no ground of objection since they are thereby placed in no worse position than that which they would have occupied if the claim had not been paid.' Restatement of Restitution, Chapter 9, Section 162.

'The scope of the right of subrogation consists in the immediate transfer, by operation of law, to the promisor in suretyship of all rights of the creditor against the principal whenever the promisor pays the debt or satisfies the obligation. This right of subrogation is independent of any agreement between the parties and rests upon principles of natural justice and equity.

'Subrogation is not limited in its application to transactions in suretyship. Whenever one pays a debt of another, although not obligated to do so, if the payment was necessary for the protection of his own interests, the equity of subrogation arises.' Sterns Law of Suretyship, 5 Ed. page 439.

If the full tax debt has been paid, in part with moneys of others, plaintiff's right to be subrogated may be limited, pro-rata. And if it appears at trial that the tax debt has not been paid in full, plaintiff may not be entitled to any subrogation. IV Scott on Trusts, 2d Ed. sec. 513.2.

Whether plaintiff is entitled to subrogation to the rights of the decedent against the defendant for contribution of her share of the taxes, see Estate of McClure v. United States, 288 F.2d 190, 153 Ct.Cl. 226; Phillips-Jones Corp. v. Parmloy, 302 U.S. 233, 58 S.Ct. 197, 82 L.Ed. 221, or subrogation to the right of the Federal and State governments against the defendant, see Foulke v. Pardee Works, D.C., 35 F.Supp. 734; Buhl v. Kavanaugh, 6 Cir., 118 F.2d 315 as on a joint and several tax liability, will undoubtedly have to await the proof at trial.

Subrogation, originally of an equitable nature and cognizable only in courts of equity, is in modern times an example of an equitable doctrine working its way into courts of law. See James, Right to a Jury Trial in Civil Actions, 72 Yale L.J. 655, 657--663; Keener on Quasi-Contracts, Ch. I., Dusenburg vs. Speir, 77 N.Y. 144. Although many other states still require the action to be maintained as a bill in equity, this is not the law in New York. The Court of Appeals in Dunlop v. James, 174 N.Y. 411, said at page 415, 67 N.E. 60 at page 61, 'It may...