Spier v. Hyde

Hatch, J.:

So far as is material to the disposition of the present appeal, it is only necessary for us to determine the effect of the letter of May eighth, the rights and liabilities of the parties arising therefrom, and the determination of the court based thereon.

The plaintiff in his complaint stands squarely upon the agreement of March twenty-seventh, and from anything which appears in the complaint the later agreement of May eighth has no existence. This did not, however, eliminate it from the case. It being averred *157 in the answer, as matter of defense, the plaintiff was required to meet it by showing that it was either legally insufficient, or that it had no effect as matter of fact. It was not necessary for the plaintiff to traverse the answer, either by a denial of the existence of the contract, or by an averment of affirmative facts by way of avoidance. The plaintiff is to be deemed to have replied to the answer, so far as to be permitted to interpose any defense which would have the effect of showing that no contract ever was made, or if it existed, of avoiding such contract. (Kirchner v. New Home Sewing Machine Co., 135 N. Y. 182 .) These being the relative positions of the parties, the plaintiff had the right to prove anything which would defeat the force and effect of the contract of Hay eighth, and to succeed in such defense, if the facts warranted. This was the course which the trial took, and the court has found that the evidence was sufficient to require the legal conclusion that such contract was not binding. We are, therefore, to examine the testimony in the case, and the decision based thereon, to see if the same may be supported under legal rules. The proposal contained in the contract of May eighth, and the acceptance of the same by plaintiff, are undisputed facts; nevertheless the court held that it did' not constitute a contract between the parties, and was in legal effect only a statement that a certain amount was due to the plaintiff from the defendants, and an admission by him that such amount was due; that if it be otherwise treated, it was without binding effect for lack of consideration.

We do not find ourselves in harmony with these views. The contract itself refers in its first sentence to the former contract of March twenty-seventh between the parties. It then refers to a conversation had that day between the defendant Hyde and the plaintiff, and recites that, as agreed upon, the plaintiff will be entitled to receive 375 shares of preferred and 375 shares of the common stock of the Goodson Graphotype Company in the event of its formation, “ which stock shall be in full for your services and all demands under my letter to you of March 27th, 1899.” This was something more than a statement of an amount due to the plaintiff. It was not only that, but it was a statement that such amount due was in full for all services and demands which the plaintiff had against the defendants by reason of his former contract with them. When the *158 plaintiff accepted that statement as satisfactory to him, as he did, then it became a binding acknowledgment upon his part that the whole amount he was entitled to receive under and by virtue of his former contract was the stock mentioned therein. Instead, therefore, of this being the statement of a partial account of what was due to the plaintiff, it was a binding contract that it was the whole amount due, and when discharged relieved the defendants from all liability. It is evident, therefore, that the decision cannot be upheld in this respect.

Was it invalid for other reasons? It is not made clear by the proof in the case just what sums of money and shares of stock the plaintiff was entitled to under his former agreement. It was not accurately known at the time when the agreement of May eighth was executed by any of the parties to the action. It is not yet known what the exact amount was to which the plaintiff was entitled, nor can it be established except by an accounting. The parties, therefore, at the time of their negotiations stood in relation to each other of dealing with respect to a matter where the defendants were required to pay and deliver either money or shares of stock, or both, to the plaintiff in compensation for services which he had rendered pursuant to the several contracts which had been made. As the particular amount of money and stock which plaintiff was entitled to receive was not accurately known, it was competent for the parties themselves to agree as to such amount, fix and specify the particular number of shares of stock which were to be delivered in full satisfaction of the whole amount of property and money due. And in the absence of mistake or fraud in making such agreement, it would be binding upon both, and conclusively fix the rights of the respective parties thereto. Such a contract is founded upon a good consideration, for the reason that each pai’ty renounces to the ether his rights • and liabilities under a former contract, and each abandons such rights in consideration that the other will do the like, and the mutual agreements furnish a consideration in law, recognized as binding. (McIntosh v. Miner, 37 App. Div. 483 ; Hartwig v. American Malting Co., 74 id. 140.)

hi or does the fact that the agreement of May eighth was executory in its character change its effect. It was said by Andrews, J., in Morehouse v. Second Nat. Bank of Oswego ( 98 N. Y. 503 ): “ If *159 the subsequent agreement is accepted in satisfaction, and this appears expressly or by implication, the original cause of action is merged and extinguished. (Kromer v. Heim, 75 N. Y. 574 , and cases cited.) It is plain, also, that if one having a debt or claim against another satisfies or releases it in consideration of an executory promise by the party owing the debt or duty, he cannot afterward enforce his original cause of action upon a mere failure by the other party to perform his promise, ‘ for he has a remedy to compel performance.’” (Nassoiy v. Tomlinson, 148 N. Y. 326 .) The decision, therefore, cannot be supported upon this ground.

Upon the trial evidence was given which the plaintiff claimed tended to show that the defendant Hyde had been guilty of fraud in making false representations as to the amount and extent of the plaintiff’s interest in the pool; that the plaintiff was ignorant in respect of such matters, relied thereon and was misled thereby, in consequence of which the contract of May eighth is void for fraud. There was a sharp conflict in the testimony upon this question. The defendant Hyde denied that he had ever made any misrepresentations, and adduces testimony from other witnesses in support of his contention. The court, however, has not found upon such question. It is stated in the decision that prior to the acceptance by the plaintiff of the contract of May eighth the defendant Hyde made statements to the plaintiff as to the amount of profits coming to the plaintiff, which statements were not true; that they were relied upon by the plaintiff, who was ignorant of the actual facts. This falls far short of a finding that the defendants made the representations, knowing them to be untrue, with the intent that they should be acted upon by the plaintiff, and that in reliance thereon he so acted. This the law requires in the establishment of fraud. (Oberlander v. Spiess, 45 N. Y. 175 ; Kain v. Larkin, 131 id. 300 ; Cooley Torts [2d ed.], 580 et seq.)

It is sufficient to say that even though the proof upon the part of the plaintiff was sufficient from which every element necessary to a finding of fraud could be based, the court has not made such finding, and, consequently, the evidence may not be resorted to for the purpose of sustaining the judgment, although such a finding might have been authorized. It is quite evident that in reaching a conclusion upon this subject the court will be confronted with several *160 questions which easily suggest themselves. One as to the proper construction of the contract of March twenty-seventh, and the rights of the plaintiff thereunder. If the defendants, acting in good faith, construed such agreement as limiting the plaintiff’s rights to a participation in the proportionate amount of the 10,100 shares of stock in the new company and not in all of the profits which should arise from the pooling of the 10,100 shares of stock of the old company, no fraud could he predicated of representations to the plaintiff that his interests and shares of stock amounted to only 361 shares each of preferred and common stock. If such be the construction of the contract, the representations might be true. If the defendants made the representation merely as the expression of an opinion as to the amount which plaintiff’s interest would realize or ought to realize, and the extent of the plaintiff’s interest was not accurately determined, no fraud could be predicated of such fact, even though the statement of amount was less than the plaintiff was entitled to receive. It is evident that the court has not considered these questions, or at least has not expressed any views thereon in the finding which it made. The defendants are entitled, before they can be charged with fraud, to have these elements considered and a finding made thereon. This has not been done, in consequence of which the judgment may not be sustained upon this ground. It is not essential in the consideration of the present case that we express any opinion respecting the proper construction of the contract of March twenty-seventh and the rights of the plaintiff thereunder. If he be correct in his construction of such contract, then a clear basis exists entitling him to recover the profits of the pool stock of the old company, but even though this be the fact, it was still competent for him to make the agreement of May eighth, and he cannot avoid it if it was not the product of fraud or mistake, or if he had full knowledge upon the subject.

If the defendants’ construction of the contract of March twenty-seventh is to obtain, then, under the agreement of May eighth, the plaintiff may have received more than the exact amount to which he is entitled. These questions will all arise upon a new trial, and until all of the facts are before us we are not called upon nor would it be proper to announce a construction as binding upon either party to this litigation.

*161 It is evident that the present judgment cannot be sustained. It should, therefore, be reversed and a new trial granted, with costs to the appellants to abide the event.

Van Brunt, P. J., O’Brien and McLaughlin, JJ., concurred.