Kley v. . Healy

44 N.E. 150, 149 N.Y. 346, 3 E.H. Smith 346, 1896 N.Y. LEXIS 713

Opinions

Gray, J.

The finding of fact by the trial court with respect to the representations made by the defendant to the plaintiff, in order to procure from her the instruments in settlement of their differences, which are the subject of this action, is in the alternative, viz.: that the defendant was interested, or was about to become interested, as a co-partner in the firm of Higgins & Co. The allegation of the complaint was that the defendant represented to the plaintiff that he was interested as a co-partner in the firm of Higgins & Co. The finding of fact is, therefore, not as the fact was alleged in the complaint to be. It may be read, either that the defendant made representations to the plaintiff in the alternative form set forth in the finding; or that the defendant represented the one or the other fact with respect to the firm of Higgins & Co. The argument of the appellant is that the finding is not in the alternative; but that it states a representation by the defendant in the alternative; that is to say, that he was interested, or was about to become interested, as a co-partner with Higgins & Co.

It appears that after the judgment, which the plaintiff had recovered against the defendant, had been opened and when leave was given to the defendant to answer the complaint in the action, the plaintiff and defendant got together and agreed between themselves to settle their differences and -with that purpose in their minds, they went to the office of the plaintiff’s lawyer to have the matter put into legal shape. According to the plaintiff’s own testimony, the representations which the defendant had made to her, to bring about the settlement, were to the effect, either that he was going to have an interest in the firm of Higgins & Co., or that he wras about becoming interested in the firm; and in no instance does she testify that the defendant represented, as she has alleged in the complaint, that he was interested as a co-partner in the firm. It is clear that she failed to sustain the allegations of her complaint by her own evidence concerning the statement or representation made to her by the defendant, and upon which she says she had agreed to settle, and it is with respect to what he said to her and upon which her mind acted in coming to an agreement to settle, that the court is concerned. Looking at the finding in its alternative phase, that the defendant represented that he was about to become interested as a co-partner of Higgins & Co., the finding would not warrant the judgment below. It was admitted, and so testified by the defendant, that he was not inter- ■ ested in the firm of Higgins & Co., at any time; but he did not testify that he had not expected to be a partner in the firm and there was no evidence in the case that it was not true that he was about to become interested as a co-partner with Higgins & Co. The burden was upon the plaintiff to show that such a representation, if made, was false and that it was deceitfully and fraudulently made and this she failed to do. It is a familiar rule, where representations consist in mere expressions of hope, expectations and the like, that the party to whom they are made is not legally justified in relying upon them and assuming them to be true. The representation of what one expects, or hopes, as about to take place, in order to induce action on the part of the person to whom made, may be honest, or may be fraudulent. If the former, then no action will lie upon the ground of fraud, if the expectation is not realized. If the representation is made fraudulently and with the intention to deceive, then the evidence must exhibit it in that character. For the presumption will be, in the absence of such evidence, that the person making the representation did so honestly, however extravagant in his hopes. What has been said upon this phase of the appeal is in accord with the reasoning, in part, employed by the learned General Term below. We might, in affirming the determination of that court, rest upon its opinion, were it not that there is another ground upon which the judgment should have been reversed and which obviates the difficulty of a point taken by the appellant that this question was not sufficiently raised by a proper exception to the finding of fact as to the misrepresentations. It is insisted that the exception was too general to be availed of by the appellant at the General Term. If the argument is sound, (and I doubt it), it is not necessary to pass upon the question, or that the case should rest there.

I think that the judgment recovered by the plaintiff in the trial court was properly reversed by the General Term, for the reason that the plaintiff has not offered to restore the defendant to the position which he occupied, at the time wffien the agreement for settlement was made between them, and the court in its decree has not provided for such restoration as a condition of awarding the relief demanded. The conclusions of law, reached by the trial court and upon which the judgment was ordered, were that the satisfaction of the judgment should be vacated and that the plaintiff was entitled to collect her judgment by execution. Exceptions were taken to these conclusions and enable us to consider their correctness. A court of equity shapes its remedy so as to meet the demands of justice and, as said by Mr. Pomeroy, in his work on Equity Jurisprudence, (§ 910) “ the fundamental theory upon which equity acts is that of restoration — of restoring the defrauded party primarily, and the fraudulent party as a necessary incident, to the positions which they occupied before the fraud was committed. Assuming that the transaction ought not to have taken place, the court proceeds as though it had not taken place, and returns the parties to that situation.” In Graham v. Meyer (99 N. Y. 611), which was an action to set aside the settlement of a judgment and where, as here, the judgment was not an undisputed claim, it was said : “ Before the plaintiff can have the compromise annulled on the ground of fraud, he was bound to restore to the defendant the money paid to him with the interest, and also to restore to him, so far as he could, his right to prosecute his writ of error to the Supreme Court from the judgment, in case, for any reason, by the lapse of time, he had lost it.” In that case the judgment, as to which a settlement had been effected, could have been assailed by writ of error to the Federal Supreme Court and the defendant was seeking to do so. In the present case, at the time the parties agreed upon the settlement, the defendant had secured the right by the order of the court to contest the plaintiff’s claim, upon which she had entered judgment against him, by serving an answer within ten days. By this decree that judgment was restored and adjudged to be enforceable against the defendant. This was going further than was warranted upon principles of equity. Concisely stated the case is this: The plaintiff stipulates to satisfy the judgment, to discontinue the action and to release the defendant generally, upon condition that he pay her attorney’s fees and the sheriff’s fees. He complies and the stipulation being executed by both parties, there is the apparent end of all differences. When this action is brought, on the ground that the agreement of settlement was procured by fraudulent representations, the issue turns upon the credibility of the parties and its decision against the defendant leaves him, though having performed the expressed conditions of the settlement, without the right which he had gained, and which he gave up for the agreement, viz.: the right to contest her claim. In Gould v. Cayuga Bank, (86 N. Y. at p. 79), it was said with reference to the-general rule that a party seeking to rescind a contract must restore to the other party what he has obtained, that “ the effect of the avoidance of an agreement on the ground of fraud, is to place the parties in the same position as if it had never been made and all rights which are transferred, released, or created by the agreement are revested, restored, or discharged by the avoidance.”

The making of the representations sworn to by the plaintiff was denied by the defendant, as was also any promise to pay the judgment. And it is to be obseiwed that the agreement contained no such promise. 'Though the court credited the plaintiff’s evidence and set aside the instruments she had executed, it should have restored both parties to the situation in which they were when the agreement of settlement was made. However unwilling the trial court to believe the defendant’s evidence, a just application of equitable principles in such cases required that the decree should confine the remedy to the cancellation of the instruments of release and of satisfaction of judgment and that it should return both parties to the situation in which they were previously to their making. This equitable rule is not only generally an essentially just one; but in this case it is especially so. The judgment now adjudged to be collectible of the defendant was obtained under circumstances well calculated to excite a reasonable suspicion of its correctness; entered as it was some ten years after the alleged service of the summons.

When this case was in this court before, upon appeal from a dismissal of the complaint at the Circuit upon the plaintiff’s opening, (127 N. Y. 555), it was decided that the trial judge had committed an error and that on the face of the complaint a good cause of action was stated. In answer to the defendant’s point that the complaint should have alleged a return, or tender, of the moneys paid by'him to the plaintiff’s attorney, it was observed that the allegation was unnecessary; inasmuch, as the court was bound to assume, for the purpose of the appeal, that the complaint was true and, therefore, the plaintiff was entitled to retain the moneys thus indirectly received by her. It was said: “ If her action failed, she was entitled to the sum received by virtue of the transaction itself. If she succeeded, the sum was less than she was concededly entitled to by the original judgment.” What we are now discussing, namely; that the trial court, in finally decreeing, in behalf of the plaintiff, the cancellation of her satisfaction of judgment and that she might recover that judgment of the defendant, disregarded the equitable rule in such cases and that it should have restored the parties to their original situation, where the judgment was opened and the plaintiff’s claim allowed to be disputed. This point, of course, was not up on the prior appeal.

For the reasons stated, I think the order appealed from should be affirmed and that judgment absolute should be rendered against the appellant, upon her stipulation.