Rensselaer County NyArchives Court.....Allen, James Vs. Michael Allen 1889
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Source: Reports Of Cases - New York
Written: 1889

Cases Determined in the THIRD DEPARTMENT at GENERAL TERM, May, 1889.

JAMES ALLEN, Appellant, v. MICHAEL ALLEN, Respondent, Impleaded with JOHN J. 
ALLEN and JAMES H. ALLEN.

Action — when in tort and not on contract.

A complaint, which alleges, in substance, that the plaintiff delivered to the 
defendant a note for $1,500, the property of the plaintiff, to be safely kept 
for the benefit of the plaintiff, and to be surrendered to him upon demand, and 
that the defendant, with knowledge that the plaintiff was the owner of said 
note, and that his name had been indorsed thereon without his authority, 
wrongfully and fraudulently negotiated the same and misappropriated the proceeds 
thereof, and converted the same to his own use without the knowledge or consent 
of the plaintiff, states a cause of action sounding in tort and not on contract.

Austin v. Rawdon (44 N. Y., 63) distinguished.

Appeal by the plaintiff from a judgment, rendered at the Rensselaer County 
Circuit and entered in the office of the clerk of the county of Rensselaer on 
the 28th day of August, 1888, dismissing the plaintiff's complaint, and, also, 
from an order, made at the Rensselaer Special Term and Circuit, entered in said 
clerk's office on the 27th day of July, 1888, denying the plaintiff's motion 
made on the judge's minutes to set aside the verdict rendered at the circuit 
against the plaintiff, and for a new trial.

R. A. Parmenter, for the appellant.

Henry A. Merritt, for the respondent.

Ingalls, J. :

James Allen, the plaintiff herein, loaned to Fitzgerald Brothers $1,500, and 
received from them their note, as follows:

"$1,500. Troy, N. Y., February 27th, 1885.
"Six months after date we promise to pay to the order of James Allen, fifteen 
hundred dollars at our office, 505 River street. Value received with interest.
(Signed.)        "FITZGERALD BROTHERS."

The plaintiff placed the note in the hands of his nephew, James H. Allen, for 
safe-keeping. The plaintiff can neither read nor write. James H. Allen induced 
the plaintiff to consent to the payment, by the maker of the note, of $200, for 
the benefit of James H. Allen, and such payment was made accordingly, and no 
question is raised in regard to the validity of such payment upon the note. The 
Manufacturers' National Bank held sundry notes against the defendants, amounting 
to about $1,800, which were described by Samuel Gleason, the cashier of the 
bank, who was a witness for plaintiff, who testified in regard to the notes, as 
follows:

By Mr. Parmenter:

Q. You are the cashier of the Manufacturers' National Bank of Troy? A. Yes, sir. 
Q. How long have you been cashier? A. About six years. Q. Do you know the 
defendant, Michael Allen? A. Yes, sir. Q. And his two sons, John J. and James 
H.? A. Yes, sir. Q. On the 30th of April, 1885, did that bank hold these six 
promissory notes (one made by Allen Brothers, and indorsed by Michael Allen, for 
$300, due March 11, 1885) that were under protest; also, a note made by Allen 
Brothers, indorsed by John J. Allen and Michael Allen, for $250, due February 
12, 1885, under protest; also, note made by Allen Brothers, and indorsed by 
Michael Allen, for $100, due May 17, 1885; also, note made by Allen Brothers, 
indorsed by Michael Allen, for $500, due May 24, 1885 also, note made by John J. 
Alls-n, indorsed by Michael Allen, for $150, due May 24, 1885; also, note made 
by Michael Allen, indorsed by Fitzgerald Brothers, for $550, due May 30, 1885; 
do you know it of your own knowledge; were those notes in the bank? A. There 
were a number of notes in the bank at that time which I settled, and among them 
was that amount; I settled them myself; six or seven notes I settled at that 
time, and those are the notes? Q. For whom were the notes that were made by 
Allen Brothers discounted? A. Discounted for Allen Brothers. Q. And they had the 
signature of Michael Allen upon them? A. Yes, sir; the $1,500 note was taken to 
said bank and discounted before maturity, and the avails thereof were applied 
towards the payment of the notes so held by the bank; the name of the plaintiff 
was indorsed upon the $1,500 note by the said James H. Allen; the defendant. 
Michael Allen, is a brother of the plaintiff, and the other defendants are the 
nephews of the plaintiff; the $1,500 note has been fully paid by the makers 
thereof, and has been surrendered to them by the bank.

Upon this appeal substantially two questions only arise. One of law and the 
other of fact. The question of law is whether the complaint contains the 
statement of a cause of action sounding in tort or in contract? We have 
carefully examined the pleading, and have reached the conclusion that the 
complaint states only one cause of action, and that is for a wrong, the 
allegations therein in regard to the agreement between the parties must be 
considered matter of inducement in the nature of frame work for the real cause 
of action. The gravamen of the pleading consists of the statement therein of the 
wrongful acts of the defendants, in contradistinction to a statement of facts 
showing a mere contract obligation of which the plaintiff at the trial sought to 
predicate the liability of the defendants to him, as upon contract expressed or 
implied. In regard to the statements therein of contract engagements between the 
parties, or any of them, there does not seem to be much controversy, and it is 
quite probable that had the complaint simply stated a cause of action for money 
had and received no controversy would have arisen. We are persuaded that the 
pleader had no such cause of action in mind when he constructed the complaint, 
but, on the contrary, intended to state a cause of action in tort, and, 
manifestly, he has been successful to such an extent that the pleading cannot be 
changed into a complaint upon contract, by judicial construction, without 
violating the rules of pleading, even under the Code, which justifies great 
liberality in construing pleadings. The complaint, after the statement of the 
execution of the note, and setting out the same, contains the following:

"Second. That the said plaintiff cannot write or read writing, and never could; 
that, at the time of the making of the said promissory note, the defendant James 
H. Allen was present as the friend and nephew of this plaintiff, and he, the 
said defendant James H. Allen, then and there took possession of said note for 
safe-keeping for the said plaintiff, and for no other purpose; that the said 
James H. Allen never became the owner or holder of the said note, except to keep 
the same for this plaintiff; that the said James H. Allen never discounted or 
purchased the said note from or for this plaintiff, and was never authorized by 
this plaintiff to dispose of the said note, or to negotiate the same, or procure 
it to be discounted for himself or for this plaintiff. Nor did the said 
defendants, jointly or severally, or any one or more of them, have any authority 
from this plaintiff to indorse his name upon said note, or to negotiate the 
same, or to cause the same to be discounted for said defendants, or any of them, 
nor for this plaintiff; and the said defendants had no right, power or authority 
to use the said note, in any way or manner, for their own purpose, nor to 
receive payment therefor, or receive any partial payment thereon, except as 
hereinafter stated by this plaintiff." The complaint contains the following 
statement:

"Fifth. That this plaintiff never indorsed the said note for $1,500, nor 
authorized any person to indorse his name thereon, but that, without authority 
therefor, and in violation of said trust under which said last-mentioned note 
was being held, as aforesaid, the same was indorsed by Allen Brothers and by the 
other defendant, Michael Allen, the father of the said Allen Brothers, and 
underneath said last-mentioned two indorsements appears the name of 'James 
Allen,' written by some person to the plaintiff unknown, and without authority 
to do so from this plaintiff. That thereupon the defendant, Michael Allen, with 
knowledge and notice of said unauthorized indorsement of plaintiff's name 
thereon, procured the last-mentioned note to be discounted at the Manufacturers' 
National Bank of Troy, and the proceeds thereof, as plaintiff states, on 
information and belief, were paid by said bank to said Michael Allen, not in 
cash, but by the surrender to him of certain promissory notes exceeding in 
amount the value of said $1,500 note at that time, made by the defendants John 
J. Allen and James H. Allen, individually, or in the name of Allen Brothers, and 
indorsed by the said defendant Michael Allen, being then over due and under 
protest, and upon which the defendant Michael Allen had been previously duly 
charged as indorser; that at the time of the negotiation of said $1,500 note the 
defendant Michael Allen, and also the remaining two defendants, had knowledge 
and notice that said note for $1,500 was the property of this plaintiff, and had 
been received by the defendant James H. Allen, in trust, to be held by him for 
the benefit of this plaintiff, and the said defendants wrongfully and 
fraudulently diverted said note and appropriated to their own use and benefit 
the proceeds thereof, received from said last-mentioned bank upon the discount 
thereof, by retiring their own paper then due and under protest, and have never 
paid or reimbursed this plaintiff any portion of the moneys for which the said 
note for $1,500 was given as aforesaid. That at its maturity the said Fitzgerald 
Brothers paid in full and took up said $1,500 note, after deducting therefrom 
the payment of $200 indorsed thereon as aforesaid.

The allegations that the defendants, at the time of the negotiation of the note, 
had notice and knowledge that it was the property of the plaintiff, and that 
James H. Allen received it, to be held by him in trust for the plaintiff, and 
that the defendant wrongfully and fraudulently diverted said note, and 
appropriated to their own use and benefit the proceeds thereof, are statements 
which clearly characterize the cause of action as in tort, and negative the idea 
of an intended cause of action upon contract. This concluding clause in the 
statement of facts "that the said defendants, by reason of their wrongful acts 
by them done and hereinbefore complained of have subjected this plaintiff to 
loss and damages to the amount of $1,300 together with interest thereon from the 
27th day of Febuary, 1885, and are liable to the said plaintiff therefor, 
indicates very clearly the purpose of the pleader in regard to the nature of the 
action which he intended to institute. It was for the wrongs which the 
defendants had perpetrated that redress was to be sought, and not for mere 
violation of an agreement in neglecting or refusing to pay money pursuant to 
contract. To disregard the allegations of the complaint, which characterize it 
as the statement of a cause of action in tort, would leave the pleading without 
the statement of any sufficient cause of action; while pleadings under our 
present system are to be liberally construed in favor of the pleader, yet the 
principle is not to be indulged so far as to destroy all distinction between 
causes of action, as by a recognition of such distinction in the statement of 
the cause of action in pleadings the orderly conducting of legal proceedings in 
causes mainly depends. The purpose of a pleading is to inform the party against 
whom it is aimed of the nature of the cause of action upon which relief is 
sought, to the end that such party may prepare for the trial of the action, and 
not become the victim of surprise in regard to the nature of the action.

In Southwick v. Farmers' National Bank of Memphis (34 N. Y., 429) Judge Earl 
very aptly remarks: "Pleadings and a distinct issue are essential in every 
system of jurisprudence, and there can be no orderly administration of justice 
without them. If a party can allege one cause of action and then recover upon 
another, his complaint will serve no useful purpose, but rather to ensnare and 
mislead his adversary." (See, also, Romeyn v. Sickles, 108 N. Y., 650.)

It is true that a pleading is ordinarily to be construed according to its entire 
scope and effect, rather than according to a single sentence or expression 
contained therein. It may happen that after the statement in a complaint of a 
cause of action, which clearly indicates its nature and the relief sought, the 
pleader may insert an allegation foreign to such cause of action, and 
inconsistent therewith, and unnecessary to be stated; and, in such case, the 
court would be authorized to disregard such statement, and would be likely to do 
so, thereby following the precedent established by the cases to which reference 
is here made. (Segelken v. Meyer, 94 N. Y. 475; Conaughty v. Nichols, 42 id., 
83; Greentree v. Rosenstock, 61 id., 583.) We are convinced that the case under 
consideration cannot be brought within the doctrine of the decisions referred 
to, as the entire scope and structure of the complaint show that the cause of 
action therein stated was for a wrong, viz., the wrongful and fraudulent 
diversion and misappropriation of the note, and of the avails thereof, by the 
defendants, and the material allegations of the complaint are all consistent 
with such cause of action.

Aside from the statements merely by way of inducement or description, the cause 
of action contained in the complaint may be briefly stated in this wise: That 
the plaintiff delivered to James H. Allen the note for $1,500, the property of 
the plaintiff, describing it, to be safely kept for the benefit of the 
plaintiff, and to be surrendered to him upon demand; and that the defendants, 
with a knowledge that the plaintiff was the owner of such note, and had 
deposited the same with James H. Allen for the purpose aforesaid, wrongfully and 
fraudulently negotiated such note and misappropriated the same, and the proceeds 
thereof, and converted the same to their use and benefit without the knowledge 
or consent of the plaintiff. We are satisfied that the trial court rightly 
construed the pleading and correctly instructed the jury in regard thereto. 
(Rich v. The N. Y. C. and H. R. R. R. Co., 87 N. Y., 383; Walter v. Bennett, 16 
id., 250; Ross v. Mather, 51 id., 108; The People v. Denison, 19 Hun, 138; S. 
C., 80 N. Y., 656; S. C., 84 id., 273.) The case of Austin v. Rawdon (44 N. Y., 
63) has been referred to by counsel, and, upon an examination of the facts of 
that case, we think it is distinguishable from the case which we are 
considering. In that case a complete cause of action was stated, including a 
demand of the securities, and in such form as to entitle the plaintiff to 
recover, as upon contract, a money judgment, and there was then inserted in the 
complaint the following allegation: "But, on the contrary thereof, the said 
defendants had, as plaintiff is informed and believes, wrongfully disposed of 
the aforesaid securities and converted them to their own use and benefit, to the 
great damage of the plaintiff, as such receiver." Such allegation might well be 
regarded, under the circumstances of that case, the statement of a mere 
conclusion and unnecessary to that cause of action, and, therefore, properly to 
be disregarded by the court in determining the nature of the cause of action, 
within the principle of the decisions to which we have above referred. But it is 
clearly otherwise with the case under consideration, because the statements 
which characterize this complaint as in tort constitute the very gist of the 
cause of action therein stated and essential thereto. It will be observed that 
the complaint herein does not even allege a demand of the note which was 
deposited with the defendant James H. Allen for safe-keeping, which would seem 
to be necessary to a recovery as upon contract merely. Hence we infer that the 
pleader relied upon his statement of the cause of action for a wrongful and 
fraudulent misappropriation of the note and its proceeds by the defendants, and, 
therefore, no statement of a demand of the note was necessary. The entire 
structure of the pleading, as has already been stated, marks it as in tort and 
not contract. The cause of action being in tort, the trial court properly 
refused to allow a recovery upon contract for money had and received. (Neudecker 
v. Kohlberg, 81 N. Y., 297.) The evidence in support of the verdict of the jury 
upon the question of fact submitted to them so far sustains their determination 
that this court should not interfere with their decision.

The judgment must be affirmed and a new trial denied, with costs. 

Learned, P. J., and Landon, J., concurred. 

Judgment affirmed, with costs.

Additional Comments:
Reports of Cases Heard and Determined in the Supreme Court of the State of New 
York. Marcus T. Hun, Reporter. Volume LIX, 1889, HUN 52. Banks & Company, 
Albany, NY. 1901.

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