New York County NyArchives Court.....Nealis, James Vs. Mathias Stransky 1889
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Source: Reports Of Cases - New York
Written: 1889

First Department, May Term, 1889.

JAMES J. NEALIS, as Receiver, etc., of MATHIAS STRANSKY and Others, Respondent, 
v. SALEM LISSNER and MICHAEL LEVENSON, Appellants.

Allegations of fraud in a complaint — when they do not state a cause of action 
in tort.

A complaint, alleging that the defendants agreed with the plaintiff, the 
receiver of an insolvent firm, to purchase the stock in trade of the firm at a 
specified price, and that in case the defendants should, at the auction sale 
thereof, buy such stock for a less amount, they would, nevertheless, pay the 
agreed price; that the defendants purchased the stock at less than the price 
agreed upon, but refused to carry out the contract entered into by them, and 
that the plaintiff was entitled to the difference between the price paid at the 
auction sale and the price agreed upon, and further alleging that the defendants 
unlawfully conspired to cheat and defraud the said firm of Stransky, Reimans & 
Aarons, of which plaintiff was receiver, attended the sheriff's sale, and 
purchased the merchandise there sold, and that while conspiring to the same 
fraudulent ends the defendants did certain other acts and things, does not state 
a cause of action in tort, and the allegations of fraud therein should be 
stricken out on the motion of the defendants.

Appeal from an order made at the New York Special Term denying a motion to 
strike out certain allegations of fraud in the complaint as redundant, and for 
other relief, entered in the office of the clerk of the county of New York, 
November 27, 1888.

The complaint set up an agreement made by the defendant to pay for a certain 
stock of goods a price agreed upon, and, although the same might be purchased at 
the auction sale thereof for a less price, to pay the balance of such price to 
the plaintiff. The complaint also contained the following allegation: That, 
pretending to act under said agreement, the defendants Lissner and Levenson 
unlawfully conspired to cheat and defraud said Stransky, Reiman & Aarons, 
attended the sheriff's sale of the stock, goods and fixtures, of Stransky, 
Reiman & Aarons, on or about the 26th day of March, 1888, and purchased the same 
for $23,185.09; that theretofore the said stock had been appraised at 
$51,443.81, which sum was agreed to by defendants as being the cost price, 
ninety per cent of which would be $46,299.43, leaving a balance due from the new 
firm of Lissner, Levenson & Reiman to the old firm of Stransky, Reiman & Aarons, 
under the agreement, of $23,114.34; that, still conspiring to the same 
fraudulent ends, the said Lissner and Levenson opened a business in the same 
line as formerly conducted by Stransky, Reiman & Aarons at the same stand, 
having obtained a lease thereof at the same rate of rental formerly paid by 
Stransky, Reiman & Aarons; and, still pretending in good faith to keep their 
agreement with said Reiman and said Stransky, Reiman & Aarons secured said 
Reiman's services at the new stand, and the same was opened by him, and the 
business started and run for upwards of a month, without compensation, and in 
the expectation that said Lissner and Levenson would carry out their said 
agreement, and relying on their promises so to do.

The plaintiff or his attorney were ordered to show cause why the following 
portions of the complaint herein should not be stricken out as redundant, that 
is to say, the words "pretending to act under said agreement" in the sixth line 
of the ninth folio of said complaint, and the words "Lissner and Levenson 
unlawfully conspired to cheat and defraud said Stransky, Reiman & Aarons" in the 
seventh and eighth lines of said ninth folio, and the words "still conspiring to 
the same fraudulent ends" in the eighth and ninth lines of the tenth folio of 
the said complaint, and the words "still pretending in good faith to keep their 
agreement with said Reiman, and said Stransky, Reiman & Aarons" in the second, 
third and fourth lines of the eleventh folio of said complaint; and why the 
plaintiff should not elect upon what cause of action he will rely herein, 
whether upon the cause of action upon contract or of fraud in said complaint set 
forth, or whether he will rely upon the cause of action therein for damages to 
Alexander Reiman or for damages to Mathias Stransky, Alexander Reiman and Louis 
Aarons, as copartners.

Aaron P. Whitehead, for the appellants,

Charles Donahue, for the respondent.

Brady, J.:

This action was brought upon a contract by which the defendants agreed to 
purchase the property of Stransky, Reiman & Aarons at a price named. It appears 
that the firm mentioned failed in the month of March, and the merchandise owned 
by them was sold under execution. Before the sale Reiman and the defendants 
agreed to go into business together, and to purchase the stock of the firm 
already suggested, the defendants agreeing that in case they should buy the 
stock for less than ninety per cent at the auction, they would, nevertheless, 
pay that sum for it. They purchased the stock at less than ninety per cent, but 
refused to carry out the contract, which induced this action, the plaintiff 
claiming, as receiver of the firm, that he was entitled to the difference 
between the price paid at the auction sale and the price agreed upon, which was 
something like fifty per cent. The complaint charges upon the defendants, in 
connection with the contract, fraudulent conduct; for example, it is alleged in 
paragraph seventh of the complaint that, under the agreement to which reference 
has been made, the defendants, unlawfully conspiring to cheat and defraud the 
said firm of Stransky, Reiman & Aarons, attended the sheriff's sale and 
purchased the merchandise there sold, and that, still conspiring to the same 
fraudulent ends, the defendants were guilty of certain conduct, and that, by 
reason of the matters and things charged, the firm named were damaged to the 
extent of $30,000, which the plaintiff, as receiver, claimed the right to 
recover. The cases of Harway v. The Mayor (4 T. & C., 167) and Sheahan v. 
Shanahan (5 Hun, 461), cited on behalf of the plaintiff, do not sustain the 
proposition that, in such a case as this, the allegations of fraud are 
necessary, or are to be tolerated, and for the reason that, assuming the facts 
in regard to the contract, as alleged, to be true, it is not necessary, in order 
to establish the plaintiff's claim to show, in addition, fraudulent devices of 
any kind whatever. The averments amount to a contract made and broken, and the 
right to maintain the action depends upon these elements, and these elements 
alone. The cases mentioned do not present any of these characteristics. In 
Sheahan v. Shanahan, for example, the defendant claimed that the judgment was 
erroneously recovered, because the complaint was for a wrongful conversion of 
property, while the cause of action established by the evidence was on contract. 
The General Term held that the foundation of the claim made by the plaintiff was 
an express contract, and, although the breach of it was alleged in terms 
characterizing the defendant's failure to perform as wrongful, it was still no 
more than a non-performance of the agreement alleged to have been made, and that 
these allegations of wrong did not change the action from one on contract to one 
in tort. This case is really an authority for the proposition that the 
allegations of fraud were unnecessary for the plaintiff's recovery. It may be 
said, perhaps, with propriety, that a deliberate refusal to carry out a contract 
necessarily involves the element of fraud; the refusal being prima facie 
unjustifiable, and, therefore, in violation of law. For these reasons it is 
thought that the order in the court below should be reversed, and an order 
entered directing the allegations of fraud to be stricken from the complaint as 
redundant. This disposition of that part of the appeal disposes, also, of the 
attempt to compel the plaintiff to elect whether he will proceed upon the 
contract alone or upon the alleged fraud. The attempt to obtain an order 
directing the plaintiff to elect whether he will rely upon the cause of action 
herein for damages to Alexander Reiman, individually, or for damages to the firm 
of which he was a member, must fail. The receiver seems to be invested with all 
the property of the firm, and this action is broad enough to embrace all the 
damages that may be urged by either of them growing out of the cause of action 
alleged. 

Order appealed from should be reversed, without costs.

Van Brunt, P. J., and Daniels, J., concurred.

Order reversed, without 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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