
    The First National Bank of Saratoga Springs, Respondent, v. Edward J. Slattery, Appellant, Impleaded with Walter H. Hanson.
    
      Defenses — stricken out when false — counterclaim, not — designating facts as a “ defense” - precludes a claim that they constitute a “ counterclaim” — effect— issue that the plaintiff is not a corporation — alleging both a sale and a pledge.
    
    Any affirmative defense which clearly appears to be false may be stricken out as sham, but a counterclaim cannot be stricken out as sham, for it is not a defense . within the meaning of section 538 of the Code of Civil Procedure, nor can the court strike out as sham an answer which consists of a mere denial.
    A pleader.who designates facts set forth in his pleading as a “defense” cannot subsequently claim, when an emergency or liis convenience makes the change desirable, that they constitute a counterclaim.
    An allegation denying on information and belief that the plaintiff is a banking association by the name set forth in the complaint, followed by a second averment, also upon information and belief, that there is no such corporation as the First National Bank of Saratoga Springs as alleged in the complaint, is not an affirmative allegation that the plaintiff is not a corporation, and it raises no issue upon that question. '
    In an action brought to recover upon a promissory note, the answer alleged that the defendant sold and delivered to the plaintiff certain bonds for the value of which the plaintiff was still indebted to the defendant, and then followed a statement that the plaintiff had not accounted to the defendant for the value of : the bonds.
    The affidavit of the plaintiff’s cashier distinctly stated that the bonds were never sold to the plaintiff; that they were delivered to it as collateral security for an indebtedness of which the note in suit was a part, and that the.statement in the answer of the sale and delivery of bonds was absolutely false.
    
      Held, that the defense was clearly sham and false, and was properly stricken out.
    " Appeal by the defendant, Edward J. Slattery, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office. of the clerk of the county of Saratoga on the 6th day of September, 1895, upon the decision of the court rendered upon a motion made at Special Term striking out a portion of said defendant’s answer as sham, with notice of an intention to bring up for review upon such appeal an order made at the Albany Special Term, bearing date the 27th day of August, 1895, striking out a portion of defendant’s answer as sham and directing judgment for the plaintiff upon the remainder as frivolous. '
    
      The complaint in this action was as follows: “ The plaintiff complains of the defendants and shows that the said plaintiff is a banking association, by the name and style of the ‘ First Fational Bank of Saratoga Springs,’ duly constituted and organized under' and by virtue of the act of the Congress of the United States of America, entitled ‘ An act to provide a national currency secured by a pledge óf United States bonds, and to provide for the circulation and' redemption thereof,’ ■ appro ved June 3, 18.64, and the several acts! amendatory thereof and supplementary thereto, and located and doing business in Saratoga Springs, F. Y.
    “The plaintiff further shows th.at the defendant Edward J. Slattery heretofore made his promissory note in writing, of which the following is a copy:
    “ ‘ $4,000., . Saratoga Springs, February 19, 18.95.
    “‘Three months after date I promise to pay to'the order of W. H. Hanson, four thousand dollars at the First Fational Bank of Saratoga Springs, value received. E. J. SLATTERY.’
    and delivered the same to the defendant Walter H, Hanson, and the said Walter II. Hanson afterwards indorsed the said note and the same was thereupon, and before it became due, for. value received, duly transferred to the plaintiff, who then became .and still is the owner and holder thereof. That when the said note became due,' it was duly presented at the First Fational Bank of Saratoga Springs, the place where it was made payable, for payment, and payment thereof then and -there duly demanded, which was refused; whereupon the said note ivas then and there duly protested for non-payment, of. all,which the -said defendant'Walter H. Hanson had .due- notice. That the said defendants have not paid the said note or any part-thereof, wherefore the plaintiff demands ■judgment against-the said defendants for four . thousand dollars, with interest thereon from the 19th day of May, 1895, and eighty-five cents expenses -of protest, besides costs.”
    The answer of the defendant Edward J. Slattery was as follows:
    “ The defendant Edward J. Slattery, above named, answering the complaint of the. plaintiff above named : , . ,
    “1. Upon information and-belief, denies that the said plaintiff is a banking association by the name and style of the ‘ First - Fational Bank of Saratoga Springs,’ duly constituted and organized under and by virtue of the act of the Congress of the United States of America, entitled, ‘ An act to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof,’ approved June 3, 1864, and the several acts amendatory thereof and supplementary thereto, and located and doing business in Saratoga Springs, R. Y.
    
      “ 2. Upon information and belief, alleges that at the commencement of this action there was not, nor is there now, any such corporation as the ‘First Rational Bank of Saratoga Springs,’ as alleged in the first paragraph of the complaint herein.
    “ 3. Admits the making and delivery to plaintiff of his promissory note in writing, a copy of which is set forth in the complaint herein.
    “ 4. Alleges that he has no knowledge or information sufficient t.o form a belief .as to the truth of any of the allegations of the complaint not hereinbefore specifically admitted .or denied.
    “ 5. And for a further and. separate defense in this action tha said defendant alleges that on or about the 20th day of July, 1894, said defendant sold and delivered to the plaintiff thirty (30) consolidated mortgage bonds of the Union Electric Railway Company of Saratoga Springs, of the value of five hundred dollars ($500) each, and bearing interest at the rate of five per cent per annum, for which plaintiff became and still is indebted to said defendant in the sum of fifteen thousand dollars ($15,000), with interest thereon from the 20th day of July, 1894, no part of which has been paid, and that said plaintiff has not accounted to said defendant for the value of the said bonds.-
    “ Wherefore, the defendant Edward J. Slattery demands that the complaint herein be dismissed, and that judgment be rendered against the said plaintiff and in favor of the said defendant for fifteen thousand dollars ($15,000), with interest thereon from the 20th day of July, 1894, besides costs.”
    
      Pratt & Logan, for the appellant.
    
      Edgar T. Brackett and W. P. Butler, for the respondent.
   Parker, P. J.:

The Code of Civil Procedure (§ 538) gives the court authority to strike out a sham defense. It may not strike out a counterclaim as sham, for that is not a defense within the meaning, of that section; (Collins v. Suau, 7 Robt. 94; Fettretch v. McKay, 47 N. Y. 427.) Ror can it strike out an answer which consists of a mere denial for the reasons given in Thompson v. Erie Railroad Co. (45 N. Y. 468). But we have no doubt of its authority, in a proper case to strike out any affirmative defense if it clearly appears that it is .a false one. (Commercial Bank, etc., v. Spencer, 76 N. Y. 156; Robert Gere Bank v. Inman, 51 Hun, 97; Albany Co. Bank v. Rider, 74 id. 349.)

The Special Term,, therefore, had authority to strike out the defense contained in the fifth paragraph of- the answer in this action, unless it is to be considered a counterclaim. The pleader has not designated it as such ; on the contrary, lie has called it a defense. There is a marked distinction recognized in the Code between a defense and a counterclaim. (See §§ 500, 507; also the definition of a counterclaim in § 501. See, also, Fettretch v. McKay, above cited.) And when the pleader designates the facts which he -sets forth as a “ defense ” the court will conclude that he so intended them.

He will not be at liberty to call them a defense when he serves1 the answer, and a counterclaim when a subsequent. emergency or. convenience makes the change desirable. (Morris, Tasker & Co. v. Chamberlin, 38 N. Y. St. Repr. 476; Eq. L. Ass. Soc. v. Cuyler, 75 N. Y. 511; Acer v. Hotchkiss, 97 id. 395-408.)

The matter stricken out, therefore, must be treated as a defense,, and as such we have no doubt but that it was a sham-, one. There;, are hardly facts enough stated in it to constitute a defense... There is an averment that defendant sold and delivered to plaintiff certain bonds of the value of $15,000, for. which it is still indebted to defendant, but this is followed by the statement that, “ plaintiff has not accounted to said defendant' for the value of the said bonds.” .

Why should plaintiff account for their value if it had purchased the bonds? Such an averment is utterly inconsistent with .the idea of a sale. There is no averment of a request or of a price fixed, or of a promise by plaintiff to pay what the bonds, were- reasonably worth. Ro facts showing a sale, except what may be inferred from the use of the words “ sold and delivered.” Certainly the pleader has not fairly and squarely set forth a contract of'- sale, and his sugr gestions of a liability on plaintiff’s part to account to him for their value raises the sérious question whether a sale was ever made.

It is suggested in the appellant’s points on this appeal that “ if the bonds were originally delivered to the bank as collateral, such a transaction would constitute ‘ a sale and delivery,”’and it is quite probable that the pleader had this same idea when he drew this part of his answer. Very clearly it would be no defense to the action on the note that the plaintiff held bonds as security for its payment, and just as clearly a deposit of bonds as collateral security is not a sale of them.

In opposition to this the affidavit' of plaintiff’s cashier squarely and distinctly states that the bonds were never sold to the plaintiff; that they were deposited with it as collateral security for an indebtedness of which the note in suit was part, and that the averment in the answer of a sale and delivery of them is absolutely and wholly false. This statement is in harmony with, and to some extent corroborated by, the averment in the answer, that plaintiff has not accounted to. defendant for the value of the bonds.

The defendant does not: specifically deny this statement nor attempt to explain the real transaction concerning the bonds. • He makes a new affidavit to the effect that the statements in his answer are true, and adds nothing more to it.

Such a response is altogether unsatisfactory and leaves no doubt as to the propriety of the action of the Special Term. The defense attempted to be set up was clearly sham and false and was properly ¡stricken out. The' first paragraph of the answer denies, on information and belief, that the plaintiff is a banking association by the name set forth in the complaint. The second paragraph avers, on information and belief, that there is no such corporation as the “ First Rational Bank of Saratoga Springs ” as alleged in the complaint. • Reitlier of these is “an affirmative allegation that the plaintiff * * * is not a corporation,” and hence they raise no issue over that question. (Code, § 1776; Concordia, etc., Assn. v. Read, 93 N. Y. 474.)

■ The making and delivering of the note to plaintiff is admitted, and no other allegation in the answer raises any issue over any material fact which plaintiff would have to prove to establish his claim against the defendant. All of the answer was frivolous, and judgment against the defendant was properly ordered, thereon..

The order of the Special Term was right and should he affirmed, with costs. .

Qrder ..appealed-from affirmed, With»,costs;,and disbxi-rsei'iiente.

All concurred, except Putnam, J,,. not sitting.'

Judgment and order affirmed, with costs.  