
    Pope Manufacturing Company, Respondent, v. Rubber Goods Manufacturing Company, Appellant.
    (No. 1.)
    First Department,
    December 30, 1905.
    Demurrer — reply to counterclaim for breach of contract, demurrer thereto sustained.
    When, in an action for the breach of a contract, the answer, as a counterclaim, alleges a breach of the contract by the plaintiff’s assignor after said contract was modified in particulars set forth, a reply which alleges that the defendant “has at all times had knowledge of the manner” in which the plaintiff’s assignor carried out the provisions of-the contract, " and fully assented Jo the carrying out of the same” in that manner, does not state a defense to the counterclaim and a demurrer thereto should be sustained.
    Knowledge of and assent to the breach of a contract do not waive the breach. There must be a formal release, á consideration, or such conduct on the part of the assenting party as will have created a condition to the detriment of ^the other party, and such facts must be alleged.
    A reply to such counterclaim alleging that when the defendant made a part • payment under the contract it “had full knowledge of the manner in which’’ the plaintiff’s assignor “had theretofore performed the said agreement,” and “ fully assented ” to such performance, states no defense to the counterclaim, for knowledge of a breach of the contract at a time of payment is no defense, nor is a subsequent assent without considerati6n. >
    A reply which alleges the modification of the contract on which a counterclaim is founded is not a denial thereof, but at most a partial defense, and if pleaded as a complete defense a demurrer thereto will be sustained.
    Houghton, J., dissented.
    
      Appeal by the defendant, the Bubber Goods' Manufacturing Company, from an interlocutory judgment .of the Supreme Court in favor of the plaintiff, entered in the office of the -clerk of the ' county of New York on the 8th day of July, 1905, upon the decision of the court, rendered after a trial at the New'York Special Term, overruling nine-demurrers interposed by the defendant to nine separate replies of the'plaintiff to the first and fourth counterclaims set forth in the answer.
    
      Nathan Ottinger, for the appellant.
    
      Lewis H. Freedman, for the respondent.
   Clarke, J.:

. The complaint alleges a contract between plaintiff’s assignor, the American Bicycle Company, and the defendant, due performance on the part of its assignor, and the breach thereof on the part of defendant in that it has neglected and refused to pay the sum of $2.00^000, which, under the terms of said agreement, became due and payable on the 8th day o'f November, 19[)2, and demands judgment therefor. The answer sets up various defenses' and counterclaims arising out of the same contract. The-fourth counterclaim alleges a breach by the plaintiff’s assignor of 'the contract, as modified, in various particulars set forth in extenso and claims damages therefor in the sum of $200,000. The plaintiff’s second reply to this counterclaim is that the defendant has at all times had knowledge of the manner in which the American Bicycle Company and ■ its constituent companies carried out and performed the provisions of the said agreement * * * and fully assented to the carrying out of the same -in the manner in which it was in such respects performed by said American Bicycle Company and its constituent companies.” To this reply the defendant demurred.

The plaintiff claims that “■ the allegation that the defendant had knowledge of and fully assented to the manner of performance * * * is an allegation sufficiently broad to enable the pleader to prove a waiver.” This is not sound. Mere knowledge and assent do. not constitute a defense. There must be .a formal release,, sufficient' consideration-, or such conduct upon the part of the assenting person as .will have created a condition to the detriment of the other party. The facts to sustain this conclusion should have been alleged. In Todd v. Union Casualty & Surety Co. (70 App. Div. 55) the complaint alleged compliance with the provisions of the contract “ except in so far as such compliance and observance were waived or rendered unnecessary by the position and action of this defendant.” The word “ waived ” was used. Mr. Justice McLaughlin, writing » the opinion of this court, said : “ If he has not performed, for the reason that defendant waived performance, then the conditions waived and the facts and circumstances constituting such waiver must be alleged.” “Knowledge” and “assent” in the case at bar are no more definite and no less conclusive than “ by the position and action of this defendant ” .in the Todd case. The plaintiff cites People ex rel. McLaughlin v. Police Comrs. (174 N. Y. 450) and Ryan v. City of New York (177 id. 271). In the McLaughlvn case the relator was endeavoring by mandamus to be reinstated on the police force. In the return to the alternative writ the commissioners set up many facts to prove relator’s acquiescence in the action of tlie police commissioners and waiver of any legal rights, and the. cdurt held that it was error to exclude evidence tending to establish the facts which defendants claimed existed. It was in that connection that the court said : “ It is well settled by authority that a man may waive any right that he has, whether' secured to him bj> contract, conferred upon him by statute or guaranteed him by the Constitution.” In the Pyan case, which arose on a demurrer to the complaint, the court held that from the facts stated in the complaint the legal effect was that plaiptiff had waived any claim that he might have had. Neither of these cases touches the point now under consideration, namely, that facts must be stated from which it may be determined whether or not the legal conclusion of waiver follows. It is not to be denied that the cause of action set up in this counterclaim might be destroyed by showing a release under seal, a waiver for consideration or estoppel by conduct. The facts, however, not being pleaded to establish any such defense, the demurrer is well taken.

Further, the contract provided inter alia that .the rubber company should pay “ $200,000 in cash to be paid annually (so long as the Bicycle Company shall fulfill the terms of this agreement) for five years from the date of this contract, ” and the bicycle com-pa.ny agreed to purchase from the rubber company “ at least ninety (90) per cent in amount of all tires and rubber parts purchased by, through or-for the'Bicycle Company * * * during the five years next ensuing- the date of this agreement.” If this reply means that the words “at all times. had knowledge” and “fully assented to, the carrying out of - the -same in the manner in which it was in such respects performed ” refer to what was: going on through the year, it states an;impossibility, because it. would not be known until the end of the year whether the bicycle company /had purchased at least ninety per cent in .amount or not. If it means at the end of the year, then it is in all respects similar to the third reply and is to be so treated.

As a third reply to the.fourth counterclaim plaintiff alleged that “shortly after November 8, 1900, the defendant paid to. American Bicycle Company the. first instalment of $200,000 which,^pursuant to the terms of the agreement, .*.* * became due. on or about the 8th day of November, 1900, and * * * that at the time -of such payment the defendant had full knowledge of the manner in which American Bicycle Company * * * had .theretofore performed the said agreement and fully-assented to the performance thereof in such manner.”

This reply was demurred to. This is an allegation of knowledge at the time of payment. But knowledge at- the time of payment by one party of breaches by' the other theretofore- occurring is no defense. Nor is subsequent assent without consideration. If one party chooses to break a contract the other party is not ■ obliged to follow his example. He may strictly* perform on liis, part and hold . the other. There-is no allegation that in reliance upon such payment" the bicycle company was in any way prejudiced or was induced to do any act which it would otherwise not have done or -which it was not already bound to do. In De Busscher v. Alt (47 L. J. Ch. 381, 389), Thesiger, L. J., clearly drew this distinction : “ If a person having a right, and seeing another person about to-commit er in the course of committing an act infringing upon that right, stands by in such a manner as really to induce the /person- committing the act, and who might otherwise have abstained from'it, to believe that he assents to its being committed, he cannot afterwards be heard to complain of the act. '* ^ *. But when once the act is completed without any knowledge or assent upon the part of the person whose right is infringed, the matter is to be determined on very different legal considerations. A right of action has then vested in him which at all events as a general rule, cannot be divested without accord and satisfaction or a release under seal. * * * Even an express promise by the person injured that he would not take any legal proceedings to redress the injury done to him, could not by itself constitute a bar to such proceedings, for the promise would be without consideration and, therefore, not binding. * * * The principal element of an estoppel by conduct, namely, that it should have been pursued with the intent or so as to induce the person relying upon the estoppel to act in a particular manner is here wholly wanting.” ■ In Ackerman v. True (175 N. Y. 353) the court said : “As it is obvious that the plaintiff, at most, was merely silent while the defendant erected his building upon the street, she was not, under the doctrine of the cases cited, estopped from asserting her right to have the erection of the defendant adjudged a nuisance, to insist upon its removal and to recover her damages therefor.” Therefore, if it be true that at the time the defendant paid to the plaintiff the third annual sum of $200,000 due to it on the 8th of Eovember, 1900, it knew that theretofore the plaintiff had breached its contract with the defendant and at that time assented thereto, this reply would not be good in that no facts are there set up which defeat the cause of action and the demurrer "should have been sustained. As stated, the fourth counterclaim sets up various breaches of the- contract. The fifth reply is “ that on or about the 27th' day of December, 1899, the defendant duly consented that the plaintiff * * * might purchase Palmer tires and might mention Palmer tires in their catalogues or advertisements, and that in such respect the agreement * * * was modified and strict performance thereof waived by the defendant.” This is not a denial of the counterclaim. It is an admission thereof without any denial, and is, if anything, a partial defense. It has not, however, been pleaded as a partial defense and the demurrer was well taken. (Thompson v. Halbert, 109 N. Y. 329.)

In the sixth reply to the first counterclaim plaintiff alleges “ that the only bicycles sold by American Bicycle Company * * * as incomplete and stripped were of an inferior, cheap grade, mannfactufed and sold for the purpose of keeping in operation certain of the factories of American Bicycle Company ; * * * ' that purchases from the defendant by said American^ Bicycle Company * * * swere not diminished by reason of the manufacture and sale-of such incomplete and ¿‘tripped bicycles.” This is a confession, a partial defense and a plea in mitigation of damages. Hot being pleaded as such it is demurrable under Thompson v. Halbert (supra).

The- remaining replies and the demurrers thereto fall within some . one of the rules discussed, herein and the demurrers should have been sustained. ■

The judgment must be reversed and the demurrers sustained, with costs in this court and in the court below, with leave to reply over upon payment thereof within twenty' days.

O’Brien,j P. j.,- Ingraham and McLaughlin, -IJ., concurred; ' Houghton,, J., dissented.

Judgment reversed and demurrers sustained, with costs in this . court and in the court below, with leave to reply over upon payment thereof .within twenty days.  