
    Richmond E. Slade, Respondent, v. Howard T. Montgomery and James H. Moran, Appellants.
    
      Duress — counterclaim— toaiver of tort — direction of a verdict.
    
    A note given by the two principal stockholders of a railroad company in order to induce the secretary of the company to execute a release of his claim for compensation for his services as secretary, made by an intending purchaser of the railroad a condition precedent to his purchase, is not void for duress.
    In an action upon the note by the secretary against such stockholders, the stockholders may interpose a counterclaim for money retained by the secretary while acting as custodian of their funds, his failure to account for such moneys being under the circumstances a mere omission and not a malfeasance which would be the subject of an action in tort.
    The stockholders cannot, however, interpose a counterclaim for moneys which they allege the secretary obtained from them, upon the false representation that it was to be paid to a broker as compensation for procuring a loan (as such claim does not arise out of the same transaction as the note), where it appears that the defendants do not elect to waive the tort, as is shown by the fact that they allege that the moneys were obtained by fraud and deceit.
    
      It seems, that the question whether, in pleading a cause of action arising out of a tort, the pleader has elected to waive the tort and sue on contract, is determined by the presence or absence of an allegation that in the alleged false representation, fraud and deceit there existed an intent to deceive or cheat.
    
      A counterclaim, for an excess of commissions paid by the stockholders to the-secretary for the latter’s services in procuring a loan, is available to the stockholders where they elect to waive the secretary’s tort in retaining the excess, and to sue for moneys had and received; in such a case, an allegation at the end of the pleading that the secretary converted the money to his own use may be regarded as surplusage.
    Where the only evidence given in support of the latter counterclaim is the testimony of the stockholders, which is contradicted by that of the secretary, it is. error for the court to direct a verdict against the stockholders.
    Appeaí by the defendants, Howard T. Montgomery and another, from a judgment of the County Court of Westchester county in favor of the plaintiff, entered in the office of the clerk of the county of Westchester on the 13th day of September, 1899, upon the verdict of a jury rendered by direction of the court.
    
      J. Ridker (Jack/, for the appellants.
    
      James M. Hunt, for the respondent.
   Jenks, J.:

This is an appeal from a judgment of the County Court of Westchester, entered upon a verdict directed for the full amount of the plaintiff’s claim upon a joint and several promissory note for $750,. made to his order by the defendants. Each answer admits the giving-of the note, but alleges that its execution was obtained by fraud or by duress, and contains certain counterclaims. The replies denied the allegations in counterclaim, and alleged adjustment and settlement of the claims set up in paragraph 3 of the answer by the delivery of the note.

The defendants owned almost all of the stock of a railroad corporation, and the plaintiff was its secretary. The minutes of the-directors of August 25, 1894, show this resolve: That the secretary be paid $50 per month until the road is in operation, and thereafter not to exceed $100 per month, said salary to begin October 1, 1894, to accumulate and be paid out of the net earnings of the company.” In 1897 the defendants were about to sell the road, and the purchasers insisted as a condition of purchase that the defendants' should furnish a release from the plaintiff of any claim for the services contemplated by said resolution. The defendants sought the release, but the plaintiff held off, demanding $1,500, while defendants insisted that nothing was his due. After haggling, the note in suit was given October, 1897, in consideration of such release.

There was no proof of fraud in the circumstances attendant upon the execution and delivery of the note. The proposed purchaser would not buy unless the plaintiff executed a release, and the plaintiff refused to give the release unless the note was made. There was neither concealment nor false representation; the plaintiff simply barred the way. Further, the plaintiff did not compel the delivery of the note ; he refused to execute the release unless the note was given, and the penalty of his refusal was but the consequent inability of the defendants to satisfy the proposed purchaser. The defendants did not stand in vinculis, nor were they terrorized or intimidated, and consequently there was no duress. (Jewelers’ League v. De Forest, 80 Hun, 379 ; affd., 151 N. Y. 654.)

The first counterclaim sets forth that between August, 1894, and July, 1897, the plaintiff was custodian of cash belonging to defendants, and at times exhibited his accounts, whereon items appeared of payments to himself; that he stated that the account showed the true amount received, and, as it was short of the amount received, he had so charged the deficits to himself, as he must have received the money, wherefore the defendants seek to recover such amounts. I think that the counterclaim is properly pleaded under the 2d subdivision of section 501 of the Code of Civil Procedure. An agent or person acting in a fiduciary capacity is not subject to an action for tort for a mere omission, but only for acts of misfeasance.

(Segelken v. Meyer, 94 N. Y. 473.) Even if the action be ex delicto, the defendants could waive the tort and sue in assumpsit. (Rothschild v. Muck, 115 N. Y. 1; Coit v. Stewart, 50 id. 17.) This they have done. But the facts adduced tend to show that such money was the property of the corporation. Thus, the defendant Montgomery testified: “ I also told him (the plaintiff) that he had received considerable money from the company, or rather helped himself to it, which he admitted.” 4-gain, the same witness testified : I had several conversations with Mr. Slade (the plaintiff) in reference to the accounts of the road. I asked him to show me a statement of the receipts and disbursements. * * * I looked over the books. * * * I called his attention to the difference between the total receipts and disbursements. * * * At the time the note for $750 was given the fact was stated that he had drawn considerable money from the railroad company.” No proof was made that entitled these defendants to counterclaim the dues of the railroad corporation, and, therefore, there was no evidence to warrant the submission of this counterclaim to the jury.

In 1896 the defendants needed money to maintain this railroad, and plaintiff took part in the negotiations for a loan of $55,000, to be made through Seed from Hoaglaud. The defendants testify that plaintiff told them that Seed wished a commission of five per cent, but desired that they should pay it through plaintiff in order that the commission might be concealed from Seed’s principal, Hoagland, who was also Seed’s intimate friend. Five per cent upon $55,000, the commission said to be required, was thereupon paid to plaintiff for Seed, who, it is claimed, never received it and never required it. Therefore, the defendants attempt to counterclaim said sum paid to plaintiff as Seed’s commission. But this counterclaim is not properly pleaded. The cause of action is contract based upon the promissory note given in 1897, in adjustment of any possible claim of the plaintiff for salary as secretary of the defendant corporation, in view of such services and of the resolution of the directors fixing his salary. The subject-matter of the counterclaim is his alleged deceit or fraud in obtaining commissions from the defendants in procuring a loan of $50,000 or $53,000 for defendants or for the corporation in 1896. It is not pretended that he acted as secretary in securing the loan, or that such services were incident to that office. Clearly, then, the cause of action does not arise out of the contract or transaction set out in the complaint, and is not connected Avith the subject of the action, and, therefore, is not within the purview of subdivision 1 of section 501 of the Code of Civil Procedure. And whether the 2d subdivision of section 501 applies depends upon the question Avliether the counterclaim sets out any other cause of action on contract existing at the commencement of the action, Avhile this counterclaim is founded on tort. Admitting that the defendants could have Avaived the tort, and have based their counterclaim upon assumpsit (Rothschild v. Mack, supra ; Coit v. Stewart, supra), they have not done so. Bliss on Code Pleading (§ 153) states that the rule upon which the determination as to whether the action is for a tort or for a contract depends, is the presence or absence in the pleadings of an allegation that the false representation, fraud and deceit were made ivith an intent to deceive or cheat. (Sparman v. Keim, 83 N. Y. 245; Lindsay v. Mulqueen, 26 Hun, 485; Allen v. Allen, 52 id. 398.) After setting forth the facts as indicated, the pleader proceeds that the statements made by plaintiff to defendant * * * as aforesaid were false and untrue; and further that the statements made by plaintiff to defendant that it would be to defendant’s advantage to pay said Seed an additional commission * * * was likewise false and untrue.” Defendant further “ alleges upon information and belief that the statements made by plaintiff to defendant that .said Seed requested and required a commission for procuring said loans for defendant was a fraud and deceit practiced by plaintiff upon defendant for the purpose of obtaining the sum of $2,750 for plaintiff’s own benefit and advantage.” Defendant further alleges that plaintiff did not pay Seed the said sum or any part thereof, but alleges “ that he wrongfully, fraudulently and deceitfully converted ■said monies and applied the same to his own use,” and is now indebted because of the said fraud and false representations. Applying this ■rule, it is clear that the pleading here is in tort, and, therefore, it was not proper to consider it as a counterclaim in this action. (Bliss Code PI. § 381; Mayor v. Parker Vein Steamship Co., 8 Bosw. ■300, Woodruff, J.; Piser v. Stearns & Marvin, 1 Hilt. 86 ; Drake v. Cockroft, 4 E. D. Smith, 34.) And as the character of the ■counterclaim depended upon the pleading thereof, it was not competent for the trial court to convert a pleading in tort into one in contract. (Neudecker v. Kohlberg, 81 N. Y. 296.) Segelken v. Meyer (supra) does not apply here, in that it was there held that an agent -or person acting in a fiduciary capacity is not subject to an action of tort for a mere omission such as not ¡laying over money due, but -only for acts of misfeasance. There the question was an action against an attorney for not accounting or in not paying over a balance struck against him on an accounting. But here the counterclaim is pleaded directly upon the tort. And the same is true of the amendment made to the answer at the trial.

The third counterclaim is properly pleaded, for the pleader now waives the tort and claims in assumpsit. It is alleged that plaintiff procured and agreed to procure a loan for defendants of $55,000,. for which defendants agreed to pay Seed five per cent commission, and that at plaintiff’s request and for Seed defendants paid plaintiff $2,750 for said commission; that Seed failed to procure or pay more than $53,000, and that defendants demanded of plaintiff the return of $100, being five per cent of $2,000, the amount defendants never-received of said loan of $55,000 promised to defendants by Seed. The mere assertion at the end of this pleading that the plaintiff converted the money to his own use is surplusage under the circumstances.” (Segelken v. Meyer, supra.) Testimony was offered by the defendants to sustain this pleading. Opposed was but the testimony of the plaintiff. The learned judge, of course, could not. say that there was no evidence and could not properly say that the weight of evidence was so preponderating in favor of the plaintiff that a verdict contrary to it would be set aside, and, therefore, he was not warranted in his direction of the verdict (Hemmens v. Nelson, 138 N. Y. 517, 529 ; Linkhauf v. Lombard, 137 id. 417), and the exception to his refusal was sufficient. (Vail v. Reynolds, 118 id. 297, 304.)

The judgment should be reversed and a new trial granted.

All concurred.

Judgment reversed and new trial granted, costs to abide the event.  