Baldwin v. Martin

The assignment, which has been found to have been fraudulent and void as to creditors, was made in September, 1853, and this action was commenced about fourteen years thereafter. One of the defences is, that the right of action did not accrue within six years next preceding the commencement of the action, and the question arising thereupon, as to which party the onus is upon of removing the statute bar, depends upon the construction of the sixth subdivision of section 91 of the Code, which is as follows :

. . . “the cause of action not to be deemed to have accrued until the discovery by the aggrieved, party of the facts constituting the fraud.” The rule which, previous to the adoption of the Revised Statutes, prevailed in equity, that a party was not to be affected by lapse of time, unless he had discovered the fraud, was substantially enacted in the 51st section, which provided that bills for relief on that ground should be filed within six years after the discovery of the facts constituting the fraud (2 R. 8. 301, § 51).

Under the rule as it had previously prevailed, as well as under the statute after its passage, it was necessary to allege in the bill such facts as were required to repel the presumption arising from the lapse of time; and where the fraud was committed more than six years before suit brought, it was necessary to allege and prove that the discovery of it was within six years (Miller’s Heirs v. McIntyre, 61 Pet. 6; Moore v. Greene, 19 How. 69; Bertine v. Varian, 1 Edw. Ch. R. 343).

In the application of this rule, there was no difference *99"between courts of equity and of law, where the remedies were concurrent; the former courts adopting the statute as to the time of limitation, but fixing the period where it should be deemed to commence to run, upon principles applicable solely to courts of equity.

It is not doubted that under the Revised Statutes in actions of this nature, it was required of a plaintiff to allege and prove the discovery of the fraud within six years before suit. In other words, the onus was upon him of repelling the presumption arising from the lapse of time; and it only remains to be seen whether any provisions of the Code have changed the rule, and thereupon shifted the burthen of proof.

One of the essential changes effected by the Code was in assimilating the forms of pleading to the rules which had previously prevailed in courts of equity. Hence it is required that pleadings shall contain a statement of facts constituting the cause of action or defence. All fiction and mere form allowed in common law actions, was disallowed by the Code, and a single system adopted, applicable to all pleading. But it was not, as I think, intended to effect any change in actions or defences, except in the mode of stating them; nor any change in the rules or nature of evidence.

Since, as well as before the Code, the complaint may be upon the original demand (Esselstyn v. Weeks, 12 N. Y. R. 635); and under both systems the statute bar must be specially pleaded (Young v. Rummell, 2 Hill, 478 ; Code, § 74), in one case the rules of pleading requiring it, and in the other the rule is made a part of the statute law. After pleading the statute bar, the plaintiff can give evidence in avoidance, it seems, without specially replying the new matter (Esselstyn v. Weeks, sup.).

In pleading the statute, it is sufficient to allege in the answer, that the cause of action did not accrue within the prescribed limit, when, ordinarily, the plaintiff must show an avoidance. But it is said that this applies only *100to cases where it appears, "by the complaint, that the statute has attached, and not to a case where the statute "begins to run, not from the time the fraud was committed, "but from the time of its discovery. One answer to this, is, that the fraud is the cause of action, and the action relates to the time the fraud was committed. The non-discovery suspends the running of-the statute, and avoids or repels the presumption, which arises from the lapse of time, and revives or restores the original cause of action, which otherwise would be barred by the statute. So that a fraud, committed more than six years before suit, would, actually and not merely presumptively, be barred, unless a suspension of the statute time was shown. Another answer is, that the Code has changed so much of the previous rule of equity pleading as required the plaintiff, by his bill, to allege matters in avoidance, where the statute bar had presumptively attached. As has been seen, the section of the Revised Statute, and of the Code, are essentially similar, and the former was prepared, as the reporters say (Reporter’s Note, § 51, 5 Edm. Ed. Gen. Stati. 437), “adopting the principle and language of the case in 20 I. R. 585, in the Court of Errors.” If, therefore, we were to follow the rule of equity pleading, it would be incumbent upon a plaintiff'to repel the presumption arising from the lapse of time, by averring that the discovery of the fraud was within six years before suit. But I think the legislature, in uniting the equity and common-law systems, intended to make applicable the same rules, whether the action was of an equitable or legal nature, and thus make a uniform system. Hence, the rule, which at law required the statute of limitations to be specially pleaded, was enacted in the Code, and made applicable equally and alike to both kinds of relief, and changed the rule of equity pleading, by allowing the complaint to be upon the original demand, and requiring the statute bar to be specially set up as a defence.

*101This adaptation or blending of the rules of law and equity, relates only to the manner of forming the issues, and does not affect the rules of evidence as they had previously existed; and it is therefore conceded, that where the complaint shows the cause of action accrued more than the prescribed number of years before suit, and the statute bar is pleaded, the plaintiff must show matter in avoidance ; but it is claimed that where such fact does not appear by the complaint, the rule is otherwise.

It nowhere appears that the legislature designed to distinguish an action for fraud, from any other action: or that it was intended to except such actions from rules applicable to all other actions. Hence, matter to show a suspension of the time, which otherwise would raise a bar, need not be averred in the complaint; but, as in other actions, must be specially pleaded, and then leaving, as I think,'the burthen of proof precisely where, they are left in all other cases (Sands v. St. John, 23 How. Pr. R. 140; Clinton v. Eddy, 37 Id. 23). As in the case of an absent debtor, the cause of action accrues at the maturity of the debt, but the statute is suspended during the absence; and to a plea of the statute, it lies with the plaintiff to show the absence. So in case of a fraud, the action accrues when the fraud was committed, but the statute is suspended until discovery, and it must follow that the plaintiff holds the affirmation of showing the matter on which the suspension rests.

Even if the cause of action accrued upon the discovery of the fraud, and not upon its perpetration, no allegation in respect to time would be necessary in the complaint; and even if it appeared to have been discovered more than six years previously, the complaint would not be demurrable. Judge Grover says, in Gates v. Andrews (37 N. Y. R. 657), that the provision is to prevent the running of the statute until discovery, and is not to be deemed as creating a cause of action from *102that time.” The cause of action in the case at bar was a fraud .committed more than thirteen years before suit. jSTo other or different cause is alleged in the complaint. The Code declares that civil actions can only be commenced within the prescribed periods (for fraud within six years from its discovery), but the time of the discovery need not be stated, and the statute bar, if it exists, must be set up by the answer. The cause of action is perfect, notwithstanding more than six years have passed since the fraud was committed ; and if the statute is not set up as a defence, the action will prevail. Therefore, as Judge Grover says (Gates v. Andrews, sup.), the statute has merely provided “for a class of cases where the right of action was perfect, but became barred by the statute before the discovery of the facts upon which such right depended.”

It cannot, it seems to me, make any difference whether the complaint shows the cause of action outlawed or otherwise. In either case the objection must be taken by answer.

Take the ordinary case of a cause of action appearing by the complaint to be barred by the statute. The defendant cannot demur, but must set up the statute by answer. The burthen, then, rests upon the plaintiff to show matter which arrested the running of the statute. This is conceded. But wherein does it differ from the case at bar ?

The complaint alleges a cause of action as having accrued more than six years previously; and the dedefendant by answer avers that the right of action did not accrue to the plaintiff within six years. Must not the plaintiff, then, show that the discovery of the fraud was within six years, and, therefore, that the running of the statute was suspended % In analogy to previous rules in equity, it appears to me, it is so ; for it will be seen that the 6th sub. of § 91 limits the relief to the class of actions which were solely cognizable in the *103Court of Chancery (Fort v. Farrington, 41 N. Y. R. 164), from which it may be fairly inferred, that the legislature did not intend to essentially change the burthen of proof as it existed in that court, nor do anything more than to require the objection to be taken by answer, and have left the previous rules of evidence undisturbed. I am of opinion, therefore, that it was incumbent upon the plaintiff to show that six years had not elapsed since he discovered the facts constituting the fraud, and having failed to do so, the judgment is erroneous. To cast the burthen on the other side, would be to require the defendant to prove knowledge in the plaintiff, a duty which is, in most cases, impossible of performance ; while placing the burthen on the plaintiff" is putting it where the proof can easily be fnrnished, and is more consistent with the reason of the rule, which, as I think, puts it there.

The case of Errickson v. Quinn, 3 Lansing, 399, accords fully with the views I entertain and have here expressed.

The judgment should be reversed and a new trial granted, with costs to the appellant to abide the event.

The appellants having consented, on the argument, to turn their respective appeals into motions for a new trial, under section 368 of the Code, for the reason that the judgment is interlocutory merely, and the General Term having thereupon entertained the said motions, I have arrived, after a most critical examination of the questions of fact and of law, at the conclusion that the motions should be denied and the judgment affirmed upon the grounds assigned by the learned judge below. His findings of fact are fully supported by the evidence, the conclusions of law at which he arrived justified by the facts, and his exposition of the law applicable to the peculiar features of this case is well defined.

*104I will add, that on the argument I felt strongly inclined to differ with him upon the question relating to the burden of proof under the statute of limitations. It then appeared to me highly improbable that the Code, which assimilated legal and equitable remedies and abolished the forms of former actions, had worked a change upon that point. But, upon investigation, I have satisfied myself that the rule laid down and applied to this case is the correct and proper one, and as such should be followed in preference to the rule to the contrary laid down by the Supreme Court in Errickson v. Quinn, 3 Lansing Rep. 299. The action is one which, before the Code, was solely cognizable by a Court of Chancery. There was no remedy at law for such a fraud. By the Revised Statutes, by which the first attempt was made to regulate limitations in equity by express enactments, it was provided that bills for relief, on the ground of fraud, shall be filed within six years after the discovery, by the aggrieved party, of the facts constituting such fraud, and not after that time (3 Rev. St. 301, § 51); and this statute was held to give six years aftér the discovery of the fraud, on a bill filed, in cases where there was a concurrent remedy at law. But the Code has changed the rule and limited the action for relief, on the ground of fraud, in such cases, to that class of actions which were solely cognizable by a Court of Chancery (Foot v. Farrington, 41 N. Y. 170).

The language of the sixth subdivision of section 91 of the Code is as follows :

“ An action for relief on the ground of fraud, in cases ‘1 which heretofore were solely cognizable by the Court “ of Chancery; the cause of action in such cases not to • ‘ be deemed to have accrued, until the discovery by the, “ aggrieved party of the facts constituting the fraud.”

As pointed out by Grover, J., in Gates v. Andrews, 37 N. Y. 658, the provision is, not that the cause shall *105accrue upon such discovery, hut, to prevent the running of the statute, it shall not he deemed to have accrued before such discovery, thereby providing for a class of cases where the right of action is perfect, but might become barred by the statute, before the discovery of tlie facts.

The case at bar belongs to this class. The defendant insists that plaintiff5 s cause of action accrued more than six years before the commencement of the action, and consequently is barred. To make this defence available, he set it up as a distinct and separate defence in the answer. This he had to do in order to be in a position to claim the benefit of the statute, for section 74 of the Code expressly provides that the objection, that the action was not commenced within the time limited, can only be taken by answer, and an omission to plead the statute, and going to trial without doing so, notwithstanding the claim is clearly barred on its face, has repeatedly been held to preclude the defendant from invoking the statute. In such case the defendant was held to have made his election to stand upon the other defences actually pleaded.

How in order to give full effect to the statutory requirement, that the objection can be taken by answer only, and to maintain the principle of the numerous decisions made under it, that a defendant who has not thus pleaded cannot invoke the aid of the statute in any manner, although the claim is barred on its face, it seems to me to be necessary to hold, that under the sixth subdivision of section 91, as it now stands, plaintiffs cause of action is not to be deemed to have accrued more than six years prior to the commencement of the action, unless it is made to appear by way of defence, that the discovery of the facts constituting the fraud occurred more than six years before suit brought. In other words, the cause is not to be deemed outlawed in the absence of evidence fixing the time of the discovery.

*106The legislature probably intended, as suggested below, that he who commits a fraud, against which equity alone can give relief, and who necessarily strives to conceal it, shall not be permitted to escape the consequences of his acts through a plea of the statute of limitations, unless he is able to establish that plea by evidence adduced on his behalf. ' But whether such was or was not the true reason which led to the legislative enactment, is not very important. The bare suggestion of the proposition is of sufficient importance to authorize the construction above referred to, in the absence of statutory provisions calling for a different rule.

If I am correct in these views, it follows that the court below had no right to determine, without proof, the particular time from which the running of the statute is to be computed, and as the defendant had wholly failed to give evidence in support of his plea, and the plaintiff on the other hand had given some evidence, which, although insufficient to establish the precise time of the discovery, yet tended to show that it was within six years, it was properly held that the action is not barred.

The motions for a new trial should be denied, and the judgment affirmed with costs.