Meyerhoffer v. Baker

Scott, J.: The plaintiff executed a lease from defendant of certain premises in the city of New York, and upon such execution deposited with [798] defendant the.sum of $2,400, to be liéld until the termination of' the lease, as security, for her compliance with the terms, conditions and covenants contained in.the lease. It was further agreed that if. plaintiff should vacate the'premises-during the'term, or should be . removed or dispossessed by due process of law, or otherwise for non-payment of rent, or for any other* reason whatever,.the defendant should retain said sum of $2,400/^0 wards liquidating any damage or expenses which might be suffered' or incurred by him. The plaintiff having defaulted, in the /paymént of rent, the defendant instituted summary proceedings against her to recover possession of the premises. The plaintiff did not appear or defend,, and judg-ment went against her in the Municipal Court awarding possession of the premises to the'' landlord. She now sues" for damages for deceit and misrepresentation on the part of defendant in inducing her to enter into the lease,. alleging that certain false statements were made to her respecting, .the number of tenants- in th.e house,. and the amount of rent paid ■ by "them. . She has thus far been defeated upon the ground that the final order in defendant’s - favor " in the summary proceeding was a bar to the prosecution of. this action. It is well settled that the estoppel of a foflner judgment extends to every material matter within _ the - issues’ which was expressly litigated and determined, and also to those matters which, although not expressly determined, are comprehended and involved in the thing expressly stated and decided, whether 'they were .or were not actually litigated and considered. "Whatever is necessarily implied in. the former decision is, for the purpose of estoppel, deemed to have been actually decided. (Pray v. Hegeman, 98 N. Y. 358.)- In a summary proceeding to dispossess a tenant for the non-payment of rent, three questions are involved and are necessarily and finally determined ■ in the landlord’s, favor if he succeeds. • These are: First, that the relation of ■ landlord and tenant exists, .or, in other words, that the -tenant holds under- a valid lease; second, that the tenant has entered into possession, and, third, that the tenant has defaulted in - the payment' of rent. And- in such a proceeding a judgment by default is as conclusive as one rendered after defense and litigation. (Reich v. Cochran, 151 N. Y. 122.) The determination below seems to have proceeded upon the theory that this action challenges, the [799] existence of a lease between the plaintiff and defendant, and, therefore, seeks to re-litigate one of the questions finally decided in the summary proceeding in the Municipal Court. We do not so construe the complaint. The plaintiff does not deny that she made a lease with defendant; on the contrary, she asserts it. She does not ask that that lease be declared to have been void ab initio, but alleges that she was induced to make it by fraud, and for that fraud she seeks damages. It is true that she alleges an attempted rescission on her part, which failed because of the defendant’s refusal to accede to it. She is not, however, asking a judgment of rescission, one which the City Court had no jurisdiction to render, and even if she were suing in equity for a rescission it is by no means clear that the final order in the summary proceeding would be an effective bar. (Becker v. Church, 42 Hun, 258; affd., 115 N. Y. 562.) A person who claims that he has been Induced to enter into a contract by fraud is not confined to a single remedy. If sued for the consideration or a part of it he may defend by pleading the fraud that was practiced upon him, or he may sue in equity for a rescission, or he may affirm the contract and sue at law for the damages which he has suffered by reason of this fraud. It is the latter course which the plaintiff has chosen. We have not overlooked the provisions of section 2244 of the Code of Civil Procedure which permits a tenant to set up in a dispossession proceeding “ any new matter constituting a legal or equitable defense or counterclaim ” to be “ established in like manner as though the claim for rent in such proceeding was the subject of an action.” This provision was evidently inserted for the benefit of the tenant, who before the adoption of this provision was confined to the simple issue as to whether or not he owed any rent.' It is permissive and not mandatory. Apart from all other considerations a sufficient reason for not setting up as a counterclaim in the Municipal Court the claim asserted in this action is that this plaintiff could have recovered there no more than $500. (Laws of 1902, chap. 580, § 1, subd. 13; Id. § 157.) We think it clear, therefore, that the question whether or not the plaintiff was induced to enter into the lease by fraud was not involved, actually or by necessary implication, in the proceedings in the Municipal Court, and that the adjudication in that court went no further than to determine that the parties had made a lease, leaving untouched [800] the question- whether or not the plaintiff was induced to make that lease by fraud; The plaintiff’s present claim for damages could nqt, properly speaking, have been set up as a, defense to the summary proceeding, nor could it have been set up as a defense to an action for rent which is the test provided by section 2244 of the Code. If pleaded at all it must have been by way of counterclaim. The plaintiff was not bound to set up the counterclaim. (Brown v. Gallaudet, 80 N. Y. 413.) The cases cited by respondent (Gates v. Preston, 41 N. Y. 113; Blair v. Bartlett, 75 id. 150), wherein judgments in favor.of physicians for their services have been held to be a bar to actions for damages for malpractice in the performance of'the same services have rested upon the principle that the malpractice constituted no performance, and that, the judgment for the fees necessarily implied a finding Of performance. Schwinger v. Raymond, 83 N. Y. 192, 197.) These cases are in precise accord with Reich v. Cochran (supra), but do not affect the present case which involves no question as to the actual making of the lease. (Woods v. Garcewich (67 App. Div. 53) is not in conflict with the views herein expressed. In that case the validity of the lease was not attacked. The lease was originally made by one Seckle, the owner of the premises, to Robert Garcewich, by whom it was assigned to Morris Garcewich, the defendant’s husband. Morris Garcewich became a bankrupt, and his receiver in bankruptcy sold the lease-to the plaintiff Woods who went into possession of the leased premises. Subsequently the defendant Henrietta Garcewich demanded possession claiming-that her husband had assigned the lease to her before his bankruptcy. There thus arose a controversy, not as to the validity of the lease, but as to the title to it and the consequent, right of possession. In the summary proceedings in the Municipal Court between plaintiff and defendant both claiming ownership of the lease by assignment, the validity of that which appeared on its. face to be prior in point of time was necessarily and directly involved, and was raised by the pleadings and the opinion of the court goes ho further than to hold that the judgment of the Municipal Court was conclusive upon that point. We are, therefore, of the opinion that the final order in- the summary proceedings constituted no bar to the prosecution of the present action for damages. (Prince v. Jacobs, 80 App. Div. 243.) [801] The determination of the Appellate Term and the judgment of the City Court must be reversed and a new trial granted, with costs to the appellant to abide the event. ■ Ingraham and Clarke, JJ., concurred; Patterson, P. J., and Lambert, J., dissented.