Title Insurance v. Hawes

Gebabd, J. This action is brought to recover seventy-seven. dollars and fifty cents for services rendered to defendant in examining and searching her title to certain real property. . The complaint sets out one cause of action in two counts, one on quantum meruit, the other on a special contract signed with defendant’s name by her husband and attorney. The answer denies that defendant’s husband had authority [479] to bind her and sets np a cause of action for slander of defendant’s title to this particular real property by the plaintiff and demands $1,000 as damages therefor. The court struck out this counterclaim, but permitted the facts to stand as an affirmative defense. It is conceded by both sides that the defendant, Gertrude D. Hawes, desired to obtain a loan on certain real property owned by her. This loan was to be made by a client of Mr. Coddington, a lawyer who testified that he insisted as a condition of making the loan that a policy of plaintiff with no exceptions be given him. The counterclaim set up by defendant alleges that she entered into an agreement with Coddington under which Coddington agreed to make the loan upon being furnished with a Torrens Law certificate issued July 10, 1910, and a search to be made by plaintiff which was to show whether there were any mortgages or other liens other than those contained in the “ memorials ” attached to the Torrens Law certificate and that plaintiff was to issue its policy to this extent only and defendant set forth that Coddington refused to make the loan because plaintiff had raised objections to the title, on the ground that the Torrens Law was unconstitutional and that the proceedings thereunder were irregular in that no guardian was appointed, etc. Arguing from the premise claimed by defendant, we think the court was wrong in allowing these facts to stand as an affirmative defense. By section 1, subdivision 14, of the Municipal Court Act, the court had non jurisdiction to try an action of slander, and therefore the con rt was right in striking out the counterclaim, but the question arises whether these facts relating to the alleged slander of title could be properly pleaded and proceed to defeat plaintiff’s action. The objection that an affirmative defense is bad in law may be taken at the trial and is not waived by not demurring. Ampersand Hotel Co. v. Home Insurance Co., 198 N. Y. 495. It is not claimed that the plaintiff did not perform that which according to its claim it was employed to do. What defendant claims is that plaintiff in addition to making the' examination and search went beyond this and, by putting in [480] its report objections to the Torrens proceedings, clouded and slandered the defendant’s title. If the matter set up by the defendant amounts to anything at all it amounts to facts constituting a cause of action for slander of title. How, as plaintiff was to report to Coddington, according to defendant’s own theory, what it found, is there not at least a possibility that the report to Coddington was privileged and that the plaintiff should have a right to present the defense of privilege in an action for slander. As to defendant a slander of title to the owner.alone cannot give rise to a cause of action any more than actionable words uttered in the presence of the person slandered only. Defendant’s brief states that the defendant did not withdraw the counterclaim but only the demand for damages ' reserving the right to sue in the Supreme Court for the slander of title. This affirmative defense if established did not show that the plaintiff failed to perform the work it was employed to perform or the work which was accepted by defendant but only that, after performing this service, thé plaintiff went further and slandered the defendant’s title by reporting concerning the Torrens Act, an additional report which defendant says plaintiff was not employed to.make. I do not think this slander arises out of the same transaction, because the property slandered happens to be the same property the title to which plaintiff was employed to search and examine. We are not referred to any case holding that facts constituting a cause of action which a court has no jurisdiction to try may be set-up as a counterclaim. In Heiferman v. Scholder, 134 App. Div. 579, cited- by defendant, it was- held that the Municipal Court has the right to try the question whether a title is marketable ■ or not as this does not involve the question of the right of possession of real property which the court held was the only question falling within the prohibition of the Municipal Court Act. To the same effect is Heimbinder v. Sullivan, 129 App. Div. 589. But here the defense amounts to a cause of action for slander which the Municipal Court has no jurisdiction to try. Hor -can I see any analogy between this case and those [481] eases whore it has been held that in the Municipal Court fraud in the procuring of a contract may. be set up as a deicn.se to an action on the contract, although fraud might not be proved as a basis for affirmative relief. For as was said by Leventritt, J., in Pelgram v. Ehrenzweig, 51 Misc. Rep. 31: “ In the Municipal Court, in actions upon written contracts, though fraud may not he proven as the basis for affirmative relief, it is always available as a defense to a claim founded' on the contract.” For fraud is pleaded not as a cause of action to get a recovery for the defendant setting it up to recoup against plaintiff’s recovery, but the fraud goes to the existence of the contract sued on. Hor can defendant stand in any better position under sections 150 and 151 of the Municipal Court Act which permit a counterclaim to be set up arising out of the same contract. If a laborer is employed to mow the grass and having finished his task, while reporting completion, assaults his employer, can the assault he counterclaimed by the employer as against an action for the services rendered? The assault cannot he said to arise out of the same transaction within the meaning of the Code. The alleged slander of title did not go to the question of performance of the contract hut to the question whether the plaintiff after performing committed an independent wrong, amounting to a cause of action which the Municipal Court has no jurisdiction to try. The facts set up here by defendant constituted an independent claim for damages, which defendant sought to recoup against any damages claimed by plaintiff, and this independent cause of action the Municipal Court had no jurisdiction to try and -it matters not that defendant reduced her claim to only so much as was necessary to equal any recovery by plaintiff. For the distinction between a counterclaim and an affirmative defense, see Deeves & Son v. Manhattan Life Ins. Co., 195 N. Y. 336. The question of the authority of defendant’s husband being in question, it was error to allow the husband to testify that [482] when he signed his name- as “ attorney ” he signed it “ as attorney in law.” The judgment must be reversed and a new trial ordered, with costs to the appellant to abide the event. Seabuky and Guy, JJ., concur. . Judgment reversed and new trial ordered.