Opinion
Argued June 2, 1936 —
Decided October 2, 1936.
1. The power to strike a pleading as sham, frivolous or false will not be exercised unless it clearly and palpably appears to be so, and on a motion to strike the court must determine whether an issue is presented, and, if so, it must not try that issue by affidavits.
2. A bill of particulars furnished is no part of the record of the case and cannot be used on a motion to strike a pleading. Its function is to limit the proof to matters specified therein, and thus enable the opposite party to meet his opponent's proof without danger of surprise.
3. In order to be available as a defense, the statute of frauds must be specifically pleaded, and it cannot be raised on a motion to strike a complaint, but only by answer in the nature of a plea.
4. Where a motion to strike a complaint as sham is addressed to the whole complaint, and not to any particular count thereof, and any count is found not to be faulty, the motion must be denied.
Plaintiff-appellant instituted suit against defendant-respondent by the issuance of a writ of attachment. The complaint consists of three counts. The first count alleges that, on or about August 1st, 1930, plaintiff and defendant entered into an agreement, a copy of which is annexed to the complaint, and under which, generally stated, defendant was to manufacture and sell exclusively, devices embodying plaintiff's inventions, and pay plaintiff a minimum annual royalty on the sales of said patented devices; the term of the agreement was for five years from August 1st, 1930; pursuant to the agreement defendant paid plaintiff $9,360 for the first two years, and there was due and owing to the plaintiff from the defendant $14,040 for the last three years of the term of said agreement. The second count alleges a demand for an accounting, a refusal thereof, and that a sum the exact amount of which was unknown to plaintiff, approximated at $10,000 in excess of the minimum royalties, was due plaintiff. The third count alleges that defendant agreed to pay plaintiff the reasonable value for the exclusive use of his inventions; that defendant did, in fact, use plaintiff's patents; that plaintiff had fully performed all of the provisions of the agreement on his part, and that there was due and owing plaintiff $20,640 under this count.
Defendant filed no answer; but it did make a demand for a bill of particulars which was furnished. Plaintiff's answers disclosed that the agreement upon which this suit was based, although reduced to writing, was not signed by either party.
Thereafter, defendant served plaintiff with a notice of an application to strike the complaint on the grounds that it was in part sham, and was in part frivolous, in that it did not disclose a legal cause of action. This notice was supported by an affidavit, to which was attached the particulars furnished, and in which the affiant concludes that since the agreement was to commence August 1st, 1930, and thereafter continue for a period of five years, it was in violation of section 5 of our statute of frauds. 2 Comp. Stat., p. 2612.
Plaintiff filed an affidavit verifying the allegations set forth in the complaint.
The learned Circuit Court judge, sitting as a Supreme Court commissioner, held:
"The contract upon which the action is based is undeniably an oral one. It is for services not to be performed within one year. As such it is void and unenforceable under section 5 of the statute of frauds. Also, see, McElroy v. Ludlom, 32 N.J. Eq. 828; Dolan v. Miller, 13 N.J. Mis. R. 543 .
"I have examined the authorities submitted on behalf of the plaintiff contending that the complaint cannot be struck because of the defense of the statute of frauds without the same having been set up by answer and because the bill of particulars is not a part of the record and cannot be considered on this motion; also that it is inequitable for defendant, where there has been part performance, to set up the statute of frauds, and, further, that because the contract was reduced to writing, even though not signed, it may be sufficient to take the case out of the statute. A careful consideration of all those matters leads me to the conclusion that they are not in point and have no merit.
"The complaint being sham will be struck."
Accordingly he ordered that the defendant's application be granted and "that the complaint herein be and the same is hereby struck."
On rule for judgment the Supreme Court ordered that the clerk enter a judgment of nonsuit; and that the writ of attachment be vacated and for nothing holden. The rule was entered. It is the propriety of that judgment that is here challenged.
On appeal from the Supreme Court.
For the appellant, Joseph J. Corn.
For the respondent, Lionel P. Kristeller ( James A. Castner, on the brief).
We desire, in limine, to make the observation that we are not to be understood, in our determination of this cause, as in anywise departing from "the ancient rule of law that error (now appeal) will lie only after final judgment" ( Salaman v. Equitable Trust Co., 105 N.J.L. 649 ; 146 Atl. Rep. 423; Lully v. National Surety Co., 106 N.J.L. 81 , 85; 148 Atl. Rep. 762), and that "an appeal does not lie from an order granting a motion to strike out the cause of action contained in the complaint." Lully v. National Surety Co., supra. But a writ of error (now appeal) does lie in all cases where the decision of the lower court is final, and has not proceeded from a matter resting in discretion. Cf. Eames v. Stiles, 31 N.J.L. 490; Allgair v. Hickman, 82 Id. 369; 81 Atl. Rep. 752; Hanford v. Duchastel, 87 N.J.L. 205; 93 Atl. Rep. 586; Jaudel v. Schoelzke, 95 N.J.L. 171; 112 Atl. Rep. 328. The right of appeal from a judgment of nonsuit is well settled. Rutherford v. Fen, 21 N.J.L. 700; Jaudel v. Schoelzke, supra.
We think the learned judge fell into reversible error.
First: Nowhere is it brought to our attention, nor do we perceive anything, which can possibly be characterized as false about the facts set forth in the complaint. The opposite, in fact, appears to be true. Obviously, therefore, the complaint is not sham. Cf. National Surety Co. v. Mulligan, 105 N.J.L. 336 (at p. 338 and cases there cited); 146 Atl. Rep. 372. It is, moreover, well settled that the power to strike a pleading as sham, frivolous or false will not be exercised unless it clearly and palpably appears to be so. The cautious exercise of such power is imperative. Louis Kamm, Inc., v. Flink, 113 N.J.L. 582; 175 Atl. Rep. 62. Thus it has been said repeatedly, that the duty of the court, on such a motion, is to determine whether an issue of fact is presented, and not to try the issue on affidavits. It is only where the matters set up in the affidavits submitted on the part of the defendants are not controverted, and demonstrate that the cause of action pleaded is a sham, and is without factual support, that the court is justified in granting the motion. See Solomon v. Salins, 108 N.J.L. 214 ; 157 Atl. Rep. 383; Jaeger v. Naef, 112 N.J.L. 417 ; 171 Atl. Rep. 166; Torricelli v. Sebastini, 112 N.J.L. 458 ; 171 Atl. Rep. 526; Louis Kamm, Inc., v. Flink, supra (at p. 596 of 113 N.J.L. There was no such proof in the case at bar. Defendant did not even attempt to deny, much less to demonstrate, the falsity of the facts as pleaded by the plaintiff.
Second: Was the allegation in defendant's affidavit, based on plaintiff's answer to the bill of particulars, that plaintiff's alleged cause of action was predicated on an oral agreement in violation of section 5 of the statute of frauds, sufficient to justify the learned judge in concluding that the complaint did not set forth a legal cause of action? We think not.
(a) A bill of particulars furnished is no part of the record of the case and cannot be used on a motion to strike a pleading. "The theory of ordering particulars is to limit the proof to matters specified in the bill of particulars and to enable the other party to meet his opponent's proof without danger of surprise. Consequently, such bills have relation to the trial and not to the record." State v. Lehigh Valley Railroad Co., 94 N.J.L. 171, 174; 111 Atl. Rep. 257. The same theory applies to civil cases. Cassatt v. First National Bank of West New York, New Jersey, 9 N.J. Mis. R. 848; 156 Atl. Rep. 278; Tierney v. Tierney, 13 N.J. Mis. R. 654, 656, et seq.; 179 Atl. Rep. 314; Wolfson v. Mills, 112 N.J.L. 1 ; 169 Atl. Rep. 359.
(b) In order to be available as a defense, the statute of frauds, like the statute of limitations, the pleas of release, payment, performance, or of facts showing frauds, illegality, or contributory negligence, must be specifically pleaded. Supreme Court rule No. 58 (rule 40, Practice act of 1912). Thus the statute of frauds cannot be raised under the circumstances exhibited here, on a motion to strike but only by answer in the nature of a plea.
Our courts (both in law and in equity) have held that where the existence of the agreement is denied, such a denial entitles the defendant to the benefit of the statute without pleading it, but where the existence of the agreement is admitted, the statute of frauds must be pleaded to be available as a defense. Van Duyne v. Vreeland, 12 N.J. Eq. 142; Busick v. Van Ness, 44 Id. 82 (at pp. 84, 85); 12 Atl. Rep. 609. See, also, Lozier v. Hill, 68 N.J. Eq. 300 (at pp. 305, 306); 59 Atl. Rep. 34.
A clear and comprehensive resume of the law on the subject is found in Douma v. Powers, 92 N.J. Eq. 25 ; 111 Atl. Rep. 401, wherein Vice-Chancellor Stevenson held (at pp. 26, 27, 92 N.J. Eq.) that:
"The rule is well settled in New Jersey and generally in other states that declarations in actions at law and bills in suits in equity are not demurrable because they fail to allege affirmatively that the contract sued on, which are within the operation of the statute of frauds, are in writing. The rule of pleading is precisely the same in courts of law and courts of equity. Browne on Frauds (5 th ed.), § 505. In Whitehead v. Burgess (1887), 61 N.J.L. 75, 76, Mr. Justice Van Syckel, speaking for the Supreme Court, states the principle as follows:
"`Where an action is founded upon a contract, which at common law is valid without writing, but which the statute required to be in writing, the declaration need not count upon or take notice of the writing.
"`If an action is brought upon a promise to pay the debt of another, the declaration need not aver that the promise is in writing even if such be the fact.
"`The reason is that the statute of frauds merely introduces a new rule of evidence but does not alter or affect the rule of pleading.' (See cases cited.)
"In Hinchman v. Rutan, 31 N.J.L. 496, Chief Justice Beasley, in delivering the opinion of the Court of Errors and Appeals, says (at p. 498):
"`It has uniformly been held, since the time of Charles II, when the statute of frauds was first enacted, that in declaring on a contract within its operation it need not be alleged or substantially shown that the contract was in writing.'
"The rule is equally well settled that when the declaration or bill shows on its face that the contract sued on was oral — was not in writing — the statute of frauds is available as a defense on demurrer. Wirtz v. Guthrie (Vice-Chancellor Emery, 1913), 81 N.J. Eq. 271, 276.
"The following are some of the authorities which sustain the foregoing propositions: Cozine v. Graham, 2 Paige 177; Wentworth Lumber Co. v. McLean ( Ga. Appeals), 97 S.E. Rep. 194; Boney v. Chesires (Ga.), 92 Id. 636; Kinney v. Kinney, 93 Id. 496; Campbell v. Burnett ( Maryland Court of Appeals, 1913), 87 Atl. Rep. 894; Dudley v. Bachelder, 53 Me. 403, 406; Farnham v. Clements, 51 Me. 426; 1 Dan. Ch. Pl. (6 th ed.) 365; Ziegner v. Daeche, 91 N.J.L. 634.
"Where the bill sets forth a contract within the operation of the statute of frauds, without showing whether or not the contract was in writing, the advantage of the statute as a defense can be taken by a plea. Story Eq. Pl. 761; 1 Dan. Ch. Pr. (6 th Am. Ed.) 655.
"If the defendant files an answer admitting or alleging that the contract set forth in the bill was an oral contract, he must expressly plead the statute of frauds in defense or he will be deemed to have waived the statute. Van Duyne v. Vreeland, 12 N.J. Eq. 142; Cozine v. Graham, supra; Story Eq. Pl. 763.
"If the defendant files an answer simply denying that the contract set forth in the bill was in fact made, he has the full benefit of the statute of frauds as a defense at the hearing. The denial of the contract casts upon the complainant the burden of legally proving his contract. See Lozier v. Hill, 68 N.J. Eq. 300 (at p. 305), for New Jersey authorities sustaining this proposition."
It therefore seems to us, and we so hold, that since the defendant in the case at bar did not deny the existence of the agreement it cannot have the benefit of the statute of frauds without having specifically pleaded it. This it did not do. Compare, Wilkinson-Gaddis Co. v. Van Riper, 63 N.J.L. 394, 395; 43 Atl. Rep. 675; Kotok v. Rossi, 94 N.J. Eq. 327 ; 120 Atl. Rep. 675.
We do not, of course, in reviewing a judgment consider issues not properly before us. Nor do we intimate any opinion on such issues. Having concluded that the defense of the statute of frauds was not properly before the court below, it necessarily follows that the first count was not faulty. And since the motion to strike was addressed to the whole complaint, and not to any particular count thereof, it should, on elementary principles, have been denied. Perdicaris v. Trenton City Bridge Co., 29 N.J.L. 367: Van Schoick v. Van Schoick, 76 Id. 242 ; 69 Atl. Rep. 1080; Malone v. Brotherhood of Locomotive Firemen and Enginemen, 94 N.J.L. 347, 348; 110 Atl. Rep. 696.
The state of the record before us precludes our determination as to whether the statute of frauds is or is not applicable; whether the undertaking between the parties could have been completed within a year, although, in fact, a longer time was actually taken in performance ( Smith v. Balch, 89 N.J. Eq. 566, 568; 105 Atl. Rep. 17); whether under the eighth paragraph of the agreement (which provides for the automatic termination thereof in the event of (1) defendant's bankruptcy; (2) defendant's assignment for the benefit of its creditors; or (3) plaintiff's option to terminate upon defendant's breach thereof), it could have been terminated at any time ( Reynier v. Associated Dyeing and Printing Co., 116 N.J.L. 481; 184 Atl. Rep. 780); whether there has been a sufficient part performance, or an estoppel, by reason of defendant having paid plaintiff royalties for two years under the agreement; whether, if section 5 of the statute of frauds, is a bar, and if there was an absence of a valid express undertaking ( Voorhees v. Combs, 33 N.J.L. 494), there could be a recovery on a quantum meruit. Cf. History of Assumpsit — Implied Assumpsit by Prof. James Barr Ames, Selected Reading on the Law of Contracts. Published under the auspices of the Association of American Law Schools (1931), pp. 52 et seq. The determination of these questions must await their timely presentment.
Judgment is reversed.
For affirmance — None.
For reversal — THE CHANCELLOR, CHIEF JUSTICE, LLOYD, CASE, BODINE, HEHER, PERSKIE, HETFIELD, DEAR, WELLS, WOLFSKEIL, RAFFERTY, JJ. 12.