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Administrative History

The Attorney General, acting on behalf of the people of the State of New York, filed a complaint alleging that between 1869 and 1875, contractors Henry D. Denison, James J. Belden, A. Caldwell Belden, and Thomas Gale defrauded the State of over $340,000, received in excess of the amount agreed to in a contract for work on the canal system. The defendants counter-claimed that the State in fact still owed them over $73,000 for work completed and materials supplied. The referees, before whom the original action was tried, ruled that the contractors had unlawfully deviated from the original contract and substituted unapproved alterations in specifications that increased the cost of the work. The referees ruled that the State was entitled to recover payments made and material provided for the unauthorized work.

The General Term of the Supreme Court in the Third Judicial Department, hearing the case based on appeal filed by Denison et al in 1879, ruled that the State was in effect trying to recover money not based on a fraudulently obtained contract, but based on fraud carried out under a legitimate contract. The court ruled that the State could not recover money under these circumstances without proving, as required in equity cases, that fraud actually occurred. Since, in the court's opinion, the State had not proved fraud, judgment of the referees was reversed and a new trial granted.

The Attorney General appealed the General Term's decision to the Court of Appeals and in April of 1880, the higher court affirmed the order of the General Term and rendered judgment absolute in favor of the contractors. This meant that the State could take no further action to recover money from the contractors. Upon remittitur to the court of original jurisdiction, the contractors sought and were granted judgment against the State for the amount that they had counter-claimed in the original action. The Special Term of the Supreme Court ordered this judgment vacated on grounds that the contractors' counter-claim in the original action was improper and was not properly adjudicated in that case. In 1881, the Court of Appeals agreed, ruling that the judgment absolute that it had rendered in 1880 did not grant the court of original jurisdiction authority to render monetary judgment against the State.