135 Misc. 851 | N.Y. Sup. Ct. | 1930
Defendant’s motion is for judgment on the pleadings, which consist of the third amended complaint, the amended answer and the reply thereto. The action is for moneys paid to defendant by plaintiffs for bonds .of the Green Star Company. The sufficiency of the complaint has been upheld (127 Misc. 45; affd., 219 App. Div. 711).
It is contended that this new matter, as admitted in the reply when taken in connection with the allegations of the complaint, requires that the complaint be dismissed. The pleadings in the second action are now before the court. Furthermore, defendant has pleaded the conversion by plaintiff of its bonds into the stock of a reorganized corporation and the acceptance and retention by plaintiff of dividends declared by such corporation. In substance, these allegations are admitted by the reply, which seeks to avoid the affirmative defense. Thus two matters are now brought to the attention of the court which did not appear in the pleadings at the time when the complaint was attacked. The question is, therefore, whether such new matter requires a complaint, good upon its face, to be dismissed without trial. Does the pendency of the second action or the acceptance of dividends under the" circumstances set forth in the reply defeat plaintiffs?
Plaintiffs assert that the decision upon the motion in the second ■action made upon the theory that these two complaints were in ■conflict adjudicates that there is actually no conflict in fact or theory between the two actions and that each may be prosecuted up to trial. They allege that the dividends were not taken for their own account or with the intent that their receipt should be in ratification of the transaction, or be evidence that they had determined to accept the new stock and dividends in lieu of the purchased bonds, and affirmatively aver that the dividends were when received
Assuming, as the court must, that the allegations of the reply are true, defendant is confronted by the situation that not only has the Appellate Division concluded that these actions are not in such conflict that the mere pendency of one would bar the maintenance of the other, but that the decision so reached was upon a motion made by Merendante at the behest and with- the active participation of defendant trust company; that it was virtually this defendant’s motion and that consequently that decision of the Appellate Division laid down the law of the case for all of these parties. Even though the averments of the complaints be not in actual conflict so that one remedy bars the other, nevertheless the question to be considered is whether the present pleadings present such proof of ratification of the original purchase transaction by plaintiffs that as matter of law no result can ultimately be reached in this case save the dismissal of the complaint.
In Schenck v. State Line Telephone Co. (238 N. Y. 308) plaintiff instituted an action at law for damages due to a fraud upon a sale of property. That action was barred by the Statute of Limitations. He brought a later action seeking in equity a judgment of rescission with a conveyance of the land purchased. The court held that the action merely evinced plaintiff’s readiness that the transaction be allowed to stand upon the condition that his demand for damages be heeded and the damage paid. Defendant, not having assented to that condition, was not permitted to draw from it the conclusion that the plaintiff’s conduct in maintaining the first suit was actually an affirmation that the purchase stand. Under that decision the position taken by plaintiffs in the second action here should be understood to be that they are entitled to damages for the misrepresentations causing a delay in sale and that if defendant pay such damages plaintiffs are willing to retain the securities. Payment by defendant of the damages is the condition upon which plaintiffs will ratify the transaction.
In Clark v. Kirby (243 N. Y. 295) plaintiffs, upon discovering
It cannot be said here that plaintiffs’ rescission of the purchase has “ not stood or will not stand.” That conclusion if found at all may not be reached until the actual trial of the action. If plaintiffs triumph in this action the rescission will have stood. If not, the attempted rescission will have been futile. If plaintiffs succeed, obviously there can be no recovery in the later action. If unsuccessful here in obtaining the purchase price of the bonds, plaintiffs may still press the later action to trial and upon proper proof recover.
The records of this court show that upon the motion of Mercábante an order was entered restraining the trial of the later action until after the determination of this action, which order was affirmed (226 App. Div. 653), this being the outgrowth of the motion which, according to the reply, was as heretofore stated actually made by Merc adante at the instance of the corporate defendant. While the acceptance of dividends under the circumstances set forth in the answer would ordinarily be a ratification, by conduct, of the transaction which plaintiffs in their complaint claim to have rescinded (Brennan v. National Equitable Investment Co., 247 N. Y. 48’6), nevertheless the reply here shows that plaintiffs received such dividends, not from defendant, but from the reorganized corporation in which they had been persuaded by defendant to become a shareholder in exchange for the bonds which defendant had sold to plaintiffs, that the dividends were taken with the intent to hold them only as custodian for defendant under the circumstances, and that they were placed in a separate account upon the books which evidenced the fact that the checks and the moneys therefrom were really defendant’s, and defendant was so notified. The dividends were tendered by plaintiffs to defendant, which refused to receive them.
There was no attempt, as in the Brennan case, by the payee to change the very nature of the obligation for which the checks were given. There, though the checks were dividend checks, plaintiff claimed that he received and kept them as a partial distribution of capital and as restitution of the moneys which he asserted had been taken from him. The dividends were paid by the
It may be that upon the trial here defendant will succeed in establishing that plaintiffs by their conduct subsequent to the institution of this action have actually receded from their rescission position and ratified the original purchase. This court may not, however, as matter of law so declare now upon the allegations of the pleadings. Motion denied. Order signed.