Gaylord v. Brown

112 N.Y.S. 745 | N.Y. App. Div. | 1908

Ingraham, J.:

The plaintiff alleges that he was in the employ of the firm of A. O. Brown & co., who are defendants in this action; that the firm -had become interested in certain gold and - copper, lands in the Republic of Santo Domingo and caused the defendant, the San Domingo Gold and Copper Company to be incorporated with a capital of $64,000,000; that the defendants sold a. large amount of ' stock of the said company and received Upwards of $500,000 thérefor; for the purpose of inducing subscriptions to the stock of the company, the defendants represented that the said company owned a large amount of property in the Dominican Republic which contained gold to the extent of $150,000,000; that the defendants had examined the property transferred ; that competent mining engineers had examined the property and reported favorably thereon ; that the said property liad been purchased and paid for in full; that a corps of mining engineers had been sent to install machinery thereon ; that the defendants further represented to the plaintiff that for the $5,000 which the defendants requested the plaintiff to subscribe to the stock of the said company he would receive in return, within six months, at least $75,000, and that the plaintiff was to receive the stock subscribed for by him at the same price that it. was to be allotted to the defendant Buchanan and his friends, Buchanan being a member of the firm of Brown & Co.; that the plaintiff, relying upon the truth of these representations, subscribed for the stock of the company and paid to the defendant Brown & Co. $5,000 therefor and received 250 shares of the capital stock of the company at the rate of $20 per share. It is then alleged that the defendant Buchanan received large amounts of stock of the company at a price much lower than $20 a share, and that the defendants had sold a large amount of said stock to third persons at $4 per share; that these gold properties are practically worthless, and that the defendants never owned the same; that none of the properties contained gold running $1,000,000 or gold in any quantity, or of any commercial value whatever, and, generally, that all these representations were false ; that on January 15, 1907, all operations were abandoned; that Brown & Co. subsequently alleged that they would pay on January 15, 1908, to the subscribers to the said stock the price paid by them to the company, together with interest at four per cent; that large amounts of money had been retained by the defendants for over a year, since the company ceased operations; that if the representations relying upon which the plaintiff subscribed to said stock had been true, 250 shares would have been worth $125,000, and that the shares are now valueless, and the plaintiff demands judgment in the sum of $125,000.

Tho defendant the San Domingo Gold and Copper Company was made a party defendant, and it interposed an answer admitting certain allegations of the complaint and denying other allegations, and generally denying all of the allegations^ of fraud; and as a separate defense it was alleged that all of the money .that it received for its stock has been long expended, and that the said company has no method of raising money except by borrowing' from the defendants Brown & Go. ; that the plaintiff, about the 11th of October, 1906, deposited the certificate for the shares of stock before mentioned and assigned all his right, title and interest in said stock to the defendants Brown & Co. to secure certain loans and advances made to him by them, and that subsequently the plaintiff assigned all the right, title and- interest remaining in said stock. to one Alice B. Gaylord, and that this defendant is ready and willing, upon the receipt of the proper releases, authorizations, assignment or transfer of said shares of stock from the said Brown & Co. and Alice B. Gaylord and from the plaintiff to borrow from the defendants Brown & Co. the sum of money necessary to repay to the plaintiff the amount subscribed by him for said stock, together with interest at four per cent, and to repay to him the said amount. It is clear that this defense is frivolous. If the plaintiff had any cause of action against this San Domingo Company to recover $125,000, or any other sum, neither the fact that the company has no money to pay nor that on compliance with certain conditions it would borrow the money from a codefendant and then pay, is any possible defense.

-The learned judge in overruling this demurrer said that it was difficult to determine whether the plaintiff seeks to recover for deceit, or on a promise to repay the plaintiff the money he expended, or in equity to enforce a trust on the funds now in the hands of the defendants. But we think that although the complaint contains immaterial allegations there is but one cause of action alleged, which is to recover damages for fraud. The amount alleged to have been paid for the stock was $5,000. The plaintiff has made no tender of the stock and made no demand for a return of this sum ; makes no claim to rescind the contract, but simply alleges that this purchase was induced by false and fraudulent misrepresentations, and seeks to recover the damages sustained by him in consequence of the fraud. The complaint alleging that the defendants made these representations it would appear that a good cause of action was alleged as against all the defendants, and, as we think that no facts were alleged in this separate defense which were a defense to this cause of action, the demurrer should have been sustained.

The judgment appealed from is, therefore, reversed, with costs, and the demurrer sustained, with costs, with leave to the defendant to amend the answer within twenty days on payment of such costs.

Patterson, P. J., Laughlin, Clarke and Scott, JJ., concurred.

Judgment reversed, with costs, and demurrer sustained, with costs, with leave to defendant to amend, on payment of costs.