25 N.Y.S. 682 | N.Y. Sup. Ct. | 1893
Defendant’s testator, John P. Kennedy, was during the period covering the transaction in controversy, and for a number of years prior thereto, the president of the Howe Machine Company. He was also interested in other enterprises, one of which brought about an acquaintance with Kountze, one of the results of which was a request by Kountze that Kennedy advise him -of any business opportunities in which it might be deemed desirable ■to invest money. Prior to November, 1883, Mr. Kennedy, although president of the corporation, had only a nominal interest in it, hav
Assets.
Real estate, Bridgeport.........................................$ 460,000
“ “ elsewhere ......................................... 34,000
Personal property.............................................. 205,000
New building and machinery.................................... 35,000
Bills receivable, accounts....................................... 300,000
$1,034,000
Liabilities.
. $320,000 First mortgage bonds.....................
. 50,000 Less sinking fund.............-...........
$270,000
80,000 Savings bank..................
150,000 Bills payable and open accounts
$500,000
The referee has found, and upon evidence, sufficient to support it, that the statement as to the assets was substantiaHy true; but with reference to the liabilities he found that the balance sheet of the corporation showed an indebtedness, at the time of the preparation of the statement, of $571,001.31, whereas the statement gave the liabilities at $500,000. He further finds that the excess, amounting to upwards of $70,000, was deducted because it was supposed that they were not actual liabilities of the company, or did not properly belong to bills payable and open accounts. The referee further found that there were certain small liabilities, aggregating $8,262.67, which had not been entered upon its books at the time of the sale
If the findings to which we have referred are to stand, the judgment dismissing the complaint should be affirmed. The plaintiffs, claiming to have been defrauded, had one of three courses open te>them: (1) To rescind the transaction, offering to restore what they had received, and commence a suit for the recovery of the moneys-paid. (2) To bring a suit in equity to obtain a rescission of the contract, and to recover what they had parted with, the pleadings containing an offer to restore what they had received» (8) To keep what they had received, and to sue for damage®for the fraud. The plaintiffs chose the latter remedy, and thereby assumed the burden of establishing, separately and independently, five things,—representation, falsity, scienter, deception, and injury. If any one of these essential constituents of an action of this character be lacking, there can be no recovery Brackett v. Griswold, 112 N. Y. 467, 20 N. E. Rep. 376. It is both, proven and found that the representations were made, that they were untrue, that plaintiffs were deceived thereby, and that damage resulted; but it is not found that defendant had knowledge-that they were untrue; on the contrary, it is affirmatively found that he believed them to be true, and had reasonable ground for-his belief. In addition to the general rule stated by the court rathe case last cited, there have been before the courts, many, times,, controversies where all the requisite elements of such an action; were found to be present except knowledge on the part of the-person maldng the representations of their falsity, and its absence-has universally been held to prevent a recovery. Marsh v. Falker, 40 N. Y. 565; Chester v. Comstock, Id. 576; Oberlander v. Spiess, 45 N. Y. 175; Wakeman v. Dalley, 51 N. Y. 27; Duffany v. Ferguson, 66 N. Y. 484; Daly v. Wise, 132 N. Y. 306, 30 N. E. Rep. 837. Am. exception to the rule is when the person making the representations assumed or intended to convey the impression that he knew them to be true, though conscious that he had no such knowledge,. (Marsh v. Falker, supra,) but that question will be considered, so-far as necessary in this case, later on.
¡First mortgage bonds............................................ $270,000
Savings bank.................................................... 80,000
.Bills payable and open accounts.................................. 150,000
Total ...................................................... $500,000
The first item was correctly stated. The second item represented the principal of the debt due the savings bank, in ¡addition
Bills Payable.
City Savings Bank............................................. $80,550 80-
Bridgeport Bank............................................... 15,000 00
A. B. Stockwell................................................ 10,000 00
Indianapolis Cabinet Co........................................ 5,537 10
Sundry bills payable........................................... 70,477 89
$190,565 79
Accounts Payable.
$242,237 81 O. K. Garrison.................................
2,625 96 Howe Sewing Machine Co.....................
1,800 00 Bridgeport Sav. Bank (Int.)...................
239 00 Howe St. property (rent)......................
98,281 75 Sundry accounts payable.......................
-- 345,184 52
Total ................................................... $535,750 31
From these items the secretary made the following deductions:
First mortgage bonds............................... $270,000 00
City Savings Bank................................. 80,550 80
A. B. Stockwell.................................... 10,000 00
Bridgeport Bank.................................. 15,000 00
“ “ (Int.) .............................. 1,800 00
Indianapolis Cabinet Co.....................•....... 5,537 10
Howe Sewing Machine Co.......................... 2,625 96
Howe St. property (rent)........................... 239 00
Total deductions......................................... $385,752 86
Leaving a balance of bills and accounts payable of...............$149,997 45
While the statement presented to Mr. Kountze showed...........$150,000 00
The two first items, namely, first mortgage bonds and indebtedness to City Savings Bank, were properly deducted because separately stated on the paper given to the plaintiffs. As to the other items, he testified that he deducted the Stockwell claim of $10,000 because it was for a draft drawn on the Howe Machine Company by Stockwell, 'and accepted by the treasurer, without authority. Subsequently the company successfully defended the suit brought upon it. The Bridgeport Bank items, principal and interest, were deducted because the money never came into the possession of the company or benefited it, which claim the company not only refused to pay, but it never was paid, nor has it ever been called upon by the bank to pay it since their first refusal. The Indianapolis Cabinet Company item, he says, he deducted because the Howe Machine Company did not, in fact, owe it. That such apparent indebtedness consisted, of a note which he regarded as accommodation paper. It was given to the cabinet company pursuant to a contract with it that they should use the paper, and furnish woodwork for it. When the woodwork should be received, which event
This brings us to a consideration of the items which the referee has found to have been liabilities not appearing on either the books or statement. The first consists of various small items, aggregating $8,262.67, which were placed on the books subsequent to the making of the statement. Without stopping to consider the several items making up such amount, it may be said, generally, that some of them were for bills rendered and paid subsequent to the making of the statement; that over one-half of it consisted of taxes which were not entered upon the books until May 26, 1884; and, further, it should be said that it nowhere appears that the secretary knew of the existence of such items when he prepared the statement, nor any direct evidence that Mr. Kennedy knew about them. The referee found that there was an indebtedness to Mrs, Stockwell of $15,000, which was not included in the statement. This claim, which was originally for $100,000, was founded upon a bond purporting to be given by the Howe Machine Company as an indemnity to secure Mrs. Stockwell for any mortgage which she might give for the benefit of the Howe Machine Company. The books contained no reference to its existence, and liability thereon was denied by its officers. The only mortgage that she ever executed was to the Bridgeport Savings Bank, to secure the sum of $15,000, which has been referred to elsewhere as deducted from the liabilities by the secretary, on the ground, as he alleges, that the money never came into the hands of the company. Some time in March or April, 1884, and necessarily after the statement was made, a suit was brought on the bond, which was compromised April 19th, following, by the giving of a note by the company for $15,000, payable in installments. Whether any demand was made upon the officers of the company for the payment of any sum on this bond prior to the making of the representations does not appear, nor does it appear that Kennedy knew anything about it prior to the commencement of the suit. The referee further found that the company was indebted to the Credit Company, Limited, in the sum of $62,475, which was not included in the statement of liabilities. This liability arose under the following circumstances: A. B. Stockwell, while in London in 1877, drew drafts in such amount upon the Howe Machine Company, which were accepted by his brother, who was then the treasurer of the company. The proceeds of the drafts were applied to the individual use of the drawer,
We have thus alluded to some of the evidence which tends to support the conclusion of the referee that. tMs remarkably inaccurate statement of liabilities, when presented to Kountze by Kennedy, was believed by the latter to be true, and that there was reasonable ground upon which to found such belief. The record is not Without evidence supporting contrary inferences, but it is not of such a character as to warrant this court in setting aside the findings complained of, on the ground that such determination is against the weight of evidence.
The further point is made that the referee erred in refusing to find “that the said representations of the defendant to the plaintiffs were so made as to convey an 'impression to the plaintiffs that the defendant had actual knowledge of the truth thereof.” It is a significant fact that, although Mr. Kountze was examined and cross-examined in relation to the conversations had between Mm and Mr. Kennedy prior to, at the time of giving, and subsequent to, the statement, he did not suggest that Kennedy had as
