214 A.D. 417 | N.Y. App. Div. | 1925
Whether the amended complaint states facts sufficient to constitute a cause of action is the question here presented for decision.
The amended complaint alleges that the plaintiff was induced by certain false and fraudulent representations made by the defendant to sell to the defendant 450 shares of stock which the plaintiff held in a family corporation, in return for three unsecured and non-interest-bearing promissory notes, one for eight months and the other two for a year and eight months, each in the sum of $5,000. Plaintiff sues for the rescission of the sale and for the recovery of the stock, and tenders back the promissory notes received.
The learned court at Special Term, in holding that the complaint was insufficient, evidently relied upon a line of authorities holding upon the respective facts presented, that the plaintiff could, by electing to rescind and suing upon such rescission, recover the damages he had suffered, and determined that no such need was here shown as would entitle the plaintiff to invoke the aid of a court of equity.
The following is the substance of the complaint: That the plaintiff was the owner of 450 shares out of 1,000 shares of the common stock of B. F. Wood, Inc., a New York corporation, of which the defendant was secretary and treasurer; that for a period of two years before the representations relied on herein for a rescission were made, the defendant had been employed as an accountant by a firm known as Wood & McClure, of which the plaintiff was a partner, and also by the corporation B. F. Wood, Inc., which succeeded the said partnership; that the defendant had complete charge of all the books and records of both the partnership and the corporation which succeeded it, and of all income tax matters and the preparation and filing of income tax returns of the partnership and corporation and also of the plaintiff personally and of his family; that the partner of the plaintiff died, and the defendant balanced the old books of the partnership and opened and kept a new set of books for the plaintiff as liquidating partner of the partnership; that by reason of the foregoing the defendant became possessed of private and confidential information concerning the plaintiff, including his affairs and the affairs of others with whom he did business; that the plaintiff had no familiarity with the books of account or income tax laws or requirements, but relied wholly on the defendant to protect his interests; that an action was pending in the State of Connecticut in which a beneficiary of plaintiff’s deceased partner was plaintiff and the plaintiff herein was defendant; that the defend
The defendant contends that this is an action to recover on the ground of duress. From the complaint, however, it can also be taken as an action to recover on account of false representations. Because the plaintiff has alleged the resultant fear which seized him, is no reason why effect should not be given to the fact that he alleges that the fear and inducement were brought on by false, fraudulent and criminal representations. In other words, the theory of the action may be regarded as one for rescission upon the ground of fraud, and not exclusively upon the ground of duress. When a plaintiff has been induced to enter into a contract by false and fraudulent representations, it is settled that he may elect to rescind and sue for the consideration in an action at law, or he may affirm the contract and bring an action at law to recover the damages suffered by him as a result of the fraud, or he may sue for rescission in equity if otherwise he cannot obtain complete redress at law. In Clark v. Kirby (204 App. Div. 447, 451) Mr. Justice Merrell said: “ The law is elementary that where one has suffered by reason of the misrepresentation of another, and has been led to part with his money in reliance upon said false and fraudulent misrepresentation, he has three independent reme
If the plaintiff is successful, the fact that a portion of his relief would be to require the defendant to account for all the income, dividends and profits received while this stock has been in his possession, in accordance with the prayer for relief, would be sufficient to give to the plaintiff the right to apply for relief on the equity side of the court; and then, in accordance with the familiar principle, the court, having thus acquired jurisdiction of the cause, can grant to the plaintiff complete relief. This, in itself, is sufficient to require a reversal of the judgment and order appealed from. As was said by Houghton, J., in Smith v. First National Bank (151 App. Div. 317, 321): “ When a court of equity has obtained jurisdiction of the parties and of the subject matter of an action, it will retain it and adapt its relief to the exigencies of the case even though it is impracticable to grant the specific equitable relief demanded. (Valentine v. Richardt, 126 N. Y. 272; Mott v. Oppenheimer, 135 id. 312; Consolidated Fruit Jar Co. v. Wisner, 110 App. Div. 99.) Not only will equity thus retain jurisdiction for the purpose of doing justice between the parties, but also for the purpose of avoiding a multiplicity of suits. (Satterlee v. Kobbe, 173 N. Y. 91, 97.) ”
In addition, as noted, the plaintiff alleges that the shares of stock cannot be purchased in the open market. This allegation, coupled with the allegation that the sale of the stock had deprived the plaintiff of the opportunity of employment in a company with which he had been associated for more than thirty years and which had been founded by his grandfather and bore the family name, would seem to give to the plaintiff a remedy in equity, upon the ground, not only that the true value of the property could not be ascertained, but that there were peculiar and exclusive features connected with the property which could not be compensated for in damages.
The defendant further urges that even though the aforesaid facts might otherwise entitle the plaintiff to come into equity, nevertheless because the plaintiff alleges that he employed the defendant to prevent the United States government from taking advantage of the alleged fraud practiced upon it, the plaintiff is not entitled to equitable relief. In this connection, however, it is
In addition there was nothing criminal in the desire of the plaintiff to be at peace with the other party in the liquidation of the partnership, nor was the plaintiff acting criminally in retaining the defendant to assist him, even assuming as true what the defendant represented concerning the plaintiff’s books and statements. It does not appear that the defendant could do anything or was expected to do anything that would thwart or influence any investigation by the government. His employment was consistent with legitimately assisting the plaintiff since it is alleged that the plaintiff was entirely unfamiliar with the books, etc. It moreover appears that the aforesaid representations led up to the situation where the plaintiff in the Connecticut action was alleged by this defendant to have threatened to “tie up ” the business and thereby destroy the value of plaintiff’s stock. This latter representation is alleged as the representation which finally induced the plaintiff to consent to the transfer.
But whether or not the plaintiff is subject to criticism or censure in connection with the employment of the defendant has no relevancy in the case at bar, since the plaintiff does not in any sense require the aid of such agreement of employment to make out his case herein, nor does the affording of equitable relief to the plaintiff herein involve an affirmation by this court of the conduct of the plaintiff in the matter. As was said in Primeau v. Granfield (193 Fed. 911, 916): “ The wrongdoing which will defeat a litigant must have connection with the matter in litigation. Misconduct in outside matters will not have such effect. A new contract upon a new consideration is not necessarily unlawful because it relates to property acquired through unlawful transactions. The real test in such a case as this is whether the plaintiff requires any aid from the fraudulent transactions to establish his demand. If he does, he cannot recover. If he does not, and the cause of action is unconnected with the fraudulent undertaking and is founded upon a collateral consideration, he may recover.”
In so far as the defendant further urges that the plaintiff is precluded by laches, this is a matter of defense. The mere fact that the contract which the plaintiff sues to rescind was made on or about April 16, 1923, whereas the complaint shows that it was' not verified until June 28, 1924, does not in and of itself show such inexcusable laches as to render the complaint bad as against a motion to dismiss.
Clarke, P. J., Merrell, Martin and Burr, JJ., concur.
Judgment and order reversed, with costs, and the motion denied, with ten dollars costs.