Newbery v. Garland , 31 Barb. 121 ( 1860 )

By the Court, Emott, J.

The demurrer in this case was taken to the whole complaint, and it was properly overruled if the complaint can be sustained in either of two aspects which it presents. We are of opinion that it states a good cause of action for fraud or deceit, and shall not therefore advert to the other branch of the case.

There are two grounds of demurrer stated; one a defect of parties, and the other that there is no cause of action. The defendant claims that Alexander J. Hamilton should have been made a defendant with him. It sufficiently appears, from the complaint; that Hamilton acted only as the agent of the defendant, that the stock purchased by the plaintiff through Hamilton was in fact purchased by the defendant, and that the land conveyed by the plaintiff in payment was received by Hamilton for the defendant, and subsequently, and before the suit, conveyed to the latter. There is, therefore, no reason disclosed for making Hamilton a party to the present action.

The objection that the plaintiff's husband should have joined with her in the action is equally untenable. The suit is for fraudulent representations, whereby the plaintiff was induced to sell and part with certain lands of which she was seised to her separate use, and in which she had a separate estate, and with this separate property to purchase certain worthless stock. This stock which she received for her lands is as much her separate property as they were; and whether the action concerned the one or the other; whether it he regarded as brought for a fraud affecting the sale or the purchase; it equally relates to her separate estate, and is properly brought by her alone, under section 114 of the code as it now stands.

Upon the merits, the cause of action is clearly made out by the statements of the complaint. The defendant’s counsel is entirely in error in supposing, if we correctly apprehend his argument, that it is necessary for the plaintiff to rescind the contract, and to restore the property which she has received under it, before she can maintain an action for the fraudulent representations whereby she was induced to enter into it. The cases which he cites, and of which The Matteawan Co. v. Bentley (13 Barb. 644) is a fair example, are cases where actions were brought to recover property which had been parted with, or its value. Such actions obviously cannot be maintained without a rescission of the contract under which the property was transferred, and a restoration of every thing which has been received under it. But that rule has no application to an action to recover damages for fraudulent representations or deceit in sales or purchases. The cases only need to be stated, to show the distinction.

The complaint states a number of representations made by the defendant as to the property and condition of the company with which he was connected, and as to the value of the stock which the plaintiff was induced to purchase in exchange for her lands. It charges that these representations were false, to the knowledge of the defendant, and that they were made to defraud the plaintiff, to induce her to believe that the stock of this company was of great value, and to part with her real estate in exchange for certain shares held by the defendant. It states these facts, it may be added, with a precision which is unusual in the pleadings which we see under the present system of practice. The complaint does not state that these representations were made to the plaintiff, in this particular no doubt following the fact. Nor does it aver expressly that the plaintiff heard, or read, or came to the knowledge of them, which perhaps might have been alleged, . The only serious question in the case, which has occurred to us arises upon these features of it, although it is not pressed, in .the elaborate, brief submitted by the appellant’s, counsel. The representations which were made by the defendant are charged to have been uttered in published reports and statements of the condition and property of this company, made and signed by him as one of its officers, and generally and publicly circulated and advertised. It has been held in the court of queen’s bench in England, in the.case of Gerhart v. Bates, (20 Eng. L. and E. Rep. 130; 2 Ellis & Bl. 476, S. C.,) that an action will lie against an officer of a stock company who willfully publishes a false statement of its affairs,, whereby another is induced to become a purchaser of its stock, although the defendant had no interest in the sale. Lord Campbell asserts that, the action lies, without any privity of contract, and although the parties are entire strangers to each other. A question very similar was presented to the. superior court of the city of Hew York, in Cross v. Sackett, (2 Bosw. 617,) and although the doctrine of Lord Campbell was severely questioned by eminent counsel, it was substantially accepted by that court. There, also, an action for deceit was sustained, although the defendant had no interest in the stock which the plaintiff was induced to purchase, and reaped no benefit from the contract into which he was persuaded to enter. The doctrine of these cases, and of some others in the English courts to which I shall presently advert, is that a statement made to the public and designed to influence the public, is designed to influence every individual who is interested in its subject matter. If any person is induced to part with his property, or purchase that to which the statement refers, by what it contains, and which would naturally have that influence, the parties who have put it forth are responsible if it be false and fraudulent. Their responsibility is not the less because their representations are addressed to and may influence others besides the plaintiff. They are addressed to him among others, and if designed to mislead, and ( are capable of doing so, they are in effect made to him, if they | reach his knowledge, and influence his action. The cases in i which it has been held that a party is liable who makes a false and fraudulent representation that another person is worthy j of credit, although such recommendation is not addressed to Inor intended to defraud any person in particular, proceed upon a principle which will sustain the present action. Wherever there is deceit, designed to injure, and consequent damage, the common law will give an action. (Addington v. Allen, 11 Wend. 375. Com. Dig., Action on the case, Deceit, A. I.)

It is a question of evidence in such cases what proof will warrant the conclusion that the defendant fraudulently intended and did induce the plaintiff to make the purchase of stock. Such a question cannot be disposed of upon demurrer. The supreme court in the first district seem to have held substantially the same doctrine as the superior court on these points, in Cazeaux v. Mali, (25 Barb. 578.)

It is not necessary, however, to go as far as the courts have gone in these cases, to uphold the present complaint, since the defendant in this action was privy to the contract made by the plaintiff, and interested in the sale which was induced by his false representations. The case of The National Exchange Co. v. Drew (32 Eng. Law and Eq. p. 1) is in this respect more nearly analogous to the present. That was a case in the house of lords, and the principles upon which their judgment proceeded are very material if not conclusive upon the present question. It was held, in that case, that a joint stock company would be bound by the fraudulent statements of their directors, whereby third parties were induced to contract with them, although such statements were made in reports submitted by the directors to annual meetings of the company. A liability was admitted; the only question was whether it attached to the company, or only to its agents as individuals. In the present case the responsibility is cast upon the individual who made the representations, and the same individual profited by them. Another still more recent case in the house of lords is Bagshaw v. Seymour, reported in 4 Com. B. Rep. N. S. 873, where an action was maintained against a chairman of a company who had procured its shares to he put on the stock list of the exchange, by falsely stating in a prospectus, and in a letter to the committee of the stock exchange, that its capital was paid up. The action was by a person who . had been induced to buy some of the shares. The counsel for the plaintiff in error declined to argue the case, and the judgment seems to recognize, as law, the reason given in the printed case of the defendants in error for affirming the judgment, that such a fraudulent representation to the public affords as good a ground of action to a person injured thereby, as if it were made to such person directly. Upon principle as well as upon thesó authorities, we see no reason .why this action ' should not lie, for the false representations alleged to have been made by the defendant with the fraudulent purpose charged, although they were published to the world, and not made in the course of the dealings with the plaintiff.

[Kings General Term, February 13, 1860.

The question, of the sufficiency of the allegations of the complaint, as to the connection between these statements and the plaintiff’s conduct as cause and effect, is merely a question of pleading, and in this respect the plaintiff’s complaint is sustained by the cases in the queen’s bench and the superior court, to which I have adverted. Although it is not alleged, in terms, that the defendant’s representations were read by or came to the knowledge of the plaintiff, yet it is alleged that she was induced by these representations to purchase a certain number of shares of the stock of this company, and to give in exchange for them a conveyance of her lands. This involves the knowledge of the defendant’s statements by the plaintiff, and connects her contract and subsequent loss with those statements, as effect and cause. This is sufficient upon principle, and such a pleading is sanctioned by the authorities which I have cited.

The order appealed from is affirmed with costs.

Lott, Emott and Brown, Justices.]