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Mayo v. Knowlton

29 Abb. N. Cas. 210 Court N. Y. Court of Appeals, Second Division; English

Delivered by Haight, J.

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MAYO v. KNOWLTON.
N. Y. Court of Appeals, Second Division;
October, 1892.

Headnote

[Reversing 10 N. Y. Supp. 230 ; s. c., 31 State Rep. 558.]
1. Pleading ; several causes and election between them.] Where the complaint contains several causes of action, presenting the same claim upon different theories, and they are so inconsistent that the jury should be required to agree on one to the exclusion of the other, and adequate evidence in support of each has been given, the court should not determine which should be submitted to the jury, without first requiring plaintiff to elect.
2. Trial; election between inconsistent causes of action.] A complaint set up as the first cause of action, a tender back of stock, in rescission of the contract for its purchase on the ground of defendant’s fraud in selling to plaintiff defendant's own stock without plaintiff’s knowledge while acting as his agent to purchase, and demanded return of the purchase money; and set up as a second cause of action, a claim for damages for false representations as to the value of the same stock, as having been retained by plaintiff.—Held, that the two claims were based upon inconsistent theories, and that upon the trial, although evidence had been given tending to support both causes, the plaintiff was not entitled to have both" submitted to the jury.
3. The same.] In such a case, however, the court should not itself determine which cause of action should be submitted to the jury but should require plaintiff to elect.[1]
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4. Contracts ; restoration on rescission.] A purchaser of shares of stock, who has parted with them before the discovery of the fraud in the sale to him, may, nevertheless, rescind the sale by tendering . back a like number of other similar shares of the same company, even though the corporation has been reorganized meanwhile.
5. The same.] It is no objection to such a tender that the purchaser was not the absolute owner of the shares tendered, but had
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merely borrowed them for that purpose; since by so borrowing he had a right to transfer them to the person to whom they were tendered, and to give him good title thereto.
6. Questions of law and factl\ In an action to recover back money-paid for stock, it appeared that plaintiff did not attempt to rescind the purchase until several years after the sale, but plaintiff testified that he did not discover the fraud for which he sought to rescind the contract until that time.—Held, that the question whether plaintiff rescinded the contract as soon as he discovered the fraud, should have been submitted to the jury.
Appeal by plaintiff from a judgment of the General Term of the Court of Common Pleas of N. Y. City, affirming a judgment of the Trial Term of that court, entered, upon a verdict in favor of defendant.
The action was brought by Sylvanus Mayo against Dielorme Knowlton. The complaint "set forth two-causes of action ; one for the recovery of the purchase money of 4,000 shares of the Silver King Mining Co., upon rescission by plaintiff of the contract for its purchase and. the tendering back of the stock to the defendant, because of defendant’s fraud in selling his own stock to plaintiff" while acting as the latter’s agent to purchase ; and the other for damages for defendant’s false representations as-to the value of the stock upon its sale to plaintiff.
At the trial the court charged the jury as follows :
“ In considering this case, you will leave out of view the fact that Mr. Knowlton is charged with having been the owner of the stock that was delivered to Mr. Mayo ; Mr. Knowlton denies that such was the case ; but though it had been so, it would not in view of what the evidence discloses, have given Mr. Mayo a right of action.” The court then proceeded to submit to the jury the question of fraudulent representations embraced in the second cause of action. The plaintiff requested the court to charge the jury as to the first cause of action. The court refused, and plaintiff excepted to such refusal, and also to the charge that
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defendant’s ownership of the stock delivered gave plaintiff no right of action. The jury rendered a verdict in favor of defendant.
The General Term, on appeal by plaintiff, affirmed the judgment of the trial court, on the ground that the plaintiff had no right to go to the jury upon the first cause of action, in that he had not tendered back in rescission of the contract the same stock be had received from defendant.
The plaintiff appealed to this court.
The further facts are fully stated in the opinion.
Charles N. Morgan (Morgan & Worthington, attorneys), for appellant.
I. Plaintiff was entitled to recover upon the ground that defendant sold his own stock to him while acting as his agent, irrespective of any question of intentional fraud or actual injury (citing Conkey v. Bond, 36 N. Y. 427 ; Dutton v. Willner, 52 Id. 312 ; Taussig v. Hart, 58 Id. 425 ; Bain v. Brown 56 Id. 285 ; Storys Equity Jurisdiction, §§ 315,316).
II. It was not necessary that defendant should offer to return the identical shares received (citing Champion v. Joslyn, 44 N. Y. 653 ; Horton v. Morgan, 19 Id. 170; Cobb v. Hatfield, 46 Id. 533 ; Stewart v. Drake, Id. 449 ; Burrell v. Bushwick Ry. Co., 75 Id. 211 ; Barclay v. Culver, 30 Hun, 1 ; Nourse v. Prime, 4 Johns. Ch. 490 ; Hubbel v. Drexel, 21 Am. L. Reg. N. S. 452 ; Neblett v. Macfarland, 92 U. S. 101 ; Bigelow on Fraud, 409, et seq.; Hayden v. Demets, 53 N. Y. 426 ; McNeil v. Tenth Nat’l Bk., 46 Id. 325 ; Jermain v. Lake Shore & Mich. S. Ry. Co., 91 Id. 483 ; Commercial Bk. of Buffalo v. Kortright, 22 Wend. 348 ).
John R. Tresidder (James B. Silkman, attorney) for respondent.
I. The rule requiring tender is not dispensed with by evidence that the injured party disposed
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in whole or in part of what he had received before having become aware of the misrepresentation (citing Bigelow's Law of Fraud, 423 ; McCrillis v. Carlton, 37 Vt. 139 ; Masson v Bovet, 1 Denio, 69 ).
II. The shares defendant offered to return were not a good and sufficient tender in rescission of the contract (citing Cobb v. Hatfield, 46 N. Y. 533 ; Gould v. Cayuga County Nat. Bk., 86 Id. 75 ; 99 Id. 333). The principle that one share is precisely equal in value to every other share of the same stock, is applicable only in certain equitable actions, or in cases in which there has been no-delivery to the vendee (citing Horton v. Morgan, 19 N.Y. 170 ; Champion v. Joslyn, 44 Id. 653).

The complaint alleges two causes of action. The first allegation is, in substance, that at variious times between the 1st day of June and the 1st day of September, 1882, the defendant agreed to purchase for the plaintiff, as his agent, 4,000 shares of the stock of the Silver King Mining Company; that in pretended fulfillment of such agreement, and with the intent to deceive and defraud the plaintiff, the defendant caused to be transferred to the plaintiff stock of the company belonging to himself, and received and retained to his own use the money paid therefor; that in the month of June, 1886, the plaintiff first became informed of the facts, and thereupon tendered to the defendant the stock received from him, and demanded the return of the money paid.

The second cause of action, in substance, alleges that the plaintiff purchased of the defendant the stock in question, and that, in order to induce .such purchase, the defendant falsely and fraudulently represented the stock to-be of a value largely in excess of the sum paid per share, and that a dividend of ten per cent, had been declared thereon ; and demanded the damages sustained by reason, of such false and fraudulent representations.

Upon the trial, evidence was given in support of both

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causes of action. At the conclusion of the evidence the court submitted to the jury the question of fraudulent representations embraced in the second cause of action alleged in the complaint, after which the plaintiff asked to have the first cause of action alleged submitted to the jury, and upon the refusal of the court, took an exception thereto. The jury found for the defendant, and the judgment entered upon such verdict has been affirmed by the General Term upon the ground that the evidence did not establish a rescission of the contract by the plaintiff by reason of his failure to tender to the defendant the stock received from him.

The first cause of action alleged in the complaint is based upon a rescission of the contract by reason of the fraudulent performance thereof, and is to recover the purchase price of the stock; while the second cause of action is based upon an affirmance of the contract by a retention of the stock, and is to recover the damages sustained by the plaintiff by reason of the false representations made by the defendant in reference to its value, etc. The two claims are based upon conflicting or inconsistent theories, and the plaintiff was not entitled to recover upon both. Six of the jurors might find in his favor upon the first, and against him on the latter, while the other six jurors might find in his favor upon the first, and against him upon the former.[1] If entitled to recover back the purchase price of the stock, he would not be entitled to recover for the damages sustained by reason of its being of less value than that which he paid for it. If he was entitled to recover damages for the false representations made in reference to its value, etc., he would not be entitled to recover the purchase price. So that he did not have the right to have both causes of action submitted to the jury. The court might properly have required him to elect as to which one he would have submitted, but,

* See Note in 24 Abb. N. C. 326 .

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instead of doing this, the court saw fit to submit the second, and refuse to submit the first; thus-electing for him. This the court should not have done.

If, as is claimed, the defendant agreed to purchase for the plaintiff, as his agent, 4,000 shares of the stock of the Silver King Mining Company, and in the pretended fulfillment of such agreement, and with the intent to deceive arid defraud the plaintiff, the defendant caused to be transferred to him stock of the company belonging to himself, and received and retained to his own use the money paid therefor, the plaintiff, upon the discovery of the fraud, had the right to rescind the contract, because of its fraudulent performance, and recover back the purchase price paid (Taussig v. Hart, 58 N. Y. 425 ; Conkey v. Bond, 36 Id. 427 ).

We are thus brought to the question as to whether there is evidence that the plaintiff rescinded. It appears from his testimony that in the latter part of the year 1882 the property and assets of the Silver King Mining Company were conveyed to the Silver King Mining and Tunnel Company, and by agreement the stock of the former company was convertible into the stock of the latter company ; that the plaintiff had procured his stock to be so, converted ; that, upon the discovery of the fraud practiced upon him, he borrowed 4,000 shares of the stock of the Silver King Mining Company, which had not as yet been so converted, and tendered the same to the defendant, and demanded the repayment to him of the purchase price, with the interest thaf had accrued thereon ; that the stock so borrowed by the plaintiff was borrowed for the purpose of making the tender to the defendant.

Undoubtedly, when the purchaser of personal property capable of identification and description has sold and parted with the same before the discovery of fraud practiced upon him in the purchase, he will be left to an action for damages. Having parted with the property, he can no longer rescind by tendering back that which he had

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received. But the stock had ho earmark; One share was the same as another, and could not be identified or distinguished therefrom. Each share represented an equal interest in the property and assets of the corporation ; so that if the defendant had accepted the 4,000 shares of the stock tendered to him, he would have had the same interest in the property and assets of the company as that sold by him to the plaintiff (Horton v. Morgan, 19 N. Y. 170 , 173). True, a new company had been organized and the assets of the old had been transferred to the new company. The plaintiff had converted his old stock into the stock of the new company, but it is not seen how this should deprive him of his right to rescind, provided he is able to do so. He found stock of the old company which had not yet been converted, and borrowed it for the purpose of making the tender. Having borrowed it for that purpose, he had the right to transfer it to the defendant, and give him good title thereto, thus restoring him to all the rights and property parted with.

We fail to see any reason why this may not be done. In the case of Champion v. Joslyn ( 44 N. Y. 653 -658), the trial court, in charging the jury upon the question of a tender, said: “ It must be stock to which he has a .right, not stock the certificates of which he has borrowed, having no title to the stock, simply to go through the form of a tender.” To this exception was taken, and on review the court says, in reference thereto, that, “ if the defendants had lawfully obtained the certificates, and were invested with the power to transfer them, it was of no consequence to the plaintiff whether they had borrowed them, or were the unqualified owners ” (see, also, Burrall v. Railroad Co., 75 N. Y. 211 ; Barclay v. Culver, 30 Hun, 1 ; Nourse v. Prime, 4 Johns. Ch. 490 ).

A purchaser of property in order to rescind must do so promptly upon the discovery of the fraud (Cobb v. Hatfield, 46 N. Y. 533 ). The plaintiff purchased the stock in the summer of 1882, and he did not attempt to rescind until

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the year 1886; but he tells us that he did not discover that the defendant had delivered his own stock until that time. While the fact might have been found against him; we think the question was. one that should have been submitted to the jury.

The judgment should consequently be reversed; and. a new trial ordered with costs to abide the event.

All the judges concurred.

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