Conkey v. Bond

Headnote

Stock Agent to buy may not sell to Ms Principal — Sale voidable.

An agent, in assuming to buy stock for his principal, cannot set over to his principal, without his knowledge or consent, stock ofliis own as stock purchased on the authority of his principal, and the principal, on discovering the fraud, may disaffirm the transaction and recover back the money paid by him for the same. The agent stands in such relation of trust and confidence to his principal as to disable him from concluding a contract with himself without the knowledge and assent of his principal.

Appeal from tbe Supreme Court. Tbe action was brought to rescind a sale of stock in tbe Oswego Starch Company, made by tbe Defendant to tbe Plaintiff in February, 1857, and to recover $1,500, tbe price paid therefor, and certain payments made by the Plaintiff as a stockholder. The complaint alleged the facts upon which the Plaintiff claimed, and that the sale was fraudulent in fact and in law. These were, in substance, that-the Defendant undertook to purchase stock in that Company as his agent, and that he fraudulently transferred his own stock to the Plaintiff, at a price greatly exceeding its value, under the pretence that it was the stock of other parties, which he -had pimchased for the Plaintiff, as his agent; that he concealed this fact from the Plaintiff, and upon its discovery by the latter, shortly before the commencement of this suit, he refused to rescind the sale. The complaint further alleged that the Defendant made false representations to the Plaintiff as to the value of the stock and the financial condition of the Company, to induce him to make the purchase.

The judge before whom the cause was tried found that no representations were made by the Defendant which he knew to be false, and was of opinion that the Other facts, established by the pleadings and proof, did not entitle the Plaintiff to relief. These were substantially as follows :

In January, 1857, the Defendant was the owner of a number

of shares of the Oswego Hiver Starch Company, and the agent of the Company in the city of New York for disposing of its manufactures. In an interview at that date between the parties, in New York, after a glowing account by the Defendant of the business of the concern, and of which the Plaintiff had previously no knowledge whatever, the Plaintiff expressed the desire to purchase some one or two thousand dollars’ worth of the stock, if any was to be obtained in the market, at a price not exceedi/ng $150 per share. The Defendant thereupon undertook to buy some, if it could be procured, and if successful, he was to apprise the Plaintiff, who resided in the county of Chenango. Accordingly, on the 31st of January, 1857, he addressed a letter to the .Plaintiff, reiterating his opinion of the value of the investment, stating that he knew where he could obtain the shares at $150 per share, and asking Defendant if he would like it. lie stated further, that he did not wish to advise the Plaintiff, but if he should conclude to take the stock he would “ get and send him a certificate ” for that amount. The Plaintiff answered this letter on the 5th of February, remarking that he liked the statement, and was willing to take that amount, and desiring the Defendant to obtain the certificate, when he would at once put him in funds. This letter the Defendant acknowledged on the 19th by a brief note, saying that he would write and get the certificate as soon as possible; and on the 2otk of February he wrote again, enclosing the Plaintiff the scrip for ten shares of the stock, and adding, in a postscript, “ If we meet with no mishap, I think our stock wfill pay well; I could sell quick at $150, if I had any to dispose of.” The Plaintiff remitted the $1,500, and that closed the transaction.

The Defendant did not, in fact, purchase any stock from the Company or from any outside party, but caused ten shares of his own stock to be transferred to the Plaintiff. He did not communicate this fact to the Plaintiff at any time during the negotiation, or subsequently; and it was not discovered until the following June. At the time of the transfer the Company was in an embarrassed condition, and the stock was of little intrinsic value, though these facts were unknown to the Defendant, and he sup

posed, the representations to be true which he had made in this respect to the Plaintiff. The affairs of the Company were soon after wound up, and its effects passed into the hands of a receiver.

The complaint was dismissed, but the judgment was reversed, and a new trial ordered by the General Term in the Fifth District. The case, as decided in the Supreme Court, is reported in 34 Barbour, 216.