Barber v. Morgan , 1867 N.Y. App. Div. LEXIS 217 ( 1867 )

By the Court, E. Darwin Smith, J.

The complaint in an. action for deceit or fraud in the purchase or sale of property induced or procured by false representations— and such is this action—must in substance state the representations, and aver their falsity, and that they were made with intent to deceive the plaintiff and induce him to make the purchase or trade in question, and that they did induce such trade, to the plaintiff’s injury. Deceit or fraud with damages gives a good cause of action. Since the case of Pasley v. Freeman, (3 Term Rep. 51,) this has been settled law, The complaint in this action contains two counts. The demurrer is to each and to both counts upon the ground that they do not respectively state facts sufficient to constitute a cause of action. The representations made, and their falsity, and that the defendant knew of their falsity, are clearly and positively stated with sufficient distinctness, in both counts, and no question is made in respect to these allegations. The chief objection to the complaint urged on the argument in support of the demurrer was that the complaint does not, in either count, sufficiently aver that the false representations were made with intent to deceive the plaintiff) or to induce him to purchase the stock in question, and that the damages are not alleged with sufficient certainty. In Addington v. Allen, (11 Wend. 402,) it was held that a complaint in an action for false representations must aver that the defendant made the representations with an intent to deceive and defraud the plaintiff. Neither count in this complaint contains such averment, in express terms, and if the Code has not changed or modified the rules for the construction of pleading in such cases, this objection must prevail. ' In the case of Addington v. Allen the objection was held valid, after verdict, and the judgment arrested for such defect in the declaration. "Within this case and numerous others following it since, in this court and the Court of Appeals, I do not think the first count in this complaint can be sustained. It is our duty to construe pleadings liberally, under the Code, but there is nothing in substance -in the first count which amounts to an allegation or averment that the defendant made the representations to induce the plaintiff to make the purchase of.the stock in question, or with intent to defraud or deceive him, or that such representations in fact induced the purchase of said stock. This is of the essence of the cause of action, and must be in substance alleged. (Morse v. Swits, 19 How. Pr. 275. Cazeaux v. Mali, 25 Barb. 578. Zabriskie v. Smith, 13 N. Y. Rep. 322.) But within the rule asserted in the case of Zabrishie v. Smith, I think the second count may be sustained. In that case Judge Denio. says: “Under our present forms of pleading I conceive that a complaint should contain the substance of a declaration under the former system. It is sufficient, however, that the requisite allegations can be fairly gathered from all the averments in the complaint, though the statement of them may be argumentative, and the complaint deficient in technical language.” Applying this rule to the second count I think it makes out a good cause of action, and that proof of the facts stated in it will entitle the plaintiff to a verdict; which is really the true rule to determine the sufficiency of a complaint. In this count the pleader repeats the representations as stated in the first count, in which, among other things, it is alleged that the defendant represented that a company known as “ The Yew York and Santa Fe Mining Company,” was a duly organized company or corporation with an original capital stock of $5,000,000, of the par value of $100 per share. That said company had very valuable mines which it was then working; that the yield of its mines was of immense value; that said company would certainly pay quarterly dividends, in gold, of six per cent, and that the stock of the company was very hard and almost impossible to be obtained, it was so valuable. The complaint then alleges that the defendant then and there affirming and declaring to the plaintiff that he knew each and every one of the statements and representations therein set forth to be facts.; then and there induced and advised the plaintiff to purchase of and through him, the said defendant, four hundred and eighty shares of the capital stock of the said company, which shares the plaintiff did then and " there purchase through the said defendant, and paid therefore the sum of $13,376.66. The said plaintiff then and there believing and confiding in each and all of the said, statements and representations as above set forth to be true.” The count then avers that each and every of said statements were and are false and untrue, and were fully known to said defendant to be false and untrue. These allegations, together, impute and imply a fraud purposely and intentionally committed by the defendant upon the plaintiff. The plaintiff, I think, could not be required to prove on the trial any thing more than the representations stated, the fact that the defendant at the time procured . and induced him in reliance upon such representations to make the purchase of the stock as stated, and then to prove the utter falsity of such statements and representations, and that the defendant knew them to be false when he made them. This would make out a clear and complete cause of action, except proof of the damages. The case of Addington v. Allen, and most of the cases cited in the defendant’s points, where the rule is held and stated “that the complaint in these cases should contain the averment that the representations were made with intent to deceive, were cases where the defendant was not the party benefited by the fraud or personally interested in the purchase or trade induced by such fraud. In Adding-ton v. Allen, Addington represented one Baker to be good, and Allen sold Baker goods upon the faith of such representations. In Zabriskie v. Smith, Smith represented a merchant by the name of Walter H. Smith to the plaintiff to be good, and induced him. to sell goods to said Walter H. on credit. It was properly a question in that case whether the representations were made with intent to deceive and defraud. And such must be the case whenever the representations are made to aid a third person, or to give him credit. The intent on the part of the person making the representations, in such eases, to give a false credit to such third person to enable him to deceive and defraud some other person is of the very essence and basis of the cause of action. The whole right of action in such cases depends upon such fact to be established; that the party making the representations made them knowing. them to be false, and with intent to deceive and induce the person to whom'they were addressed to part with his property to such third person on the faith of such representations. There is no fraud in such case, and no liability, unless there was this intent to deceive and defraud. But in this case the complaint states a palpable personal fraud committed by the defendant on the plaintiff for his own benefit, by which he obtained from the plaintiff at the time $13,000 and upwards for stock in said mining company, which he then represented to be very valuable and worth par, and which the complaint alleges he knew at the time was utterly worthless. A bolder or grosser fraud could hardly be alleged, and it would be trifling with the course of justice to hold that a complete cause of action was not made out by proof of these facts." In the' language of Judge Denio, in Zabriskie v. Smith, certainly the requisite allegation of an intent to deceive and defraud can be fairly gathered from all the averments in this count. An allegation of such intent is involved in the very statement of the facts of the trade. It is patent on the face of the transaction. It is no more necessary, in my opinion, to allege expressly that these statements and representations were made with intent to deceive and defraud the plaintiff,, in such ease than it would be in an action for assault are battery, if the defendant had knocked the plaintiff down at the time and destroyed one of his eyes or broke his nose, to aver that he struck such blow or blows with intent to injure the plaintiff. The facts stated in both cases involve an allegation of the requisite intent, to sustain the action. On the question of damages the plaintiff clearly, under this count, would be entitled to recover some damages. The representation was that the stock was very valuable and worth par. It is averred in this count that the said company, as also its property and stock, are of no value and in fact never was. This was clearly intended to be an averment that the stock never had any value, and was of no value at the time of the purchase of it by the plaintiff, and the plaintiff would be entitled to make such proof, under this averment, The words, never was, were clearly used to assert that the stock never was of any value, in the connection in which these words are used, and should be so interpreted; and the pleader further, in another part of the count, alleges that the said stock is of no use or value to the plaintiff and that he has sustained great loss' thereby, to wit, the full amount of $14,838.50 so paid for said stock, with interest. In the averment following, that by means of the premises the said defendant had fraudulently deceived him, the plaintiff, and induced him to purchase said stock, the pleader intended to state and draw the general conclusions and averments of fraud and damages from the whole facts previously stated. In connection with the other allégations and averments it amounts, I think, to a sufficient averment- of damage sustained by the plaintiff from the defendant’s fraud, construed with that liberality which section 156 of the Code requires with a view to substantial justice.

The whole complaint is loosely drawn, and its statements - are more or less wanting in logical and technical precision and explicitness, but in view of thé liberal rules which we are required to apply in the construction of pleadings, I think the second count is sufficient, and the demurrer to that count should be overruled and the order appealed from so far reversed; but in respect to the first count the order should be affirmed, and the demurrer allowed to such count, with leave to the plaintiff to amend on payment of the costs of the demurrer, and to the defendant to answer over on payment of like costs. If the plaintiff elects to amend, and the defendant to answer over, neither party should have costs upon the demurrer, on appeal.

[Monroe General Term, December 2, 1867.

J. C. Smith, Welles and E. D. Smith, Justices.]