Case ID: abbn-cas_16/html/0320-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Van Vorst, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

COHEN v. ELLIS.
    
      N. Y. Supreme Court, First District ; Special Term,
    
    August, 1885.
    Action to rescind syndicate agreement. —Pleading; complaint; CERTAINTY AS TO DATE.—CONTRACTS; SYNDICATE AGREEMENTS; rescission; fraud; CONCEALMENT OF FACTS; acquiescence; CONFIDENTIAL RELATION; EXECUTED CONTRACT.—• Equity ; cancellation of contract and recovery of money. —Banker's duty to depositor.—Fraud.—Principal and agent; ADVERSE INTEREST OF AGENT.Parties defendant in EQUITABLE ACTION.
    One who has been induced by false representations by his bankers to become a member of a syndicate for which they were also bankers and to pay moneys into their hands to be used in the purchase of bonds, may maintain an action against them therefor. So held on demurrer.
    If the bankers were not merely agents for the syndicate, but -were by previous arrangement contractors with the parties of whom the syndicate were to purchase, and agents of the company whose bonds were to be purchased, and thus secured advantages not fully disclosed to the members of the syndicate, the action may be in equity, to rescind the plaintiff’s subscription and recover back his payments upon his returning the bonds he had received; although if the bankers were agents merely of the syndicate, the action would have to be at law for damages only. (p. 342.)
    A complaining party has a right in such case to avail himself of the equitable rules as to cogency of proof and as to presumption growing out of the relations of the parties, which may not obtain in actions at law. (p. 345.)
    Syndicate agreements being modern inventions, cases arising under them are novel in their features and call for the application of equitable principles.* (p. 346.)
    It is no objection to the maintenance of an action in equity upon adequate allegations of trust and fraud in such a case, that plaintiff demands in substance the recovery of money, as well as the cancellation of his contract, (p. 347.)
    Nor is it a sufficient objection that the transaction has been completed; although it would be otherwise if it had been executed on the plaintiff’s part, with knowledge of the fraud, or if the status quo, without defendants’ fault, could not be restored. (p„ 348.)
    The facts that the moneys have been paid over to the sellers and they have become insolvent and that the company whose bonds were thus purchased has also become insolvent, do not defeat the right to rescission on the part of the plaintiff if the loss and depreciation were without fault on his part. (p. 349.)
    In such action it is unnecessary to join the other subscribers to the syndicate, if the ground of action is a relation of confidence between the plaintiff and the bankers and a fraudulent betrayal of it, peculiar to themselves, and not apparently extending to other subscribers. (p. 351.)
    Nor is it necessary to join the insolvent sellers of the bonds, to whom the money of the syndicate was paid.
    While a claim for damages can be satisfied only by payment or a release, a right of rescission may be lost through an unconditional acquiescence; and an election once made is irrevocable. But acts done before becoming acquainted with the facts constituting the fraud do not amount to an acquiescence or election, (p. 352.)
    The complaint alleged that “after the discovery of the said frauds ” and on January 28, 1884, some seventeen days after he received the last bonds, plaintiff gave notice of rescission; but did not allege what day the discovery was made. Held, that this did not show acquiescence. Whatever uncertainty resulted from omission to state the date, defendants should seek relief from by motion, (p. 353.)
    * Seé note on Syndicates and Pools, at p. 380 of this volume.
    
      In an action to rescind on the part of plaintiff his subscription to a syndicate agreement by which he had received a quantity of bonds from defendants, induced as he alleged by their false representations, he presented an affidavit that the railroad company whose bonds were in question, was insolvent, and that the market value of the bonds was rapidly falling and would probably soon entirely disappear, and that he had asked the defendants to stipulate that the bonds might be forthwith sold without prejudice to the rights of either party, which they declined to do; and upon such affidavit, he moved before issue for an order that the bonds might be so sold, the proceeds to stand in their place and be credited on plaintiff’s claim if he should recover. Defendants’ answering affidavits denied fully the allegations of misrepresentation and other material allegations of the complaint. Held, that the court should not grant such an order even were it conceded that it had the power, (p. 356.)
    I. Trial of issues raised by demurrer to complaint.
    Alfred A. Cohen sued the defendants, composing a firm of bankers in New York city, to rescind a syndicate agreement between the parties to this action and others.
    In brief, plaintiff alleged that the defendants, being his bankers, induced him at a time when he was unable to give adequate personal attention to business, to join a syndicate, for which defendants were acting, in the purchase of the West Shore Railroad bonds, concealing the insolvency of the company, the i mperfect character of the loan secured by the bonds, and other circumstances which he relied on as entitling him to rescind ; and asked a rescission of the agreement as to himself and repayment of his "subscription upon his surrendering the bonds and all claim, &c., and an injunction enjoining them from enforcing any claim against him for the expenses of the syndicate.
    The substance of the allegations of the complaint, so far as material to the ■ questions raised by the 'demurrer, is given in a note.
    
    
      The syndicate agreement was annexed to the complaint, as a part thereof, and the substance of its material provisions, and the further material facts appear in the opinion.
    Defendants demurred to the complaint as not stating a cause of action against them, and for defect of parties defendant.
    
      W. G. Choate (Shipman, Barlow, Larocque & Choate, attorneys), for the plaintiff.
    Bristow, Peet & Opdyke ; Davies, Cole & Rapallo ; Joseph H. Choate and Howard Mansfield, for the defendants.
    
      
       After the formal beginning the complaint proceeds:
      I. On information and belief the plain tiff alleges, that during all the times of the transactions hereinafter mentioned, prior ‘to July 31, 1883, the defendants above named were copartners, carrying on business as bankers at the city of New York, under the firm name, &c„. the said firm having been established for many years, and having been largely engaged in such business, and having acquired a high reputation both in this country and abroad as responsible and reliable bankers.
      II. That for thirty years preceding September 1, 1881, the said plaintiff had resided at San Francisco, in the State of California, and that on or about September 12, 1881, the said plaintiff, whose business transactions required the keeping of large sums of money on deposit in the city of New York, being advised of the reputation, standing and credit of the said defendants, and influenced thereby, opened an account with the said defendants as his bankers, by the deposit with them to his credit of a large sum of money ; and thereafter, down to the time of the transaction hereinafter mentioned, continually kept and had on deposit with the said defendants a large balance to his credit.
      III. That in the autumn of the year 1882, the said plaintiff was temporarily in the city of New York; that he was at that time very much out of health and unable to give any active attention to business, and while confined to his hotel by reason of such ill health, and on or about December 1, 1882, his attention was called to the faet that the said defendants were about forming a syndicate for the purchase of a portion of an issue of $30,000,000 of mortgage bonds of a corporation called the New York, West Shore and Buffalo Railway Company, and the said defendants then and there proposed to the plaintiff that he should become the purchaser of some of said mortgage bonds. That at the time of the said proposition the said defendants were advised, as was the fact, that the plaintiff’s health ■was in such condition as to preclude his making any examination for himself as to the character or value of the securities so offered, and that, should the plaintiff become a purchaser as proposed, he would do so relying solely and exclusively on the recommendations and assurances of the said defendants and their statements to him in that behalf. The said defendants thereupon proposed to the plaintiff that he should become the purchaser of bonds of the said New York, West Shore and Buffalo Railway Company, amounting to $100,000 at par, and 200 shares of the capital stock of the said company for the price of $71,500, and a commission of $1,000 to be paid by the plaintiff to the said defendants, offering as an inducement to the plaintiff to become such purchaser, that if he made such purchase, as a condition thereof, he would have the right or option to purchase a further amount of $100,000 at par of the said bonds, and 200 shares of stock of the said company, on or before May 1, 1883, for the price of $76,500, and a commission of $1,000 to be paid by said plaintiff to the said defendants.
      IV. As a further inducement to the said plaintiff to accept their said proposition, the said defendants then and there made the following representations to the said plaintiff with reference to the said bonds and the security for the payment thereof, that is to say: [Here followed the alleged representations to the effect that the road was a continuous line from the city of New York, with large terminal facilities there, for which the proceeds of the bonds would pay, &c., &c.]
      V. The said plaintiff further says, that he reposed full and perfect confidence in the said defendants, and placed implicit reliance upon any statements made to him by them or either of them; that at the time when the said statements were made the said plaintiff had no knowledge whatever of the said railway company or its business or prospects, and did not understand the route of said railway or any thing connected therewith except, generally, that it was intended to connect the city of New York by means of a ferry-with the west side of the North River, and from there by rail with the city of Buffalo, with several branches; and the said plaintiff then and there informed the said defendants of his entire ignorance of the said railway company and its prospects, and that if he should buy the said bonds and stock he would do so because of his confidence in their statements, as he had not then sufficient physical strength or ability to make the necessary inquiries for himself, which, in point of fact, was the case; that relying upon the statements made to him by the said defendants, and. in the full belief of their truth, the plaintiff at first expressed his willingness to become the purchaser of a portion of the amount of bonds and stock so offered to him by the said defendants at a proportionate price, but that the defendants then and there insisted that no subscription for the purchase of a less amount than $100,000 absolutely of the bonds at par could be taken by them, and that the plaintiff was finally prevailed upon by said defendants to assent to the purchase of $100,000 at par of the said bonds and 200 shares of the said stock on the terms proposed by the said defendants. That on or about December, 6, 1882, the said defendants produced and offered to the plaintiff for his signature a written agreement, which was then signed by the North River Construction Company, a corporation purporting to have been formed under the laws of the State of New Jersey, as party of the first part, the said defendants, under their firm name, &c., as parties of the second part, and by various parties constituting a portion of the parties of the third part: [alleging further that a copy was annexed as a part of the complaint and marked “Exhibit A.”]
      VI. The said plaintiff further alleges, that during thirty years prior to December 8, 1882, during which period the plaintiff had been a resident of California, Leland Stanford, whose name appears subscribed to the said agreement, “ Exhibit A,” as a subscriber for $500,000 at par of the said bonds, and $100,000 at par of the said stock of the said railway company absolutely, had also been a resident of the said State of California, which fact, as the plaintiff is informed and believes, was well known to the said defendants, as was also the fact of this plaintiff’s said residence in said State; that the said Leland Stanford was then and had been for twenty years preceding and is now the president of the Central Pacific Railroad Company, which road, together with its leased lines, had then the control of all the traffic from the States of Nevada and California and the Territory of Arizona eastward, and also of all the traffic of China and Japan and the islands of the Pacific Ocean, brought to San Francisco for transportation to the City of New York, and had acquired areputation well known to both the plaintiff and the defendants as being a man of great prudence and caution in making investments, and as one who was in the habit of personally investigating the details of any enterprise in which he proposed to become interested before committing himself thereto, all of which facts the said defendants well knew, as they also knew that the said facts were known to the plaintiff; that at the time the said agreement was presented to this plaintiff for signature as aforesaid, and before the plaintiff signed the same, the said defendants represented to the said plaintiff that by reason of having the said Leland Stanford interested in the bonds and stock of the said New York, West Shore and Buffalo Railway Company, the said last named company would receive the benefit of all the traffic which the said Stanford could control, or influence, going east or west, and that his connection with said enterprise would necessarily be of great benefit.
      VII. [Alleges that at the time defendants requested plaintiff to sign the agreement] he was not able, by reason of his condition of health, to properly or thoroughly understand the contents thereof, though he realized that it was an agreement that gave great power and authority to the said defendants, but having implicit confidence in them, and believing their statements [rehearsing the principal alleged representations], the said plaintiff then consented to and did sign the said agreement, stating to the defendants at the time that he would not give such power or authority to any other person or firm whatever; and, relying on such statements, &c., &c., he did not even read the mortgage under which the bonds were issued.]
      VIII. [Alleges the several payments on account of the price of the bonds.]
      IX. Said plaintiff further shows, that he left the city of New York for his home in San Francisco, on or about December 15, 1882, having previously made provision with parties in New York for the payment of said bonds and stock according to the terms of the said agreement.
      X. [Alleges notice by the defendant to the plaintiff of their exercise of the option to purchase $100,000 additional; and payment to defendants therefor, continuing:] that the said payments were and each of them was made in full faith and reliance on the statements made by the said defendants to the said plaintiff hereinbefore set forth, and with no knowledge or information to the contrary, and that if the said plaintiff had not believed the said statements, and each of them, to be true, he would not have made the said payments or any or either of them.
      XI. The said plaintiff further alleges, that commencing immediately upon the execution of the said syndicate agreement, “Exhibit A,” and continuously thereafter until the desired result hereinafter stated had been accomplished, the said defendants, by circulars and reports issued by them carefully framed so as to convey the idea to the plaintiff and other subscribers to said syndicate agreement that the course indicated would prove to his and their advantage, inaugurated and pursued a course intended to persuade and which had the effect of persuading the said plaintiff and other subscribers to said syndicate agreement that the bonds for which they had subscribed would prove a highly remunerative investment; that there was an active and growing demand therefor, and that it would be to the interest of the plaintiff and other subscribers to avail themselves of the provisions of the said syndicate agreement, under which subscribers liad the right to withdraw their bonds and shares from sale by the syndicate bankers, and that the said defendants, having fixed upon Saturday, April 14, 1883, as the date on or before which subscribers to the syndicate must decide if they desired to avail themselves of their right to withdraw their bonds and shares from sale, the said plaintiff, relying implicitly upon the said defendants and their statement and advice in that behalf, and having implicit confidence in their perfect good faith, and in entire ignorance of the plan which said defendants were pursuing, and of their intention to secure for themselves a market for their own bonds, and influenced thereto by the said statements and representations contained in said reports and circulars, was induced to notify the said defendants, under date of April 11, 1883, of his election to withdraw from sale by the syndicate bankers the bonds and shares for which he had subscribed as aforesaid.
      XII. The said plaintiff further alleges, that subsequent to the execution of the said syndicate agreement and payment for the said bonds and stock as aforesaid, and the withdrawal of said bonds and shares from sale, the plaintiff discovered the following facts, all of which he avers upon information and belief to be true, and of all of which he was wholly ignorant when he signed said agreement, and when he made the several payments hereinbefore set forth, and withdrew said bonds and shares from sale as aforesaid, that is to say: [here followed specification of particulars in which plaintiff alleged he had been misled, such as that the alleged terminal grounds were not the property of the West Shore Company, but rented by it and not subject to the mortgage; and that defendants, at the time of the request and election aforesaid, had notice of this.]
      [Also that defendants had secured for themselves, by arrangement with the persons controlling said terminal property, being the same persons who were also controlling the affairs of the said railway company and the said construction company, the right to sell all bonds which should be issued, to be secured by mortgage of said terminal property, and in case of sale to receive a commission therefor.]
      [That a part of the line had been leased to another company, and a share of the gross earnings of such part contracted to be paid over to the latter. That at the time of the request the West Shore Company was insolvent and known so to be to defendants. That at the time when defendants, professing to act as agents for the plaintiff and other persons, parties of the third part to the syndicate agreement, “Exhibit A,” notified the said construction company of their election to exercise the option, the West Shore Company was insolvent, and the construction company was unable to perform its contract to construct and equip the West Shore Railway, or to perform the covenants of the construction agreement; that at such times, defendants were the financial agents of the construction company and of the West Shore Company, two of them being also directors of the railway company, and one a director of the construction company, and had full knowledge that neither company could perform the contracts which they had respectively undertaken; all of which knowledge defendants wrongfully concealed from plaintiff.]
      That the signature of the said Leland Stanford to the said syndicate agreement, “Exhibit A,” had been obtained by the said defendants, or by some other person or persons acting in concert with them, for the purpose of making it appear to the plaintiff and other proposed subscribers to said agreement that the said Stanford, whose influential position in railway matters and large interests in existing railway corporations, and familiar acquaintance with all things relating to such business, were well known throughout the community, had investigated the proposed enterprise, and been satisfied with its condition and. prospects, and taken a large pecuniary interest therein, and that the said railway would, by reason thereof, have the benefit of the said Stanford’s influence, and of the business which,he could control,
      The said plaintiff further says, that as he is informed and believes, the said Stanford, when he signed said agreement, was not a bona fide subscriber thereto: that he signed the same upon the express understanding and agreement that he was not to be called upon to take or pay for any of the said bonds or stock, and that it was not expected by the said defendants, when the said Stanford subscribed the said agreement, or when the same was offered to this plaintiff for signature, or when the said representations hereinbefore set forth were made with respect to the benefit to be derived from the said Stanford’s interest in the enterprise, that the said Stanford would take or pay for any of the said bonds or stock; and that in point of fact the said Stanford never did accept or pay for any of the said bonds or stock included in the said pretended subscription.
      [Here followed an allegation that the construction agreement contained a clause known to defendants and by them concealed from plaintiff, that the construction company should not be required to expend more under the agreement that it should receive from the sale of West Shore securities; and plaintiff, had he known of such clause, would not have consented to the purchase or syndicate agreement.]
      [Also an allegation that defendants took from other persons subscriptions to the said syndicate agreement for a less amount of said bonds than $100,000 at par.]
      XIII. Said plaintiff further alleges, upon information and belief, that prior to the application made by the said defendants to the said plaintiff to purchase said bonds and shares hereinbefore set forth, the said defendants, by themselves, their accountants, engineers and other agents and servants, had made a full and thorough examination and investigation of the affairs of the said New York, West Shore and Buffalo Railway Company, and of the-said North River Construction Company, including as well the assets and property of said companies respectively as their contracts, liabilities and financial condition, and were full and thoroughly advised as to what property the said railway company had acquired and owned, and particularly as to its terminal property at Weehawken and elsewhere, and what means the said railway company had to meet its obligations, and as to the contracts and engagements of the said North River Construction Company and its relations to the said railway company; and had already entered into a contract with the North River Construction Company, by which the exclusive right to purchase the said bonds and stock mentioned in the said syndicate agreement, “Exhibit A," was secured to the said defendants down to and including December 7, 1882, upon terms specified in their said agreement with the said North River Construction Company; and the said defendants had secured the appointment of themselves as the financial and transfer agents of the said North River Construction Company, and the promise of a like appointment as such financial and transfer agents of the New York, West Shore and Buffalo Railway Company, and had also secured for themselves an agreement for compensation for their services as such agents as aforesaid equal to 5f0 upon the par value of the said bonds sold under the syndicate subscription, without prejudice to the right of the said defendants to receive a commission from the syndicate subscribers upon all of the said bonds sold by them as bankers for the said syndicate, and the right on the part of the said defendants to insist that all sales of such bonds should be made through them, and by which said contract the said defendants had also secured for themselves the right to have all the proceeds of bonds taken under the proposed syndicate subscription deposited with the said defendants as financial agents at a low rate of interest, and to be drawn for by the construction company in round sums only, as needed for actual use; and that prior to the said application to the said plaintiff to become the purchaser of a portion of the said bonds, the said defendants had also secured the promise that three persons selected by them should be elected directors of the New York, West Shore and Buffalo Railroad Company, and two persons selected by them should be elected directors of the said North River Construction Company, which promise was, as the plaintiff is informed and believes, carried into effect at the next annual election of the said companies respectively, the said defendants, [naming them,] two of the persons selected by the defendants, having been elected directors of the New York, West Shore and Buffalo Railway Company at the annual meeting held in January, 1883, and the said defendant, [named], having been elected a director of the said North River Construction Company, as the plaintiff is informed and believes.
      
        XIV. The said plaintiff further alleges, upon information and belief, that in making the representations hereinbefore set forth to the said plaintiff, as an inducement to him to become a purchaser of the said bonds and shares, and in withholding from him the information, which was in the possession of the said defendants as to the true state and condition of the said New York, West Shore and Buffalo Railway Company, and its railway, terminal and other property, and the true state and condition of the North River Construction Company, and in exercising the option on behalf of the said plaintiff and others to take the additional bonds and shares, the option to take which purported to be reserved to the subscribers to the said syndicate agreement, “Exhibit A,” and in holding out the several inducements, and in making the representations which they did make to the plaintiff and others as to the advisability of their withdrawing from sale by the syndicate bankers the bonds and shares for which they respectively had subscribed, the said defendants were actuated by a corrupt and fraudulent design, and engaged in the execution of a fraudulent scheme, conceived in advance to secure to themselves the great profits and emoluments which they expected to realize under their agreement with the said North River Construction Company from the sale of said bonds and shares, and the use of the proceeds thereof in their business, and the monopoly of the market for the bonds for which they themselves subscribed by the tying up of the bonds subscribed for by the plaintiff and other parties to said syndicate agreement, “Exhibit A”; and that these considerations led them to disregard their duty to the plaintiff as a client who reposed trust and confidence in them, and who, as they were advised and well knew, was acting in his adoption of their suggestions in full and complete reliance upon their good faith in the premises, well knowing that if they had stated the facts correctly as to the condition of the said enterprise, as to the interest of the said railway company, in the Weehawken terminal property, as to its financial ability to meet its obligations, as to the honafides of the subscription of the said Stanford and others to the said syndicate agreement, as to what they proposed to do with reference to the sale of the bonds and shares for which they had become committed by their own subscription, and what the ellees would be of withdrawing from sale the bonds which through their representations the plaintiff had purchased, accompanied as it was by a prohibition against the sale by the plaintiff of the bonds so withdrawn until written notice should be given by the defendants that the syndicate was finally liquidated, the plaintiff would never have consented to have become a purchaser of any of the said bonds or shares, or to have become a subscriber to the said agreement, or having so subscribed, to a withdrawal of his bonds from sale.
      XV. Said plaintiff further alleges, that so skillfully did the defendants carry out their programme of inducing the subscribers to the syndicate agreement “ Exhibit A.” to believe that it would be to their interest to withdraw their bonds from sale by the syndicate bankers, that on or about May 5, 1883, the said defendants were able to announce, as they did announce by a circular of that date, that of the $20,202,000 of said bonds at par, embraced in the said syndicate agreement, bonds to the aggregate amount at par of $16,145,000 had been, withdrawn from sale under an agreement that they should not be sold until March 1, 1884, unless the syndicate should be sooner liquidated, thus leaving for sale only bonds amounting in the aggregate at par to $4,117,000; and by a circular or prospectus issued by the said defendants to the public under date of May 5, 1883, sealed proposals were invited to be received at the office of the defendants until Mqy 10, 1888, at 3 o’clock, for the purchase of the remaining $4,117,000 at par of said bonds, accompanied by the declaration that the bonds would then be awarded to the highest bidders absolutely without reserve.
      And the said plaintiff further shows, that so successful were the defendants in the execution of this programme that they were able to announce, and did announce to the syndicate subscribers, by a circular dated May 10, 1883, that under their proposal for bids for the said $4,117,000 at par, bids had been received for bonds to the amount of $10,420,000, and that awards had been made at prices ranging from 80 4-100 flat to 83 78-100 flat, averaging 80 33-100 flat for the entire $4,117,000 of said bonds.
      The said plaintiff further shows, upon information and belief, that the said $4,117,000 of bonds so sold embraced the bonds subscribed for by the said defendants, as parties of the third part, to the said. syndicate agreement, “Exhibit A,” and of others^ their immediate friends, whom they desired particularly to protect, and that by reason of their having been able to induce the plaintiff and others to withdraw their bonds from sale, and to announce, as they did to the public, that all of the said bonds had been sold, with the exception of the said $4,117,000 par of said bonds, they were enabled to obtain, and did obtain, for their own bonds, a much higher price than otherwise could have been obtained therefor.
      XVI. And the said plaintiff alleges and charges, that at the time when the said defendants were inducing the plaintiff and others to withdraw the bonds subscribed and paid for by them from sale, and to consent that the bonds so withdrawn should be withheld from sale until notice from the defendants of the final closing of the syndicate, the said defendants, by reason of two of their members being directors of the said New York, West Shore and Buffalo Railway Company, and one of their members being a director of the North River Construction Company, had the means of being advised and of knowing, and were fully advised and knew the condition of the said two corporations, and each of them, and that no sufficient means existed for the carrying out of the said enterprise of constructing, and equipping the said railroad to a successful issue, and that the said railway company had no means with which to meet obligations which it had undertaken and which called for the expenditure of money to the extent of millions of dollars in excess of their resources, and that the said enterprise was likely to result in a disastrous failure, but that they corruptly and wrongfully withheld from the plaintiff and others all information on those subjects; in their letters and circulars, using language calculated to impress the plaintiff and others with the great value of all the said securities, and that it would be to their interest to hold them and not permit them to be sold, while they themselves were endeavoring to arrange so as to tie up as many as possible of the bonds which they themselves did not hold, in order to leave the market free to themselves, not only to avoid a loss on their own investment, but to make great gains and - profits.
      XVII. The said plaintiff further shows, that although the sale of all the said syndicate bonds had been completed and consummated on May 10, 1883, in the manner hereinbefore set forth, and although the said defendants, as the plaintiff is informed and believes, continued thereafter for a long time to deal actively in the said bonds in the New York market, being enabled to do so with safety and to realize profits which they otherwise could not have made, from the fact that the bonds which had been withdrawn by the plaintiff and other members of the syndicate, acting under the advice and suggestions of the defendants, were so tied up that they could not come upon the market, and although ordinary good faith required the release of said bonds from this restriction at the earliest possible moment, it was not * until December 21, 1883, and after there had been a heavy fall in the market price of the said bonds, and within less than a month of the actual appointment of a receiver of the said North River Construction Company as an insolvent corporation, that the said defendants, by notice of that day, withdrew the said restriction upon the sale of the said bonds, delivered to the subscribers of the syndicate; that the said notice was, on December 22, 1883, sent to the plaintiff by mail, addressed to him in San Francisco, and only reached him on December 28, 1883, in due course of mail, although other notices relating to the said subscription intended for the plaintiff had been sent to a correspondent of the plaintiff in the city of New York, whose address had been furnished to the defendants, and through whom the payments made by the plaintiff bad been made, and who would have telegraphed notice of the release of said bonds to the plaintiff if the notice had been given in the usual way, and although the defendants had been in the habit of communicating with the said plaintiff by telegraph on subjects of much less moment; and that in-the interval between the date of the said notice, and its arrival in San Francisco, being a period of seven days, a still further decline in the market price of said bonds had taken place, the said bonds having fallen to 68 per cent, of their par value flat.
      XVIII. The said plaintiff further shows, that some time in the month of November, 1883, the said plaintiff received from the said defendants one hundred New York, West Shore and Buffalo Railway Company bonds, of the par value of $100,000, and on January 11, 1884, he also received from them one hundred more of said bonds, of the par value of $100,000; that no part of the shares of stock subscribed and paid for by the plaintiff to the defendants has been received by him, and as he is informed and believes the said shares are still retained by the said defendants.
      XIX. The plaintiff further shows, that he has received from tiie said defendants the amount of the coupons on the said $200,000, at par of the said New York, West Shore and Buffalo Railway Company bonds, which became due thereon July 1, 1883, and also the coupons on the same which became due on January 1, 1884, amount-in all to $10,000.
      XX. The said plaintiff further shows, that after the discovery of the said concealments, frauds, misrepresentations and misconduct of the defendants in their dealings with the said plaintiff, by Which he was deceived and led to consent to the purchase of the said bonds and shares, and to sign the said agreement “Exhibit A,” and to make the aforesaid payments for the shares and bonds to the said defendants, and on or about January 28, 1884, the said plaintiff caused to be served upon the said defendants notice of his intention to rescind the said .contract, “Exhibit A,” and the grounds of his action, and offered to return the said 200 first mortgage bonds for $1,000 each of the New York, West Shore and Buffalo Railway Company, received from them, and the several amounts received from the defendants as being the proceeds of interest coupons on the sai.d bonds, together with lawful interest on the said amount so received, on condition that the said defendants would return and pay to the said plaintiff the several sums of money so paid by him to them as aforesaid for the said bonds and shares, with lawful interest thereon, a copy of which said notice is hereunto annexed, marked “Exhibit D,” and made a part of this complaint.
      XXI. The said plaintiff further shows, that the said identical 200 bonds so received from the said defendants, and each of said bonds ever since their receipt, have been and still are in the possession of the plaintiff, and that this. plaintiff is ready and willing, and now offers to return to the said defendants the said bonds, with the coupons thereunto attached, in the same condition as received from the defendants, with the exception of the coupons which became due on July 1, 1883, and on January 1, 1884, which were paid as aforesaid, and to account for the amount of said coupons, in such form and manner as this court may direct.
      XXII. [Alleges insolvency of the North River Construction Co. and West Shore Ry. Co., and the appointment of receivers in January, 1884. J
      XXIII. The said plaintiff further alleges, that under date of January 18, 1884, the said defendants rendered to the plaintiff a statement, charging him with $759.64, alleged to be, the plaintiff’s proportion of so-called syndicate expenses, but without any account of the said expenses, or information as to how the same were made up, and that, as the plaintiff is informed and believes, the said defendants intend to assert a claim for said amount against the said plaintiff, which claim, as -the plaintiff, is informed and believes, is without foundation, and that said defendants claim to hold the said shares of stock which the said plaintiff was induced to subscribe for under the circumstances and inducements hereinbefore set forth, as security for the payment of said pretended claim.
      XXIY. The said plaintiff further alleges, that as he is advised and believes, the relation of the said defendants to the said plaintiff in respect of the said transactions hereinbefore set fortli was one of trust and confidence; that the defendants at the outset were fully advised that the said plaintiff, who had then been for a long time a depositor with said defendants’ firm, and for whom said defendants were proposing to act as agents in and about the said bond purchase, was not in a condition of health to permit any personal examination on his own behalf, and that should he consent to become a purchaser he would do so relying solely and implicitly upon their statements and good faith, and that, in view of the said relation between the parties, the defendants were called upon not only to be accurate in the statements they did make, but to make full disclosures of what they knew affecting the value of the securities they were proposing to the plaintiff to purchase, and to exercise the utmost good faith in the said transaction, and that the misstatements and misrepresentations so made by the said defendants as aforesaid, and their suppression of material facts, which would necessaiily have affected the action of the plaintiff in tiie premises, constituted not oniy a breach of trust, but a fraud on the part of the defendants, which, as the plaintiff is advised and believes, entitle him to be relieved in equity from said purchase so made, as against the said defendants, and that by reason of the insolvency of the said North River Construction Company, no redress is possible as against the said company.
      The plaintiff, therefore, prays as relief from this court;
      1. That the said syndicate agreement, “Exhibit A,”and the purchase by the said plaintiff of the bonds and shares therein mentioned, both the so-called firm and optional purchases, may, by the judgment of this court, be rescinded as between the said plaintiff and the said defendants, and that the said defendants may be adjudged to pay to the said plaintiff the several amounts paid to them by the said plaintiff on account thereof, with interest, less the amount received by the said plaintiff from the said defendants as the proceeds of the coupons originally attached to said bonds for interest payable on said bonds on July 1, 1883, and January 1, 1884, with interest from the dates of payment, against the surrender to the said defendants of the said bonds, and the relinquishment by the said plaintiff of any and all claim to the said shares of stock embraced in the plaintiff’s aforesaid subscription and purchases, which surrender and relinquishment the said plaintiff hereby again offers to make.
      3. That the said claim of the said defendants against the said plaintiff for a share or proportion of the alleged expenses of the said syndicate may be adjudged invalid, and that pending this action the said defendants may, by the order of this court, be enjoined and restrained from bringing any action or taking any proceeding for the collection thereof.
      3. [Also the usual prayer for costs and general relief.]
    
   Van Vorst, J.

This is a hearing upon a demurrer interposed by the defendants to the plaintiff’s complaint.

The grounds of demurrer are,

First. That there is a defect of parties defendant.

Second. That the complaint does not state facts sufficient to constitute a cause of action.

The principal relief sought by the plaintiff’s complaint is, that a certain syndicate agreement bearing date the first day of December, 1882, to which the plaintiff, the North River Const action Company, the defendants and others are parties, may be rescinded as between the plaintiff and the defendants, and that the defendants may be adjudged to pay to the plaintiff the several sums of money, in the aggregate amounting to $150,000 and upwards, paid by him to the defendants, under and in pursuance of the terms of the syndicate agreement.

The plaintiff received from the defendants two hundred first-mortgage bonds of the New York, West Shore and Buffalo Railroad Company, of the par value of $200,000, which, under the agreement subscribed by Mm he had agreed to take, one hundred absolutely, and one hundred under the exercise of an option, upon the terms and conditions mentioned in the agreement.

These bonds the plaintiff offers to return to the defendants.

Notwithstanding the positive allegations of fraudulent representations alleged to have been made by the defendants to the plaintiff, to induce him to sign the syndicate agreement and to incur its obligations, and which allegations, for the purposes of this demurrer, the defendants admit, it is urged on their behalf, that the plaintiff is not entitled to the equitable relief demanded of the defendants, for the reason, amongst others, that by the terms of the syndicate agreement the plaintiff purchased the bonds from the construction company, the party of the first part thereto, which was to receive from the defendants the moneys therefor after they should have been paid by the subscribers to the defendants, as the bankers for the syndicate.

Confining attention exclusively to the syndicate agreement, the construction company is declared to be the sellers of the bonds, and the defendants were the bankers of the syndicate subscribers.

The defendants were to pay over to the construction company the moneys received by them from the subscribers, and were to receive the bonds from the company, and deliver them to the subscribers. The defendants were entitled to receive from the subscribers as compensation for the negotiation of the affairs of the syndicate one per cent, upon the par value of the bonds purchased from the construction company, and sold or negotiated by or through them. The agreement secured to the defendants other substantial advantages not necessary at this moment to be mentioned.

If this was all that could be urged as to the relation in which the defendants stood to the plaintiff and to the construction company, and as to their interest under the syndicate agreement, and otherwise in connection therewith, and to the bonds themselves and their negotiation, it might well be that the plaintiff’s remedy for a rescission of the agreement, and for equitable redress could not be by him limited to an action against the defendant exclusively. But this is not all.

The complaint alleges facts, some of which are outside of the agreement, but which nevertheless are of such a character, and have such relation to the defendants personally, and their action with plaintiff in inducing him to sign the agreement, and others, which show their connection with, and interest in both the subject and object of that agreement, that they must be considered in determining what, if any, redress is open to the plaintiff, and against whom it may be enforced.

The complaint alleges that the defendants were bankers, and that the plaintiff was a resident of California, and a depositor with them. That he became such depositor in the year 1881, and kept at all times a large deposit of moneys with them down to the time of the transaction in question. That at the time this scheme was presented to him, he was temporarily in New York, in ill health, to the defendants’ knowledge, and was unable to examine into, or understand the syndicate agreement, or the subject matter proposed by it, and knew nothing of the value of the bonds, or the condition of either the construction or railway company. That in order to induce him to subscribe, and taking advantage of the relation which existed between himself and them, the defendants, who had, at the time, official relations to these companies, and had examined into their affairs, and knew of their insolvency and inability to fulfill their contracts, or complete the work in which they were engaged, made certain specific representations to him, in regard to the value of the securities offered for sale, the condition of the railroad and construction companies, and of the extensive terminal facilities of the former, and so favorably, but untruly, presented the subject to him, that reposing confidence in the defendants, and their statements, and ignorant of the facts which they concealed, he agreed to take and pay for $100,000, of the bonds absolutely, with an option to take an additional $100,000.

The complaint alleges that the plaintiff, after he had paid for the bonds and received them, discovered that the representations made by the defendants were false. The complaint charges that these misrepresentations were intentionally made, and facts were designedly concealed by the defendants, to induce plaintiff to become a purchaser of the bonds through the syndicate agreement.

The complaint also alleges that the signature of one of the subscribers to the syndicate agreement, affixed before his own, and by which he was influenced, was not bona fide; that it was not expected by the defendants that such subscriber should pay for the bonds he had agreed to take. That plaintiff, however, believed and acted upon the belief that it was a bona fide subscription. The complaint also charges in substance that the defendants had a large pecuniary interest in the negotiation of the syndicate agreement, and its success, over and above the commissions to be paid by the subscribers, and were influenced by such interest in initiating and managing the same.

The complaint charges the defendants with having fraudulently induced him to withdraw his bonds from sale, and that, taking advantage of the provisions of the syndicate agreement, by skillful management, in their own interest, they sold their own bonds at a large profit.

This abbreviated statement presents the substance of the plaintiff’s narration of the manner in which he was induced to sign the agreement, and invest his moneys. There are other allegations to which reference is made hereafter. The truthfulness of the plaintiff’s allegations are not open to discussion here, for, as aleady stated, by demurring, the defendants concede, for the purpose of this hearing, that they are true.

Upon this statement of facts, supplemented by other allegations of the complaint, it is quite clear that the plaintiff is entitled to redress. The question arises, is the plaintiff limited to the common law action of deceit, for the recovery of damages against the defendants, or is he entitled to the equitable relief demanded in the complaint? This question is much discussed in the briefs submitted by the learned counsel on both sides. But it seems to me that this question is answered when it is determined "what was the true attitude of the defendants towards the subject matter of the syndicate agreement, and the material interest they had in its successful negotiation. Were they simply agents of the construction company for the sale of the securities, and bankers for the plaintiff and other subscribers, to receive their moneys and pay over the same to the construction company upon the receipt of the bonds for them ? If that was the position and relation of these defendants, the plaintiff’s remedy would be through an action at law, triable before a jury, for damages sustained through the false representations and concealments of which complaint is made (McMillan v. Arthur, 98 N. Y. 167).

But it is quite clear that before the defendants approached the plaintiff with their proposal that he should become a purchaser of these bonds, they already had a definite agreement with the construction company, and were agents of the railway company. The terms of their agreement with the construction company do not appear to have, been disclosed by the defendants to the plaintiff, nor are they stated in the syndicate agreement. But the complaint alleges that in making the representations set forth therein, as an inducement to him to become a purchaser of the bonds, and in withholding from him the information in their possession as to the true state and condition of the railway company and its railway, terminal and other property, and the true state and condition of the construction company, “they were actuated by a corrupt and fraudulent design, and engaged in the execution of a fraudulent scheme conceived in advance, to secure to themselves the great profits and emoluments which they expected to realize under their agreement with the said North River Construction Company from the sale of said bonds and shares, and the use of the proceeds thereof in their business, and the monopoly of the market for the bonds subscribed for by them.”

By their agreement with the construction company, as the complaint alleges, the defendants had, prior to their application to the plaintiff, “already entered into a contract with the North River Construction Company, by which the exclusive right to purchase the said bonds and stock, mentioned in the said syn-. dicate agreement, was secured to the said defendants down to, and including December 7, 1882, upon terms, specified in their said agreement ” with the construction company.

The plaintiff’s counsel urges that the defendants, having secretly purchased, or having secured an agreement for a purchase by themselves, initiated the syndicate scheme, to put themselves in funds with which to pay for the bonds, and in this way realize a large profit.

If, professing to act for the subscribers to the agreement for the purchase of the bonds from the construction company, they had already, by a private agreement, secured the purchase for themselves, they should be regarded, as between themselves and the subscribers, as the secret sellers, it matters not how and in what terms they may have expressed the transaction in the syndicate agreement. A person cannot act as an agent for others, in a purchase for himself. Although the fact of such ownership is not disclosed, this proposition is none the less true. If the defendants were in substance, although not in form, the real vendors of these bonds for themselves, or to their profit, then, under the allegations of the complaint, the equitable remedy invoked in this action was properly chosen by the plaintiff.

But under the allegations of the complaint, the defendants’ option to purchase from the construction company expired on December 7, and before that day the syndicate was formed, and the agreement was actually signed by the plaintiff on December 6, others having previously signed. As the construction company, as well as the defendants, became parties to that agreement, it may have been regarded by them as the way in which the defendants’ exclusive right to purchase might be exercised, and as a substitute for any agreement between them on the subject.

The syndicate agreement, as has been seen, bears date December 6—six days before the defendants’ option to purchase should expire. But that view does not obviate the difficulty suggested by the fact, pointedly alleged, that when the defendants applied to the plaintiff to purchase from the construction company, they themselves had an undisclosed option in their own favor, which was unexpired, upon terms which were not explained.

But the complaint further alleges that the defendants, prior to their application to the plaintiff, had secured the appointment of themselves, as financial and transfer agents of the construction company, and the promise of a like appointment as agents of the railway company, “ and had also secured for themselves an agreement for compensation for services as such agents, equal to 5 per cent, upon the par value of all bonds sold under the syndicate subscription.” ■

It is quite true that the syndicate agreement itself recites the fact, that the defendants were the financial agents of the two companies, and were, as such, to perform certain services on behalf of the two companies in respect to the syndicate agreement, and were to be paid a compensation for such services by the companies, “ as had been agreed between them.” The syndicate agreement does not, however, state that their compensation at all depended upon the amount of bonds which should be sold by them, or that it was fixed by a percentage upon the par value of the bonds sold. Five per cent, upon the par value of the bonds sold under the syndicate agreement, of itself amounts to $1,000,000, In addition to this compensation, they were to charge the subscribers one per cent, in addition to their expenses.

In any light, therefore, in which this matter may be turned, the defendants had a direct pecuniary interest in the subject and object of the syndicate agreement, over and above the compensation they were to receive from the subscribers, whose bankers and agents they professed to be.

As between themselves and the plaintiff, there can foe no reasonable doubt that the defendants were bound to exercise the utmost good faith. They were called upon to make a full disclosure of their interest. Concealment of material facts could not be justified, and when they spoke it was their duty to speak truly. These propositions are applicable, in so far as the plaintiff is concerned, although the subscribers may have been advised by the syndicate agreement, that the defendants had an interest thereunder, over and above the commissions they were'called upon to pay.

The plaintiff and defendants were not standing at arm’s length, as strangers. The plaintiff was ignorant of the subject matter, the defendants were completely informed. The defendants stood in a peculiar relation towards the plaintiff. They were bankers, and he was a depositor with them. This relation is associated with personal trust and confidence. It was because of that relation that the defendants made their proposition to the plaintiff. The plaintiff was sick, incompetent intelligently to inquire or to judge. They were the custodians of his funds. The defendants knew of the plaintiff’s illness, and of his ignorance of the railway company; and of its means and prospects they were advised, as they were of the fact that if he purchased any of the bonds he would do so because of his confidence in their statements.

I am persuaded that the facts entitle the plaintiff to redress in equity. Outside of the question of the abuse of confidence reposed, there is enough in the fact that the contract was secured through misrepresentation and concealments, to warrant a court of equity to rescind and set it aside as against the defendants.

The plaintiff’s counsel also urges that equitable relief is open to the plaintiff, because, by the terms of the syndicate agreement, the defendants and plaintiff stood to each other in the relation of partners, and the defendants were also trustees for the subscribers. The privilege was reserved to the defendants to become subscribers to the agreement, and to take a portion of the bonds, and they did so, and were, as such subscribers, entitled to share with the other subscribers in the profits to be realized through certain operations under the agreement, growing out of the purchase and sale of bonds.

The defendants were, without doubt, trustees for the subscribers. Each subscriber gave to the defendants full power and authority to act for him in respect to his subscriptions, and in the execution of the syndicate agreement they were authorized to incur expenses and make disbursements. For a breach of duty or obligation growing out of this relation, the defendants would be accountable in a court of equity.

But the peculiar relief sought in this action,—the rescission of the agreement,—does not arise out of abuses subsequent to the making of the agreement, but for what transpired before, and contemporaneous with the signing of the same. The action is for a cancellation of the instrument, and not for an accounting by partners or trustees, or a review of their conduct in administering the enterprise, except incidentally. The plaintiff might have forborne, had he so chosen, to ask for a rescission ; he might have concluded to hold the bonds and sue for damages, and thus affirm the contract.

But he had a clear right, if defrauded, to be placed, in so far as he was concerned, in a court of equity, in statu quo. 0 This would involve a disaffirmance of the contract on his part, so soon as he discovered the fraud, and a return of, or an offer to return, the securities, as a condition to the recovery of what he had paid. I cannot say absolutely that the plaintiff’s remedy, in an action for deceit, would be as complete as that which a court of equity would afford. If the plaintiff has been injured in the way and to the extent that his complaint alleges, a complete remedy would be through a return of the bonds and the restitution to him of what he has paid. Besides, a complaining party has a right to avail himself of the rules respecting the efficiency of proof to establish frauds, and the presumption growing out of the relations of the parties, which equity recognizes, which do not obtain in actions at common law.

Equitable jurisdiction may be exercised upon an instrument unduly obtained, when a court of law could not enter into the question (Jackson v. King, 4 Cow. 207, 220). That may seem an extreme doctrine, since legal and equitable remedies are now administered by the same tribunal, under the constitution of this State. But the maxims and principles of equity were neither abolished nor changed when the court of chancery ceased to exist. The supreme court administers equity according to its established rules and principles..

Lord Mansfield acted upon the doctrine that a deed could not be fraudulent unless it be fraudulent both at law and in equity, and that courts of law have a concurrent jurisdiction to suppress and relieve against fraud. But the distinction above suggested is clearly recognized by Lord Hardwioke, as it is by chancellors in this State. In Hall v. Perkins (3 Wend. 626, 631), Savage, Ch. J., says: “ Fraud is often the subject of inquiry in a court of law, as well as in equity. There is a difference, however, that at law fraud must be proved.” The learned judge proceeds to present the various heads of fraud, against which equity will relieve, as formulated in the leading case (Chesterfield v. Jansen, 2 Ves. 155), which in a large sense is supposed to cover every case of fraud, whether actual, apparent, or presumed. The general statement in that case is made, that a court of chancery “ has an undoubted jurisdiction to relieve against any species of fraud.”

Besides, the power which courts of equity have of investigating directly, and disposing of the whole matter, both of the rescission of an impeachable contract, and the awarding compensation or restitution, in one proceeding, avoids a repetition or circuity of legal actions.

The learned counsel for the defendants, in their brief submitted, properly say, “ The precise relations of the parties to a syndicate agreement like this, have never been judicially determined.” Syndicate agreements similar to this are modern inventions, and cases arising under them are novel in many of their features, and call for the application of equitable principles and doctrines, to their particular circumstances, such as is adapted to work out justice and prevent wrong.

With their proposition to purchase these bonds, submitted by the defendants to the plaintiff, large powers were asked for by them, and valuable interests were sought to be secured through the syndicate agree ment. But so great was the confidence reposed that the plaintiff stated to the defendants, when he signed the instrument, that he would not give such power or authority to any other person or firm whatever.” So great confidence reposed, only intensified the duty, on the part of the defendants, to exercise the utmost good faith in all that they should represent to the plaintiff to induce him to subscribe to the instrument, and to observe the same good faith in their management of their trust under the agreement.

It is not necessary to question the proposition, that, when the nature of the injury complained of is such, that a legal action is the appropriate and efficient remedy, the party will be remitted to such proceeding.

But if I am correct in the conclusion reached with regard to the true grounds of the plaintiff’s complaint, and the relief to which he is entitled, a legal action would not afford a complete remedy.

That the plaintiff demands in substance, through the judgment of this court, the payment of a sum of money, is no objection. The return of this money is not asked as unliquidated damages, but as an incident, and a necessary complement to the rescission which he demands. When a court of equity has jurisdiction of a cause of action, it is not wanting in power, through Its decree, to order the payment of money to which a complaining party is entitled, upon the rescission of a contract. In suits commenced in equity for the spec!fie performance of contracts relating to real property, or personal, when the remedy is proper, it often happens, that consideration money paid is adjudged to be repaid.

In Mayne v. Griswold (3 Sandf. 463), it is stated that: “ When the object of a suit is to have a contract rescinded, and declared void for fraud, equity has jurisdiction, although the same amount of money will be recovered on such rescission, as would be given as damages in an action of law. The jurisdiction of the court of chancery in matters of fraud is coeval with its existence, and it is not affected by the circumstance that there is a concurrent remedy at law.”

The fact that the syndicate agreement, which by its terms is executory, has become substantially an executed instrument, through the payment of the money, and the receipt of the bonds by the plaintiff, affords no reason for refusing equitable relief, and turning the plaintiff over to a suit for damages. It is no answer to an action for a rescission of an instrument upon adequate grounds, that the transaction has been completed. It would, however, be a good answer, that it had been executed by the complaining party, with knowledge of the fraud, or that the status quo, without the defendants’ fault, could not be restored.

In Mayne v. Griswold, supra, relief was granted, although the plaintiff had paid for and received the bonds. To the end that a party to such contract, through whose fraud it had been induced, should not be at liberty to interpose the same asa shield,in a suit against him for damages, or otherwise, it is within the province of a court of chancery to condemn it for the deceit in which it originated.

But in truth the contract, according to the allegations of the complaint, has not been altogether executed, as the defendants have presented, and have still outstanding, a claim against the plaintiff thereunder for his proportion of certain expenses incurred by them thereunder. t

But it is urged on the defendants’ behalf that a return of the securities by the plaintiff to them is not a restoration of the status quo, and that, therefore, the equitable relief demanded is not applicable. There are cases which hold that a contract cannot be rescinded or its operation annulled, even when steps are taken for the purpose as soon as the fraud is ascertained, if anything has occurred to prevent the restoration of the parties to their original position, or the return of the property in the plight in which it was when delivered.

That proposition, I am sure, is stated too broadly and unqualifiedly. Two principal things have occurred in this connection since the making of the agreement. The moneys paid by the plaintiff to the defendants have been paid over by them to the construction company under the contract, and the bonds themselves have become greatly depreciated. The construction ' company, as well as the railway company, have become publicly insolvent, and they are in the hands of receivers.

Conceding that the moneys have been paid to the construction company, now openly insolvent, under the allegations of the complaint, the provision in the contract for such payment was a part only of a scheme “ previously conceived ” to injure and defraud the plaintiff. The decline in the price of the bonds in the market is owing to no fault on the plaintiff’s part, but it follows from the fact alleged that both of these companies were in fact insolvent and unable to fulfill their contracts, to the knowledge of the defendants, at the time the syndicate was formed.

The right of rescission is summi juris. The complainant must do all that he can, and that the conditions will allow, to restore the parties to their original condition. But if, through the operation of an impeachable contract, without the plaintiff’s fault, or through the action of the defendants themselves, there cannot be a complete restitutio in integrum, an inability on the plaintiff’s part will not defeat his action for equitable relief, and he will be restored to his original condition, in so far as it can be accomplished.

That the other subscribers to the syndicate agreement, and the construction company, are not made parties to this action, constitutes no valid objection to its prosecution against the defendants. If the plaintiff has been injured in the way of which complaint is made, it was through the defendants’ acts, it was their agency and representations exclusively which brought the plaintiff into connection with the syndicate agreement. The plaintiff’s relation to the defendants, as has been stated, was peculiar from the beginning. No other subscriber may have the same grounds of complaint as those alleged by him. No urgency on the part of the other subscribers could prevent the prosecution of the plaintiff’s suit, for. the relief he seeks of the defendants. No other subscriber would be prejudiced in any way by a decree in the plaintiff’s favor against the defendants.

The construction company is publicly hopelessly insolvent. Nothing can be recovered from it, by either the plaintiff or the defendants, even if contribution could be adjudged between the defendants and that company. If the defendants have paid over the money to the construction company, under the allegations of the complaint, that presents no reason for making it a party.

The decree, if plaintiff should be entitled to one, could be satisfied without affecting that company.

It is asked by the complaint only that the contract be rescinded as between the plaintiff and the defendants, who, having an interest in the subject, negotiated the agreement with the plaintiff, to their profit at liis cost. Besides, it is claimed by the plaintiff, that, under the allegations of the complaint, the defendants have in their hands large gains and profits accruing to them under the agreement, out of which restitution in equity could properly be made. As the plaintiff’s moneys cannot be followed into the hands of the insolvent construction company, nor any recovery be had of it, the defendants, having funds, the fruits of their negotiations, should make restitution to him.

But it is urged by the learned counsel for the defendants that the plaintiff ratified the agreement, received benefits under it, and that it is too late for him now to seek to disaffirm it. If, with knowledge of the fraudulent representations and concealments of which he now complains, he voluntarily received benefits under the agreement, that would be a waiver of the fraud, and would be a good answer on the merits. For while a claim for damages can be satisfied only by actual payment, or a release, a right of rescission may be lost through an unconditional acquiescence in the instrument, and an election to affirm once made is final and irrevocable.

The plaintiff’s acts, disclosed by the complaint, which are claimed to be an affirmance of the instrument, are the receipt by him upon January 2, 1884, of the moneys secured by the coupons, due on January 1, 1884, and the acceptance by him on January 11, of one-half of the bonds for which he had previously paid.

The material question in this connection, however, is, does the complaint show that the plaintiff had become acquainted with the facts constituting the frauds of which he now complains, when he received the moneys and accepted the bonds % To render an election to confirm conclusive, it must be made with a full knowledge of the facts. “To fix acquiescence upon a party, it should unequivocally appear that he knew the fact upon which the supposed acquiescence is founded,” and in order “ to constitute a valid confirmation a person must be aware that the act he is doing will have the effect of confirming an impeachable transaction” (Note to Fox v. Mackreth, 1 White & Tud. Lead. Cas. in Eq. 156, 157).

Upon a trial of an issue of fact upon the merits, it is often a question of much difficulty to determine whether a party has elected to confirm a voidable contract, under all the facts and circumstances of the case, appearing in evidence. Here the question arises upon a construction of a pleading. The complaint alleges that the plaintiff, “ after the discovery of the said concealments, frauds,” &c., and on January 28, 1884, some seventeen days after he received the last bonds, took the first steps in the way of rescission, by serving a notice upon the defendants of his intention to -rescind, accompanied by an offer to return the bonds, and the moneys received on the coupons. The complaint does not fix the day of that discovery.

Conceding the rule which formerly existed as now existing, in a qualified way,—that a pleading is construed against the pleader,—I do not think that I would be justified in deciding that the complaint shows a discovery by the plaintiff, of the grounds of his complaint, against the defendants before he accepted the coupon moneys, or the bonds. In order to agree with the the defendants’ contention, I would be obliged so to hold. That view would be exceedingly technical, and in direct opposition to the whole theory of the plaintiff’s cause of action, as disclosed by his pleading.

Should the defendants have desired to be informed of the precise day of the discovery made by the plaintiff, an application should have been made by them to have the complaint in this regard made more definite and certain. A demurrer is not a proper remedy to cure the uncertainty , ambiguity or indefiniteness of a complaint.

I have substantially considered all the points raised upon the argumen t of this issue of law. The learned counsel on both sides have submitted able and elaborate briefs. The whole case, presented by this issue, having been thoroughly discussed, and numerous authorities cited, the case necessarily invited, and the efforts of counsel merited, and have received, the most careful consideration on my part.

As I have already stated, for the purpose of this discussion, through their demurrer, and that only, the defendants have conceded the allegations of the complaint to be true, but so conceding, they have earnestly urged, that they do not constitute a cause of action. The result reached by me, as already indicated, is, that upon neither of the grounds urged, can the demurrer be sustained. The complaint is sufficient, and the defendants must be put to their answer on the merits. It was not necessary to decide whether or not the complaint set up facts sufficient to show a cause of action for redress at law by way of damages. The prayer of the complaint asks for equitable relief only, and upon a demurrer, under the authorities, to such relief the plaintiff is limited (Swart v. Boughton, 35 Hun, 281).

Among the authorities cited by the defendants upon the point chiefly discussed, is that of Butler v. Livermore, 52 Barb. 570. Upon an examination of that case, I do not find that the peculiar facts disclosed by the complaint in this case, with respect to the true relations existing between the plaintiff and the defendants, and the defendants’ relation to the subject and object of the syndicate, bring this case within the decision of Mr. Justice Sutherland, in the case cited.

Judgment for plaintiff on the demurrer, with liberty to the defendants to answer on payment of costs.

II. Motion for an order to have the bonds, which plaintiff offered to return to defendants as a condition of seeking rescission of the contract, sold, the proceeds to stand in place of the bonds and await event of action.

The plaintiff made an affidavit setting forth his possession of the bonds in question; that the West Shore Railway Company was openly and notoriously insolvent and in the hands of receivers ; that it had not paid interest on the bonds since January 1, 1884 ; that the receivers had issued certificates to the amount of $2,000,000, which were claimed to be a lien prior to that of the bonds upon the property of the company ; that its income was insufficient to pay its operating expenses, and rentals, and that the receivers were issuing certificates for such deficiency which were claimed to be a lien prior to that of the bonds ; the decline in the markét value of the bonds since the plaintiff’s purchase, and their steady decline in value since the commencement of the action ; and that, from the losing character of the business done by the receivers, it was probable that the entire value of the bonds would be almost if not entirely dissipated and lost.

The deponent also alleged that the defendants’ firm had been dissolved since his purchase of bonds, and its capital divided among the defendants, and that the defendants had met with heavy losses which had impaired their pecuniary responsibility; that the defendants had declined to stipulate that the bonds might be sold, &c.

Upon this affidavit and the complaint in the action, the plaintiff moved for an order that the bonds in question be sold at public auction for the benefit of whom it might concern, and the amount realized therefrom taken and held to be the value thereof at the time of such sale, and stand in place of the said bonds, and to be credited upon the claim of the plaintiff, if he recovered in the action.

The defendants’ answering affidavits denied the alleged misrepresentation and concealment; averred the truth of their statements to plaintiff, full disclosure, good faith and their pecuniary responsibility ; and admitted the alleged refusal to stipulate for the sale of the bonds.

At the close of argument by counsel at special term, the court delivered the following oral opinion.

Andrews, J. I do not think on a motion of this kind the court should go into a scrutiny of the responsibility of the defendants. It would evidently be impossible to arrive at any accurate conclusion as to that. It is a question of the power of the court to direct such a sale, and whether, in an action of this kind, even if the court had the power, it would exercise it. The cases to which you refer are certainly not precedents for granting an order of this kind. They were cases in which property was actually in the custody of the officer of the court, and the property was expensive to keep, and therefore it was considered, though a somewhat doubtful matter, it should be sold. In this case, the property is in the hands of the plaintiff, and the plaintiff has the power to sell it; the only difference being, that, in that case, he would have to resort to his action at law. I have never known of a motion of this kind, and it seems that the counsel on both sides, after thorough examination, are unable to find any precedent. I have a very decided opinion in the matter, and I think I may as well express it now, because I do not think further consideration will change my conclusion. I think the court has no power to make an order of this kind. Therefore the motion is denied.

An order having been entered denying the motion for sale of the bonds, the plaintiff moved to re-settle by inserting in the order that the motion was denied “ on the ground that the court has no power to make the order applied for.” The motion to re-settle was denied, and from the order denying both motions, plaintiff appealed.

Wm. G. Choate (Shipman, Barlow, Larocquc & Choate, attorneys), for the plaintiff, appellant. The court has power to order sale of the bonds. It is within the powers of a court of equity to authorize the disposal of perishable property when a rescission of a contract for the purchase of such property is sought (Bigelow on Fraud, 411; Neblett v. Macfarland, 92 U. S. 101 ; Scott v. Perrin, 4 Bibb, 360). Perishable property includes shares of stock in a corporation, and, by parity of reasoning, the bonds issued by an insolvent corporation (See especially opinion of Wood, V. C., in Maturin v. Tredennick, 12 Weekly Rep. 740, 742). No precedent is required to justify the court in so doing. The business of modern life calls into exercise the beneficent powers and flexible methods of courts of equity (See opinion of Miller, J., in Hawes v. City of Oakland, 104 U. S. 450, 453). The order asked for would impose no unnecessary hardship upon defendants ; and parries engaged in a fraudulent attempt to obtain an other’s property are not the objects of the special solicitude of the courts (Neblett v. McFarland, 92 U S. 101, 105). Where it is impossible for the plaintiff to restore the subject of the suit as to which he has claim for equitable relief, as if he has without fault and before discovery parted with it, the court decrees damages (Maturin v. Tredennick, 12 Weekly Rep. 740). And so, also, where, though the thing still exists in specie and is within the power of the court to decree its restoration, such restoration, on account of subsequent alteration of circumstances, will work great hardship and loss, and damages will give the plaintiff substantial relief, the court will make a decree varying with the circumstances of the particular case, with or without an absolute rescission (Kerr on Fraud and Mistake, 337-344; Masson v. Bovet, 1 Den. 69 ; Warner v. Daniels, 1 Woodb. & M. 90; Scott v. Perrin, 4 Bibb, 360; Bigelow on Fraud, 412; Gatling v. Newell, 9 Ind. 572-578; Downer v. Smith, 32 Vt. 1). The subject of the suit being' these bonds, a marketable commodity, just equal in value in legal intendment to the sum of money for which they can be sold, the defendant cannot possibly be wronged by their sale under the proposed order, on the theory that if they are kept they may be worth more when restored to him by the execution of the decree. The complete answer to their complaint is, you were not entitled to have them held for your benefit. That delay was the plaintiff’s misfortune, not your right. It was the plaintiff’s right at the time of the sale to return them to you in exchange for his money, which you then, as now, wrongfully withheld from him (Bigelow on Fraud, 412 ; Neblett v. MacFarland, 92 U. S. 101, 104).

Edward Lyman Short (Davies, Cole & Rapallo, attorneys), for the defendants, respondent. I.The denial of the motion to sell was proper, as the court has no power to grant such an application. This application is believed to be without precedent, and the granting of it would work a violation of the well settled rights and duties of the parties to an action of this nature, and would defeat the condition upon which final relief can alone be granted to the plaintiff. (a.) The plaintiff would defeat the right to a rescission, in this action by a voluntary disposition of the bonds pending the action (Schiffer Dietz, 83 N. Y. 300; Campbell v. Fleming, 1 Ad. & El. 40; Harris v. Equitable Life Assurance Soc., 64 N. Y. 196, 200; Masson v. Bovet, 1 Den. 69 ; Hammond v. Pennock, 61 N. Y. 145, 153; Green v. Green, 69 N. Y. 553 ; Clarke v. Dickson, E. B. & E. 148, 152. (6.) The plaintiff has determined his election, and has disaffirmed the contract, and this motion is incnsistent with the theory by which the contract is considered at an end when the purchaser declares that he no longer accepts the agreement but rejects it (Clough v. London, &c. R. R. Co., L. R. 7 Exch. 26; Reese River Mining Co. v. Smith, L. R. 4 H. L. 64,73 ; Stevens v. Hyde, 32 Barb. 171, 181; Morris v. Rexford, 18 N. Y. 552, 557. (c.) The granting of the order asked for would have been practically a present payment to the plaintiff, on account of the sum he would recover if successful. But an order directing payment of money by one party to another pending a suit, and where there is no sum in court, is contrary to the practice of the court” (Bogert v. Bogert, 2 Ed. Ch. 399, 404). id.) The plaintiff, having elected to disaffirm the contract, cannot now elect a different remedy, (e.) Even if the plaintiff could now elect a different remedy, the relief which the plaintiff would obtain if his motion were granted, and he was successful in his action, would be one unknown to the law in any form of action,—namely, a recovery back of the price paid, less the amount for which the bonds might be sold (Bowen v. Mandeville, 95 N. Y. 237, 240). No equivalent can be substituted for the bonds (Scovil v. Wait, 54 N. Y. 650 ; Krumm v. Beach, 96 N. Y. 398, 407).

II. There is no basis for maintaining in this court that the special term denied the motion to sell for want of power, because the record is silent, since no ground is stated in the order, and there is no “opinion ” to that effect either referred to in the order or a part of the record. That the “ opinion ” must be expressly referred to in order to constitute a part of the record, see Tolman v. R. R. Co., 92 N. Y. 353, 356. That the terms of the order must be ambiguous or unintelligible, see Snyder v. Snyder, 96 N. Y. 88, 92, and Salmon v. Gedney, 75 N. Y. 481. That even in the simple case of there being no evidence that the motion was not decided on the merits, it must be held discretionary, see Goldberg v. Utley, 60 N. Y. 427, 429. See, also, Martin v. Hicks, 1 Abb. N. C. 341, 346, Davis, J. ; Cushman v. Brundrett, 50 N. Y. 296 ; People ex rel. Cashman v. Heddon, 32 Hun, 299, 301.

The general term affirmed the orders appealed from, without opinion.