Case ID: ny_36/html/0427-01.html
Source: Caselaw Access Project
Author: {"author": "Porter, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Walter M. Conkey, Respondent, v. Thomas H. Bond, Appellant.
    A n agent, under a general authority to purchase, cannot buy from himself without the knowledge or assent of his principal.
    ■ Such a transaction is a breach of duty, and the contract is subject to rescission, irrespective of any question of intentional fraud or actual injury.
    Appeal from the Supreme Court. ■ The action was brought to rescind a sale of stock in the Oswego Starch Company, made by the defendant to the plaintiff in February, 1857, and to recover $1,500, the price paid therefor, and certain payments made by the plaintiff as a stockholder.
    The complaint alleged the facts upon which the plaintiff claimed that the sale was fraudulent in fact and in.law. These were, in substance, that the defendant undertook to purchase stock in that company as his agent, and that he fraudulently transferred his own stock to the plaintiff, at á price greatly exceeding its value, under the pretense that it was the stock of other parties which he had purchased for the plaintiff as his agent; that he'concealed this fact from the plaintiff, and, upon its discovery by the latter, shortly before the commencement of this suit, he refused to rescind the sale. The complaint further alleged that the defendant made false representations to the plaintiff as to the value of the stock and the financial condition of the company, to induce him to make the purchase.
    The judge, before whom the cause was tried, found that no representations were made by the defendant which he knew to be false, and held, as matter of law, that the other facts established by the pleadings and proofs, did not entitle the plaintiff to relief.
    These were substantially as follows: In January, 1857, the defendant was the owner of a number of shares of the Oswego River Starch Company, and the agent of the company in the city of New York, for disposing of its manufacture. In an interview at that date between the parties in New York, after a glowing account by the defendant of the business of the concern, and of which the plaintiff had previously no knowledge whatever, the plaintiff expressed a desire to purchase some one or two thousand dollars worth of the stock, if any was to be obtained in the market, at a price not exceeding $150 per share. The defendant thereupon undertook to buy some if it could be procured ; and if successful he was to apprise the plaintiff, who resided in the county of Chenango.
    Accordingly, on the 31st of January, 1857, he addressed a letter to the plaintiff, reiterating his opinion of the value of the invéstment, stating that he knew where he could obtain the stock at $150 per share, and asking defendant if he would like it. He stated further that he did not wish to advise the plaintiff, but if he should conclude to take the stock, he would “ get and send him a certificate ” for that amount. The plaintiff answered this letter bn the 5th of February, remarking that he liked the statement, and was willing to take that amount, and desiring the defendant to obtain the certificate, when he would at once put him in funds. This letter the defendant acknowledged on the 19th by a brief note, saying that he would write and get the certificate as soon as possible, and on the 25th of February he wrote again, inclosing the plaintiff the scrip for ten shares of the stock, and adding in a postscript: “ If we meet with no mishap, I think our stock will pay well; I could sell quick at $150 if I had any to dispose of”
    
    The plaintiff remitted the $1,500, and that closed the transaction. The defendant did not, in fact, purchase any stock from the company or from any outside party, but caused ten shares of his own stock to be transferred to the plaintiff. He did not communicate this fact to the plaintiff at any time during the negotiation, or subsequently; and it was not discovered until the following June. At the time of the transfer, .the company was in an embarrassed condition, and the stock was of little intrinsic value, though these facts, were unknown to the defendant, and he supposed the representations to be true which he made in this respect to the plaintiff.
    
      The affairs of the company were soon afterward wound up, ■ and its effects passed into the hands of a receiver.
    The complaint was dismissed; but the judgment was reversed and a new trial was ordered by the General Term in the fifth district.
    The case, as decided in the Supreme Court, is reported in 34 Barbour, 276.
    
      William F. Allen, for the appellant.
    
      Lewis Kingsley & Benj. F. Rexford, for the respondent.
   Porter, J.

The fact that the defendant volunteered his agency did not absolve him from the duty of fidelity, in the relation of trust and confidence which he sought and assumed. The plaintiff was induced to purchase at an extravagant premium, stock of the value of which he was ignorant, on the mistaken representations of the defendant, who professed to have none which he was willing to sell. This assurance very naturally disarmed the vigilance of the respondent, and he availed himself of the defendant’s offer by authorizing him to buy at the price he named.

The defendant did not buy, but sent him a certificate for the amount required, concealing the fact that he had not acted under the authority, and that the stock transferred was his own.

There is no view of the facts in which the transaction can be upheld. He stood in a relation to his principal which disabled him from concluding a contract with himself, without the knowledge or assent of the party he assumed to. represent. He undertook to act at once, as seller and as purchaser. He bought as agent, and sold as owner. The ex parte bargain, thus concluded, proved advantageous to him and very unfortunate for his principal. It was the right of the latter to rescind it, on discovery of the breach of confidence. It is not material to inquire whether the defendant had any actual fraudulent purpose. The making of a purchase from himself, without authority from the plaintiff, was a constructive fraud, in view of the fiduciary relation which existed between, the- parties. In such a case, the law delivers the agent from, temptation by a presumptio juris et de jure, which good intentions are unavailing to repel. It is unnecessary to state our views more fully on this question, as it is fully and ably discussed in the opinion delivered by Judge Bacon in the court below, and his conclusions are abundantly fortified by authority. (34 Barb., 276; Gillett v. Peppercorne, 3 Beavan, 78; Story on Agency, § 214; Michaud v. Girod, 4 How. U. S., 555; Davone v. Fanning, 2 Johns. Ch., 268, 270; Moore v. Moore, 1 Seld., 262; N. Y. Central Ins. Co. v. Protection Ins. Co., 14 N. Y., 91; Gardner v. Ogden, 22 id., 347.)

The objection, that this theory is inconsistent with that stated in the complaint, is not sustained by the record. The essential facts are alleged, and the appropriate relief - is demanded. The fact that the complaint alleged other matters which the plaintiff failed to establish, impairs neither his right nor his remedy. Utile per inutile non vitiatur.

The order of the Supreme Court should be affirmed, with judgment absolute for the respondent.

All the judges concurring,

Judgment accordingly.