Case ID: abb-pr-ns_10/html/0055-01.html
Source: Caselaw Access Project
Author: {"author": "\n      By the Court.—Monell, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

FARIS against PECK.
    
      New York Superior Court;
    
    
      General Term, November, 1870.
    Fraudulent Transfer of Stock.—Motion to Vacate Arrest.
    In actions where the cause of action and the facts which authorize an arrest are the same, the court will not, ordinarily, try the merits upon a motion to vacate the arrest.
    If the original affidavits made out against the defendant a prima fade case of a cause of action authorizing an arrest, the court will not set aside the order unless the proof adduced hy the defendant is so clearly preponderating as to leave no reasonable doubt of his success on the trial.
    If the special term, on a motion to discharge the order, has determined that there, was or was not a clear weight of evidence in the defendant’s favor, the general term, on appeal, ought not to disturb such determination.
    One who obtains possession of stock belonging to another person of the same name, and transfers it fraudulently to a third person, is liable to an action for fraud and deceit by one who in good faith takes from the latter a transfer for value; and he may be arrested therein.
    Appeal from an order.
    This action was brought by Henry L. Faris and another, appellants, against William H. Peck and Roderick F. Clow, to recover damages for a conspiracy to defraud the plaintiffs.
    An order to arrest the defendants was granted, which, upon motion, was discharged at special term.
    The plaintiffs appealed.
    The facts disclosed by the affidavits upon which the order of arrest was granted, and others read on the motion, were as follows:
    
      On the formation of the American Merchants’ Union Express Company, one William H. Peck, whose residence was unknown to the company, but who resided at Laurens, Otsego county, in this State, became entitled to ninety shares of the capital stock of such company.
    The scrip or certificate for such stock was made out and kept by the company in readiness for delivery to said Peck upon his calling for it.
    Peck did not call, and a clerk of the company who had charge of the matter, after waiting a long time, examined the blew York City Directory, and finding therein the name of “William H. Peck, 222 Washington-street,” in said city, inclosed to such address the scrip for said ninety shares of stock, on the evening of February 1, 1869, and sent the same by mail.
    The defendant Peck received the letter and in closure and on the next day signed the usual power of attorney in blank, and sold and transferred the ninety shares to the defendant Clow.
    Clow afterwards negotiated the stock, through McIntyre, a broker, to the plaintiffs, for a loan of two thousand dollars, delivering to them the same power of attorney in blank.
    In the mean time the true owner of the stock had called at the express company’s office for it, and the mistake was then discovered.
    All efforts of the plaintiffs to get their money back failed, and the defendants were arrested on allegations of a conspiracy to defraud.
    
      Moses Ely, for the plaintiffs, appellants.
    A. K. Hadley, for the defendant and respondent Peck.
    
      James Henderson, for the defendant and respondent Clow.
   By the Court.—Monell, J.

The action in this case is one of the class in which the canse of action and the facts which authorize the arrest are the same. In such actions the court will not, ordinarily, try the merits upon a motion to vacate the arrest.

The true rule is, or should be, that if the original affidavits make out a prima facie case against the defendant, of a cause of action authorizing an arrest, the court will not set aside the order, except where the proof adduced by the defendant is so- clearly preponderating as to leave no reasonable doubt of his success upon the trial.

And another rule I think should be, that when the court at special term shall have determined that there was or was not a clear weight of evidence in favor of the defendant, the court at general term ought not to disturb such determination, applying to such decision the rule which governs the general term upon findings of fact on the trial of an action.

Applying, then, these rules to the case before us, we should not disturb the decision below, so far as it discharges the defendant Clow from the arrest.

The evidence charging upon him any conspiracy to defraud is altogether too slight to hold him, and a verdict against him, upon such evidence, I think the court would be bound to set aside.

A very different case, however, is presented against the defendant Peck.

There cannot be a doubt that Tie committed a great fraud. He received the shares of stock through the mail, and on the same day (for it was posted to him on the evening of the first, and transferred by him on the second) signed a power of attorney in blank, and sold the stock to Clow.

It would be in vain for him to assert his innocence in the transaction. No one would believe him ; and his feeble attempt at justification, by swearing that he sold the stock to Clow “ without any knowledge or intimation from any source whatever , that the said certificate was not tona fide his legitimate and lawful property,” adds to, rather than diminishes, the strength of the charge.

He knew the stock was not his property, and instead of, like an honest man, endeavoring to ascertain and correct the mistake, he dishonestly forged the name of the true owner, and, with intent to deceive und defraud some one, sold and transferred the stock.

Such a signing of the name of the true owner was a forgery (2 Pars, on Prom. Notes, 584; Graves v. American Exchange Bank, 17 N. Y., 205; People v. Krummer, 4 Park. Cr., 217); by means of which forgery, the defendant Peck has made himself liable; and the question is whether these plaintiffs can maintain the action.

There can be no doubt that Clow, who transferred the stock to the plaintiffs, is liable to them, upon his implied warranty of the genuineness of the transferrer’s signature to the power of attorney. This is upon the principle of implied guarantees in negotiating bills and notes. Nor can there be a doubt that Clow could recover from Peck for the fraud.

Why not, then, the plaintiffs? Peck intended to injure some one, and he did injure the plaintiffs ; and having done a wrong, he should be held responsible for such a wrong to any one who by means of it has been injured.

The principle which holds Peck is analogous to that which governs notes and bills, where a person paying value for a forged bill may recover from any party warranting the bill either expressly or by implication of law (2 Pars, on Prom. Notes, 601; Coggill v. American Exchange Bank, 1 N. Y. [1 Comst.], 113); or, where the maker of a note puts it in circulation with a forged indorsement of a payee’s name, a bona fide holder may recover against the maker as upon a note payable to bearer (Foot v. Meacker, 3 Hill [S. C.], 227 ; and Riley's Law Cas., 248).

. There is another analogy in principle between Peck’s liability and the class of cases where consequential damages are recoverable for injuries arising, not immediately from the act, but in consequence of it, as where an obstruction is willfully or wrongfully placed upon the highway, and a wayfarer falls upon it. There the injury being the consequence of the unlawful act, although not immediately arising from it, an action will lie against the wrong-doer.

So, in this case, the injury to the plaintiffs was in consequence of the unlawful act of Peck ; and he who did the wrong must be held responsible for all injuries arising from it, whoever may be the injured person.'

The complaint in the action is not before us, and we do not know what cause of action is stated ; but I cannot see any difficulty, upon the facts, in sustaining an action against Peck for fraud and deceit, under the last paragraph in the fourth subdivision of section 179 of the Code, and in such an action he can be held to bail.

I am in favor, therefore, of affirming the order as to the defendant Clow, and reversing it as to the defendant Peck.

No costs. 
      
       Present, Barbour, Ch. J., Monell and Freedman, JJ.