Case ID: how-pr_59/html/0375-01.html
Source: Caselaw Access Project
Author: {"author": "Westbrook, J. —", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SUPREME COURT.
    
      Virginia W. Spence agt. George R. Baldwin.
    
      Order of arrest—False representations—Deceit—Repudiation of settlement because of fraud—Surrender of notes given in settlement—Condition of upholding order—Filing notes with clerk of court in lieu of tender or surrender—When so fled order of arrest will be sustained though no tender or surrender was made before suit.
    
    In an action to recover damages for a sum of money embezzled by defendant while acting in a fiduciary capacity as agent of plaintiff, where defendant collected such money and after appropriating it to his own use gave secured notes to plaintiff for the amount embézzled, representing that the notes were well secured when they were not:
    
      Held, that because of the false statements made by defendant in inducing plaintiff to take the notes plaintiff could repudiate the settlement for fraud.(
    And where, on a motion by defendant to vacate the order of arrest granted in the action, the point is raised that no tender or surrender of the notes received in settlement was made before the commencement of the action:
    
      Held, that the notes must be surrendered, and such surrender must be a condition of upholding the order of arrest. The notes must be filed with the clerk to await the final order of the court. If this is complied with the motion to vacate the order of arrest will be denied.
    
      New York Special Term, July, 1880.
    This was an action brought by plaintiff to recover as damages a sum of money fraudulently embezzled and converted by defendant while acting in a fiduciary capacity as agent for plaintiff.
    Defendant was arrested on the complaint and an affidavit showing defendant thus collected the money and appropriated it to his own use.
    The defendant moved to vacate the order and set forth, by affidavit, the fact that secured notes were given plaintiff in settlement of the claim, and alleged that such notes were still
    
      retained by plaintiff and that they are now in possession of plaintiff’s attorney..
    The motion to vacate came on to be heard before Hon. T. E. Westbrook, July special term.
    
      A. Simis, Jr., for motion, urged:
    The acceptance of the notes by plaintiff merged the original indebtednéss in the higher security, and the cause of action was on the notes; and plaintiff having taken the notes in settlement the character of defendant’s liability was changed and he could not be arrested, especially as plaintiff still holds the notes, and cited Wisner agt. Ocumpaugh (71 N. Y., 113); Jagger Iron Company agt. Walker (76 N. Y,, 521); Frisbie agt. Larned (21 Wend., 450); Southwick agt. Sax (9 Wend., 122); Nexsen agt. Lyell (5 Hill, 466); The Alliance Insurance Company agt. Cleveland (14 How., 408).
    
      E. C. Bipley, opposed.
    I. The sum claimed is not for an “indebtedness,” but for damages for fraudulent conversion and embezzlement.
    II. The plaintiff was induced to accept the notes of defendant by trick and device, and by grossly false and fraudulent statements. The defendant stated to plaintiff that the notes were perfectly good and would be paid at maturity, and that they were secured by a mortgage to one Pierrepont, as trustee, which was perfectly good, and upon property that would sell for fully enough to satisfy and pay all the notes secured; that said notes have not been paid; that they have all matured and been dishonored; that said mortgage was a fraud; that the mortgage only covered an equity of $200 or $300, and that the makers of the notes were now contesting their validity.
   Westbrook, J.

I have no doubt of the soundness of the law stated by defendant’s counsel, but I think it has no appliication to this case.

The notes were accepted by reason of false statements made by defendant, and plaintiff could repudiate the settlement for fraud. The notes must be surrendered, and such surrender must be a condition of upholding the order of arrest. The notes must be filed with the clerk to await the final order of the court in this action. If this is complied with the motion is denied.

Ho costs on motion as no tender of notes was made before suit.