Case ID: ad_272/html/1073-02.html
Source: Caselaw Access Project
Author: {"author": "", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Elsie M. H. Dash, as Administratrix with the Will Annexed of Herbert J. Holmes, Deceased, Respondent, v. Percy H. Jennings, Appellant, et al., Defendants.
   In an action to recover damages for fraud and deceit in the purchase of corporate stock, defendant Jennings appeals from so much of an order which denies his motion, under rule 106 of the Rules of Civil Practice, to dismiss the complaint for insufficiency, and denies in part his motion to strike certain allegations from the complaint under rule 103 of the Rules of Civil Practice. Order, insofar as appealed from, reversed on the law, with $10 costs and disbursements, and the motion granted to the extent of dismissing the complaint, with $10 costs, with leave to plaintiff to serve an amended complaint .within twenty days from the entry of the order hereon. Although representations that stock is a safe, conservative investment may, under certain circumstances, be a statement of fact (Graff v. Tinkham, 202 Wis. 141), and false representations that the corporation is a solvent, established business enterprise are actionable {Bothmiller v. Stein, 143 N. Y. 581; Sherman v. Smith, 185 Iowa 654), there is no express allegation in the complaint that such affirmative false representations were made by the defendants. The only allegations are with respect to alleged concealment of certain material facts. However, such concealment is not fraudulent unless there is a duty to speak, especially where there is no allegation that defendants resorted to any misrepresentations or had recourse to artifice to prevent disclosure of the facts to the purchaser, or that defendants did anything towards concealment beyond the bald and naked failure to give certain information to the purchaser. {Wood v. Amory, 105 N. Y. 278, 281; Bothmiller v. Stein, supra.) There is no allegation of any relationship between the parties which imposed the duty of disclosure on the defendants. Mere failure to disclose a fact, though fraudulent, is not equivalent to affirmation of the contrary fact. {Donovan v. Aeolian Co., 270 N. Y. 267, 272.) The amended complaint should omit all references to the Martin Act (General Business Law, §§ 352-359h). Hagarty, Acting P. J., Carswell, Johnston, Adel and Sneed, JJ., concur.