Case ID: ad_154/html/0297-01.html
Source: Caselaw Access Project
Author: {"author": "Thomas, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Harold C. McNulty, Respondent, v. Frederic N. Gilbert and Others, Appellants, Impleaded with The City of New York and William F. Schaufele, Defendants.
    Second Department,
    December 30, 1912.
    Contract by corporation and its president with attorney—rescission — . fraudulent representations and concealment — complaint — demurrer — accounting.
    A corporation and its president relying upon the representations of the attorney of the former, conveyed to the attorney legal title to the property and assets of the corporation, in order that he might effect extensions of mortgages against the property and otherwise extricate the corporation from its financial difficulties. Some of the mortgages were liens on an award due from the city of New York. Complaint in an action by the president of the corporation against the attorney and others examined, and held, that it fails to state a cause of action for the rescission of the contract for fraudulent representations or concealment,
    That demurrers should be sustained with leave to plaintiff to amend his complaint so as to state a cause of action for an accounting, and for such other relief as the facts may Warrant.
    Appeal by the defendants, Frederic N. Gilbert and others, from an order of the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk, of the county of Kings on the 7th day of September, 1912, granting the plaintiff’s motion for judgment on the pleadings.
    
      John A. Garver, for the appellants Frederic N. Gilbert and H. C. McNulty, Incorporated.
    
      Clifford C. Roberts, for the appellants Betts and others.
    
      John J. Kuhn, for the respondent.
   Thomas, J.:

H. C. McNulty was president of H. 0. McNulty, Incorporated. The corporation was so embarrassed that it made with Gilbert contract Exhibit A, and McNulty joined therein, so that his individual property is concerned. The city owes -an award for land previously taken, and the defendants are interested as owners of mortgages covering land conveyed to Gilbert under the contract. Gilbert conveyed to the Windsor Land and Improvement Company, land received by him from the McNulty Company, whereon the mortgages, save one, are liens, the payment whereof the grantee assumed. All the mortgages save one are liens on the award. It is apparent that in any final adjustment of interests involved, all the parties to this action should be present. But the primary question now arising is whether the complaint states a cause of action. The plaintiff upon the appeal contends, as the court below decided, that there is but one cause of action stated, and that is in favor of plaintiff individually — that the contract be adjudged void in its inception for fraud on the part of Gilbert. The complaint alleges that Gilbert was the lawyer of the McNulty Corporation and that he represented to. the corporation and to plaintiff “that it would be necessary for him in order to effectuate extensions of said mortgages and to otherwise extricate defendant corporation from its financial difficulties that he possess legal title to the property and assets of defendant corporation;” that such representation was false to Gilbert’s knowledge, and that the corporation and plaintiff relying thereon executed the contract. The further false representation alleged is that Gilbert, as attorney for plaintiff and defendant, represented to them that the contract as drawn “ carried out the intention of the parties as herein expressed, and fully protected each and all of the parties in their respective rights,’’.and that relying thereon the plaintiff and the corporation executed the contract. But there is no allegation that such representation was fraudulent, nor does it appear in what regard it is false. The latter allegation may be at once disregarded. The representation earlier stated is charged to he false and fraudulent, but as it concerns the opinion, or judgment of Gilbert as to the necessity of his having the title, or the terms on which he would undertake it, it is not available for avoiding the contract. The plaintiff does plead that Gilbert was interested as part owner in certain of the mortgages, and was in control of the proceedings to foreclose the same, which fact defendant Gilbert fraudulently concealed from plaintiff and defendant corporation, who had no knowledge thereof at the time said instrument was executed.” There is no charge or inference that the first parties would not have made the contract if the fact had been known. It merely emphasizes the capacity and opportunity of Gilbert to procure the extensions. It does not appear that the contract is unjust, that Gilbert has over-reached the first parties, or taken an undue advantage of his relation to them or the mortgages. The contract was executed January 22, 1910, while the complaint is verified on May 10, 1912. Meantime Gilbert has acted under the contract, and, so far as appears, his action is beneficial to those concerned. Indeed, the plaintiff asks that he be paid the stipulated $5,000 for his services and be allowed his disbursements, which is in affirmance of the contract. Hence a cause, of action for the rescission of the contract for fraudulent representation or concealment does not exist, and as this is the only (one which the plaintiff claims as existing, the demurrers should be sustained with leave to the plaintiff to amend his complaint so as to state a cause of action for an accounting, for the disposition of any money received in the award, and for such other adjustment as the facts may warrant. The plaintiff is a party to the contract. His property is involved in it. Therefore he is entitled to ask the court to interpose for his protection.

The order should be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.

Jerks, P. J., Carr, Woodward and Rich, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion denied, with- ten dollars costs.