Case ID: abbn-cas_9/html/0001-01.html
Source: Caselaw Access Project
Author: {"author": "Finch, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SPARMANN v. KEIM.
    
      New York Court of Appeals ;
    
    December, 1880.
    [Reversing 44 Super. Ct. (J. & S.) 163.]
    Infant Partners.—Recovering back Capital.—Pleading.—Complaint for Monet Received with Allegations of Deceit.—Cause of Action in Tort or on Contract.
    If a complaint states facts sufficient to sustain an action on contract, and also contains statements of alleged false representations, which do not suffice to sustain an action of tort, the cause of action is not in tort but on contract.
    
    An infant partner may rescind his agreement of partnership, and recover judgment against his copartner individually for capital paid to him.
    Plaintiff, being an infant, was induced to become defendant’s partner, and put in $1,000 into the business of defendant, on defendant’s untrue representation that the same “ was a good paying business,” and “they would make lots of money therein; ” after this $1,000 had been spent in and about the business, and the same proving greatly inferior to what it had been represented, the plaintiff demanded a return of his money from defendant. Held, the partnership agreement, being voidable as to the infant, could be rescinded, and the amount paid in under it recovered from defendant.
    Appeal from a judgment.
    Gustav E. Sparmann, an infant, appearing by guardian ad litem, sued John Keim, in the New York Superior court. The case he relied on was as follows :
    Plaintiff Sparmann, an infant, during 1874 advanced to and for defendant Keim, in loans to him and payments for him, various sums of money, amounting on June 30,1874, to $401,95. Then, by exaggerated representations of the profitable nature of defendant’s certain decorating business at 73 Second avenue, N. Y., the defendant induced Sparmann, said infant, to become his partner in the business, and to sign partnership articles ■ on July 1, 1874, wherein plaintiff agreed to put $1,000 as further capital into the business, which he, Sparmann, did, by having the previous loans and advances applied on and as part of said contribution to the capital of $1,000, and paying the residue in cash, which was subsequently disbursed in the business. The business was stated to plaintiff to be “a good paying business;” defendant also asserting “they would make lots of money in it.” After continuing in the business for a while, plaintiff became convinced of the untruthfulness of the defendant’s statement that-the business was “good and paying,” and thereupon he, plaintiff, demanded his money, the $1,000, back from defendant, who refused to repay the same.
    The plaintiff then brought suit against the defendant, for the $1,000 so obtained from plaintiff, alleging in the complaint his infancy, and also the defendant’s untrue representations, and claiming onthe trial that defendant, because of plaintiff’s infancy, was liable for the $1,000 as for moneys had and received to plaintiff’s use.
    The proofs on the trial showed, that plaintiff had received no benefit from the business, except $113.69, drawn by him, at different times, out of the business, and which he offered to restore by deducting the same from his claim and taking judgment for the balance only, with interest. Proof of the plaintiff’s infancy at the time of signing the partnership-agreement, was also admitted on the trial.
    
      The trial court nonsuited the plaintiff, on the ground that his complaint, resting on allegations that his money was obtained by “false representations,” was for a tort, and not ex contractu; and that the only proof given about the business being what the business was after plaintiff went in, a case of “ false representations ” had not been made out against the defendant ; the court holding that defendant’s statements, so far as covering the future, amounted to an expression of opinion merely.
    
      The Superior Court at general term were of opinion that the complaint was for tort and not in contract \ and that a cause of action in tort was not made out (Reported in 44 Super. Ct. [J. & S.] 163). They accordingly affirmed the nonsuit, from which affirmance plaintiff appealed- to this court.
    
      
      Wm. F. PitsMce, for the plaintiff, appellant.
    
      Leonard F. Ourtis, for defendant, respondent. ’
    
      
      See note on Pleading, at end of this case.
    
    
      
      The complaint was in the following form:
      , I. That plaintiff is an infant, under the age of twenty-one years.
      
        II. That on October 5, 1874, Charles J. Nehrbas was, by an order of this court, duly appointed plaintiff’s guardian ad litem, herein. HI. That on or about July 1, 1874, defendant, by means of false representations, obtained from plaintiff $1,000, to be invested in a certain decorating business, which defendant falsely represented would yield large profits; but, on the contrary, said business ever since July 1, 1874, aforesaid, has been constantly losing money; and furthermore, defendant is appropriating whatever profits may be, and are realized, to his own use and benefit; to the great damage and injury of plaintiff. IV. That, relying on such representations of defendant, the plaintiff, on or about said July 1, 1874, paid over to defendant, at his request, the full sum of $1,000, for the purposes of said business. V. Plaintiff also shows, that between June 11,1874, and about July 1, 1874, he, at defendant’s request, had lent and advanced to and for defendant, by payments to him and other parties, at his instance, of divers sums, in all $401.95, on condition that the same should be repaid on demand; but defendant has wholly failed to repay same, though payment thereof has been duly demanded; and that said amount of money, so lent, advanced and paid out, was thereafter, upon the formation of the partnership between plaintiff and defendant, entered into July 1, 1874 allowed by defendant as part of such $1,000, contributed as aforesaid, and constitutes a portion of the same. "VI. That plaintiff, on ascertaining the falsity of the representations made by defendant as aforesaid, and before this action, demanded a return to him of said $1,000, by defendant, who refused so to do, and still refuses.
      Wherefore, plaintiff asks said judgment for $1,000, against, &c.
    
   Finch, J.

The plaintiff was nonsuited upon the ground that the cause of action stated in his complaint was for a tort, and rested upon allegations that his money was obtained from him by the false and fraudulent representations of the defendant. If that is the true and only proper construction of the complaint, the nonsuit was right, for no false representations as to facts were either alleged or proved. Those alleged were only that the artistic decorating business,’ into which the plaintiff was invited to put his capital, “would yield large profits,” and the only representation proved was “ that it was a good paying business.” The representations were promissory, and matter of opinion, and had respect to the developments of the future. There was nothing in them on which to found an action ex delicto.

But we do not think that is a just or proper construction of the complaint. It alleges no facts to sustain an action for a tort, but does allege facts sufficient to sustain an action on contract. Its allegations are these: that the plaintiff is an infant; that he loaned and advanced to the defendant, various sums of money, amounting to $401.95; that .thereafter defendant, by false and exaggerated representations of the profitable nature of his business, induced the plaintiff to become his partner; that plaintiff was thereby induced to agree to put $1,000 as capital into the business j that he did so, by allowing the previous loan to be applied on his share of capital and paying the balance in cash; that, becoming satisfied of the falsity of the representations, he demanded his money back, which was refused ; wherefore he demands judgment for $1,000. These allegations make a good cause of action on contract. The pleader may not have so intended, and he is certainly wrong in insisting that the mere numbered paragraphs of his complaint were so many separate counts or causes of action. But there is one and only one cause of action stated in the complaint. It fails to furnish ground for a recovery in tort, but does furnish facts to sustain an action on contract.

Almost all the contracts of an infant are voidable and liable to be rescinded. This contract was of that character (Van Winkle v. Ketcham, 3 Caines, 323; Miltard v. Hewlett, 19 Wend. 301 ; Chapin v. Shafer, 49 N. Y. 407; Bool v. Mix, 17 Wend. 119 ; Stafford v. Boof, 9 Cow. 626 ; Goode v. Harrison, 5 Barn. & Ald. 159; Corpe v. Overton, 10 Bing. 252; Everett v. Wilkins,29 Law Times, N. S. 846; Green v. Green, 69 N. Y. 556). The infant avoided it, as he had a right to do. The proof shows that he had received no benefit from it, except the sum of $112.69, which on the trial he said had been paid him out of the business, arid which he offered to restore by deducting it from his claim, and asking judgment only for the balance, with interest (Heath v. Stevens, 48 N. H. 252). He, therefore, both alleged and proved a good cause of action on contract.

That there were allegations of fraudulent representations in the complaint, does not, of necessity, fix the character of the action. Thus, it was held in Veeder v. Cooley (2 Hun, 74), that where the complaint was sufficiently sustained by the testimony, it was not enough to authorize a nonsuit, if a cause of action was otherwise set forth, that it contained an allegation suited to an action ex delicto. And in Byxbie v. Wood (24 N. Y. 607) it was decided that a complaint under the Code, stating false representations of defendant, by which the plaintiff was induced to pay him money, does not necessarily stamp the action as one in tort. To the same purpose are other authorities (Neftel v. Lightstone, 77 N. Y. 96 ; Ross v. Terry, 63 Id. 614; Freer v. Denton, 61 Id. 492 ; Graves v. Waite, 59 Id. 156 ; Greentree v. Rosenstock, 61 Id. 589).

It follows, therefore, that the nonsuit was erroneous, and the plaintiff’s exception thereto well founded.

The judgment is reversed, and a new trial granted ; costs to abide the event.

All the judges concurred.

Judgment accordingly. 
      
       In Everett v. Wilkins, the plaintiff, an infant, agreed to buy a one-half interest in the defendant’s business of keeping a public house. An installment of the purchase money was paid, and the plaintiff and his wife went to board at the public house. The plaintiff was not entitled to receive any profits untilhe had paid all his purchase money, although he participated in the management of the business. He rescinded the contract and sued to recover the amount he deposited. Held, that he was entitled to recover it back, less the amount expended for board. 1874, Everett v. Wilkins, 29 Law Times, 846.
      In Corpe v. Overton, the plaintiff, while a minor, agreed to enter into a partnership, and made a deposit of 100Z., which was to be forfeited if he did not complete the contract. Finding that he had been deceived as to value of the business,' he rescinded the contract as soon he became of age.
      
        Held, that he had a right to rescind and recover back the money, in an action for money had and received, as he had obtained no benefit from the contract. 1833, Corpe v. Overton, 10 Bing. 252.
      
     
      
       Affirming 34 Super. Ct. (J. & S.) 505.
      In Wheeler v. American Life Ins. Co., in the same court, November, 1880, the same principle was applied, reversing 16 Hun, 317. In that case, plaintiff alleged that the insurance company, defendants, insured the life of John G-. Vose, and Vose assigned the policy and the moneys to bd paid under it to his children; he paid the premiums for 1870, 1871, and 1872; in 1873, defendants declared a dividend to policy holders, and the amount of Vosc’s dividend (it being less than his annual premium) they retained possession of; that Vose became insane, and by reason thereof unable to pay the premium of 1873, and died in that condition in 1874; that defendants did not untilafter his death assert any forfeiture of the policy; that, after his death, notice and proofs were given to defendants, and they refused to pay the policy; that, with the proofs, the policy was transmitted to and received by defendants, but they refused to grant a paid-up policy, and also refused to pay the amount of insurance to which the dividend, as an annual payment made on the premium day of 1873, would have entitled Vose. Besides these, were allegations as to guardianship, &o., of the children.
      The policy (which was made a part of the complaint) provided that it was not to take effect until premiums were actually paid, and that it should cease and determine if any subsequent premium should not be paid when due; also, that if, after the payments of two or more annual premiums, the policy should cease and determine by default in the payment of any subsequent premium when due, then, notwithstanding such default, the company would grant a paid-up policy for such amount as the then present value of the policy would purchase as a single premium, provided the policy Should be transmitted to and received by the company, and due application be made for such paid-up policy.
      Upon these facts plaintiff claimed to be entitled to full payment upon the policy. Defendants demurred.
      
        The Supreme Court held that, as by reason of the forfeiture and the inadequacy of the dividend to pay the premium, plaintiff could not recover upon the policy as a whole, he could not be allowed, without amendment, to recover for'the refusal to give a paid-up policy, the former being a contract with Vose, and the latter obligation accruing .after his death.
      
        The Court of Appeals reversed the judgment, holding that, although the conclusion of the court below in regard to the recovery of the amount insured was correct, yet the facts in regard to the obligation to issue a paid-up policy being fully stated in the complaint, they entitled plaintiff to recover damages for an equivalent amount, and it was error to sustain a demurrer to the complaint.
      For other illustrations of this rule and its limitations, see, besides those cited in the text, the following cases: Wright v. Hooker, 10 N. Y. 51; Marquat v. Marquat, 12 Id. 336; Farron v. Sherwood, 17 Id. 227; New York Ice Co. v. Northwestern Ins. Co., 23 Id. 357; S. C., 12 Abb. Pr. 414; Jordan & Skaneateles Pl. R. Co. v. Morley, 23 N. Y. 552; Barlow v. Scott, 24 Id. 40; Wood v. Brown, 34 Id. 337; Davis v. Morris, 36 Id. 569; Bradley v. Aldrich, 40 Id. 504; Connaughty v. Nichols, 42 Id. 83; Dyckman v. Valiente, 42 Id. 549; Austin v. Rawdon, 44 Id, 63; Elwood v. Gardner, 10 Abb. Pr. N. S. 238; S. C., 45 N. Y. 319; affirming 9 Abb. Pr. N. S. 99; Hale v. Omaha National Bank, 49 N. Y. 626; reversing 33 Super. Ct. (J. & S.) 40; Degraw v. Elmore, 50 N. Y. 1; Ross v. Mather, 51 Id. 108; reversing 47 Barb. 582; Ledwick v. McKim, 53 N. Y. 307; affirming 35 Super. Ct. (J. & S.) 304; Wright v. Wright, 54 N. Y. 437; affirming 59 Barb. 505; Mills v. Bliss, 55 N. Y. 139; Sussdorf v. Schmidt, 55 Id. 319; Larned v. Hudson, 57 Id. 151; Rindge v. Baker, 57 Id. 209; Vilmar v. Schell, 41 Id. 564; affirming 35 Super. Ct. (J. & S.) 67; Arnold v. Angell, 62 N. Y. 508; reversing 38 Super. Ct. (J. & S.) 27; Indianapolis, &c. Rw. Co. v. Tyng, 63 N. Y. 653; affirming 2 Hun, 311; S. C., 4 Sup’m. Ct. (T. & C.) 524; Pensylvania Coal Co. v. Delaware & Hudson Canal Co., 3 Abb. Ct. App. Dec. 470; Read v. Lambert, 10 Abb. Pr. N. S. 428; Barker v. Clark, 12 Abb. Pr. N. S. 106.
      The new rule introduced by the amendments of 1379 to section 549 of the Code of Civil Procedure,—providing that where it is alleged in the complaint that defendant was guilty of a fraud in contracting or incurring the liability, plaintiff cannot recover unless Improves the fraud, —might have made a difference in the conclusion reached by the court, in the case in the text, if the allegations of the pleading liad shown a case of fraud; but as the allegations were wholly inadequate, showing only promissory representations, that section seems not to be applicable.