Case ID: misc_78/html/0350-01.html
Source: Caselaw Access Project
Author: {"author": "Seabury, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Henry Pollak, Appellant, v. The Dodge Manufacturing Company, Respondent.
    (Supreme Court, Appellate Term, First Department,
    December, 1912.)
    Pleading — demurrer — admission of facts alleged — false representations.
    Fraud — false representations as to corporate stock — demurrer to complaint for insufficiency — pleading — deceit.
    While a demurrer to a complaint admits facts alleged it does not admit conclusions averred.
    The complaint, in an action against a foreign corporation for false representations as to its financial condition, in the absence of an allegation that plaintiff by reason of said representations purchased any of the stock of defendant, or that said representations were calculated to induce brokers or others to sell said stock, fails to state a cause of action.
    
      An allegation that the alleged false representations were made to induce persons to become interested in the sale of the stock does not disclose whether the pleader meant to allege that said representations were made to invite the public to buy or sell the stock, tenders no issue, and is one which defendant cannot safely either admit or deny.
    If the complaint be construed to allege that the representations were made to induce the public to buy defendant’s stock, it is demurrable for insufficiency because of omission to allege that plaintiff purchased a single share of stock.
    If a recovery be sought because of plaintiff’s expenditure of time and labor in acting as a broker of said stock, the complaint is insufficient because of a failure to allege that the representations were made to induce brokers or others to sell said stock.
    It is an essential element of a cause of action for fraud and deceit that the alleged representations should be calculated and intended to influence plaintiff, or that he should have been one of the class to whom the representations were addressed, and that they should have been calculated and intended to influence members of such a class.
    Appeal by plaintiff from an interlocutory judgment of the City Court of the city of Hew York, sustaining.defendant’s demurrer to the complaint.
    Ferguson & Ferguson, for appellant.
    Marshall B. Clarke, for respondent.
   Seabury, J.

The court below sustained a demurrer to the complaint. This appeal presents the question whether the complaint states facts sufficient to constitute a cause of action. The complaint, among other things, alleges that the defendant is a foreign corporation, organized under the laws of Indiana, and that, in 1890, it authorized an issue of $1,500,000, seven per cent, cumulative, preferred stock, divided into fifteen thousand shares of $100 each; that, “ in order to attract investors and to induce persons to become interested in the sale of the stock,” the defendant represented to the public generally, including this plaintiff, that it had assets amounting to $1,700,000, and made other representations as to its financial condition which are set forth in the complaint. These representations are alleged to have been false, and to have been known to the defendant to be false. The complaint also alleges that defendant, being desirous of disposing of said stock, made an agreement with a firm known as Wollenberg'er & Oo., that the latter should undertake to dispose of said stock in an amount in excess of $200,000 par value. The complaint further alleges that the plaintiff was engaged as a financial broker in selling and disposing of stocks and bonds, and that he relied upon the truth of said representations made by the defendant, and that “ he was induced to undertake the sale of said stock of the defendant company, and that Wollenberger & Oo. gave plaintiff the right to sell $200,000 par value of said stock.” It is further averred that the plaintiff devoted a large part of his time, energy and services for several weeks in interesting prospective customers in said stock, and in creating a demand therefor; and that he had practically ” succeeded in effecting the sale of a large amount of said stock, when he became advised of the falsity of the representations made by the defendant, and that, by reason of the fact that such representations were false, the plaintiff was prevented from selling said stock, to his damage in the sum of $5,000.

In testing the sufficiency of this complaint, we must bear in mind that, while the demurrer admits the “ facts ” alleged, it does not admit the conclusions averred in the complaint. The facts required to be pleaded are not propositions of law, but physical facts capable as such of being established by the evidence. The pleader cannot aver a legal conclusion as the equivalent of a group of separate facts from which it is an inference. The allegations should be such, and so stated, as to permit a distinct traverse, and evolve a definite issue. Cook v. Warren, 88 N. Y. 37, 40.

The complaint does not allege that the plaintiff, by reason of said false representations, purchased any of the" stock of the defendant; nor does it allege that the said representations were calculated to induce brokers or others to sell said stock. In the absence-of one or the other of these allegations, I think that the complaint fails to state any cause of action at all. The adroitness of the pleader seems to have been exercised in so framing his complaint as to evade responsibility for a direct allegation. The allegation of the pleading, that the alleged representations were made “ to induce persons to become interested in the sale of the stock,” seems to be so nicely balanced as to fail to disclose whether the pleader means to allege that the representations were made to invite the public to buy or sell the stock. Such an obligation tenders no issue, and is one that the defendant cannot in safety either deny or admit.

There can be no doubt that, if the statements of the defendant were knowingly false, and were made to induce the public to purchase its shares, any person who relied upon said statements and sustained injury thereby can hold the defendant liable. Downey v. Finucane, 205 N. Y. 251. So also I think it is equally clear that, if such representations had been made to induce brokers or others to act as brokers, and to sell the stock, any person within this class who relied upon said false representations to his damage could hold the defendant liable for such damages as immediately followed. The difficulty with this complaint is, that, if it is to be construed to allege that the representations were made to induce the public to buy its stock, it is.insufficient in law, because it fails to allege that the plaintiff purchased a single share of stock. If, on the other hand, the plaintiff seeks to recover because he expended time and labor in acting as a broker of said stock, it is insufficient, because the complaint nowhere alleges that the representations were made to induce brokers or others to sell said stock. In either view the complaint fails to state a cause of action. It .is an essential element of a cause of'action for fraud and deceit that the alleged representations should be calculated and intended to influence the plaintiff, or that the plaintiff should have been one of the class to whom such representations were addressed, and that such representations should have been calculated and intended 'to influence members of such a class.- That the representations to he actionable must be made for the purpose of inducing another to act upon them, was recognized as early as 1789 in the celebrated case of Pasley v. Freeman, 2 Smith L. C. (9th Am. ed. 1300, 3 T. R. 51), where Puller, J., said: “ Every deceit comprehends a lie; but a deceit is more than a lie on account of the view ivith which it is practiced, its being coupled with some dealing, and the injury which it is calculated to occasion, and does occasion, to another person.”

“ ETo one,” said Judge Cooley, “ has a right to accept and rely upon the representations of others but those to influence whose action they were made. If every one might take up and act upon any assertion he heard made or saw in print as one made for him to act upon, and the truth of which was warranted- by the assertbr, the ordinary conversation of business and of society would become unsafe, and the customary publication of current news, or supposed news, would only be made under the most serious pecuniary responsibility.” Cooley Torts (3d ed.), 940.

In Pollock on Torts (p. 289), it is said: “It is not a necessary condition of liability that the representation complained of should have been made directly to the plaintiff, or that the defendant should have intended or desired any harm to come to him. It is enough that the representation was intended' for him to act upon, and that he has acted in the manner contemplated, and suffered damage which was a natural and probable consequence.”

In Addison on Torts (p. 732), the rule is stated as follows : “ Whether the representation is made to the plaintiff, or to a third party, is immaterial, if it is false to the knowledge of the defendant, and has been made for the purpose of being communicated to the plaintiff, or to a class of persons of whom the plaintiff is one, or even if it is made to the public generally with a view to its being acted on, and the plaintiff, as one of the public or of such class, acts on it, and suffers damage thereby.”

In the present case, the conclusion which the pleader has alleged does not disclose the existence of any fact which shows that the alleged representations were intended to be acted upon by brokers or others who were engaged in selling stocks, or that the defendant ever contemplated that the plaintiff or the class of which he was a member should have acted upon said representations.

In my view of the case, the learned court below was correct in sustaining the demurrer to the complaint, and the interlocutory judgment entered thereon should be affirmed, with costs.

Guy and Bijur, JJ., concur.

Interlocutory judgment affirmed, with costs.