Case ID: misc_21/html/0714-01.html
Source: Caselaw Access Project
Author: {"author": "Pryor, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Warren Delano, Jr., Plaintiff, v. Isaac L. Rice, Defendant.
    
    (Supreme Court, New York Special Term,
    June, 1897.)
    Counterclaim — Fraud — Récíssíon — Restoration.
    "A counterclaim, interposed to an action" brought to recover a balance alleged to be due on a purchase of a part of the stock of a publishing company, Which, in substance, alleges that -the plaintiff represented •" to the defendant, who was the president óf the company, that a combination of stockholders had been formed to depose' him, and that, inréliance On- this statement, which was false, he bought the stock in: question, paid for in part, lit order to keep the control, Is good on' ‘ .demurrer; and as the counterclaim is to be deemed as proceeding upon k rescission, restoration, before action brought, is not k condition- \ precedent., •
    Demurrer-to counterclaim.
    Horace E. Deming, for plaintiff.
    Nathan Bijur, for defendant.
    
      
      Received too late for insertion in proper place.— [Reporter.
    
   Pryor, J.

The action is for $20,172.40, balance due on the-purchase of stock in the Eorum Publishing Company. On the" ground of a fraudulent misrepresentation the defendant, by formal counterclaim, demands a rescission of the sale and the return of the $30,139 cash payment. The plaintiff demurs to the counterclaim for insufficiency in substance.

A party induced by fraud to purchase property has. an election between three remedies. He may stand to the bargain and recover damages for the deceit, or, upon restitution of what he has received under the contract, he may rescind it and reclaim the purchase price; or, upon an offer of restitution in his complaint, he may sue in equity for a rescission of the sale and incidental relief. Vail v. Reynolds, 118 N. Y. 297, 302-303; Gould v. Cayuga, etc., Bank, 86 id. 75, 83; Allerton v. Allerton, 50 id. 670. The counterclaim purports to be an action for rescission; and, accordingly, a . precedent restoration is not necessary to its support. Cases supra.

The pleading, undoubtedly, is obscure and indefinite, but the remedy for these defects is by motion; and, as against- the demurrer, it suffices if from the averments a cause of action may be inferred. Kain v. Larkin, 141 N. Y. 144; Milliken v. Western, etc., Co., 110 id. 403. In substance the counterclaim alleges that the defendant was president of the Forum Publishing Company, and in control of the conduct and policy of the Forum Magazine; that plaintiff represented to him that a combination had been formed, with sufficient stock, to depose him from such position and control, and that, thereupon, to secure himself in such position and control, he engaged for the purchase of plaintiff’s shares. The demurrer concedes that the statement was made, that it was false to the knowledge of plaintiff, and that in reliance upon it defendant entered into the contract. It is argued, however, that the representation was immaterial, but such it could not be since it was the actual inducement to the purchase by defendant. Leake on Cont. 313. It is objected, too, that the defendant is not damaged, and yet he has paid $30,000 for stock admitted to be of no-pecuniary value. It is urged again that by inquiry defendant might have ascertained the falsity of the statement; but he was under no obligation to' make such inquiry. Mead v. Bunn, 32 N. Y. 275; Brown v. Post, 1 Hun, 304; affd., 62 N. Y. 651. It is insisted, finally, that defendant acquired wHat he coveted — namely, the controlling interest in the stock of the company; but that interest he would not have desired or purchased but for plaintiff’s false representation.

Demurrer overruled, with leave to reply on the usual terms.