#### YEOMANS v. BELL.

(Supreme Court, General Term, Fifth Department.

June 20, 1894.)

1. Sale—Rights op Buyer—False Representation by Seller.

Where the condition of a corporation can be ascertained only on an examination of the books by an experienced bookkeeper, it cannot be said that an intending purchaser of stock of such corporation had the means at hand of ascertaining its condition; and therefore a false representation in regard thereto by the seller of the stock vitiates the sale.

3. Vendor and Purchaser—Vendor’s Lien—Waiver.

A vendor who takes worthless corporate stock in part payment of the purchase price, relying on the representations of his vendee as to the value of the stock, and takes a mortgage on the land sold for the residue of the price, does not thereby waive his vendor’s lien for so much of the price as is represented by the stock.

Appeal from special term, Erie county.

Action by James D. Yeomans against George H. Bell. From a judgment in favor of plaintiff, defendant appeals.

Affirmed.

Argued before DWIGHT, P. J., and LEWIS, BRADLEY, and HAIGHT, JJ.

Tracy C. Becker, for appellant.

Adelbert Moot,, for respondent.

HAIGHT, J.

This action was brought to recover the sum of $5,000, with interest thereon from November 1, 1887, and that the same be adjudged a lien upon certain real estate, etc. On or about the 15th day of October, 1887, the' plaintiff sold to the defendant a farm, with certain personal property thereon, located in the town of Aurora, county of Erie, for the sum of $20,600, to be paid as follows; $6,500 by assuming a mortgage then existing upon the premises; $100 in cash; $5,000 on the 1st day of November, 1887; $2,000, with interest, in three months from the 1st day of November; $2,000 in two years from the 1st day of November, secured by mortgage upon the premises; and the balance by assigning to *503the plaintiff $5,000, par value, of the capital stock of the E. W. Bell Manufacturing Company. The trial court has found:

> “That to induce the plaintiff to accept such §5,000 in stock of the R. W. Bell Manufacturing Company, and to enter into said contract, the defendant did falsely represent to the plaintiff that said stock was worth 1.10; that said R. W. Bell Manufacturing Company was in good condition, and only owed §25,000, which was a mortgage upon its real estate; and that such stock had paid a dividend of six per cent, per annum since said R. W. Bell Manufacturing Company was organized, in 1881, excepting one year, when there was a surplus which was used in improvements. That in fact said R. W. Bell Manufacturing Company was not in good condition; that it was losing money; that it owed large sums of money, over and above said mortgage of §25,000, and that it had not paid a dividend of six per cent per annum from its organization, in 1881, excepting one year; that said stock had never paid but one dividend, and that a semiannual dividend, of only three per cent., in the year 1880. That the plaintiff relied upon said false statements of the defendant, and believed them to be true, * * * accepted said §5,000 in stock in part payment of said land, and conveyed the premises as aforesaid to the defendant George H. Bell by a good and sufficient deed then made and delivered to said Bell. * * * That thereafter, and shortly before the commencement of this action (December 9, 1891), the plaintiff discovered that said representations concerning said stock were untrue, and thereupon this plaintiff tendered this defendant said §5,000 in stock, and offered to return to the defendant what he had paid for said land, and requested the defendant to convey said land to the plaintiff for the amount which the plaintiff had paid therefor."

As a conclusion of law, the court ordered judgment for the plaintiff for the relief prayed for in the complaint, with costs, etc. The findings of the trial court as to the representations made are in accordance with the testimony of the plaintiff and one Ferguson, who was the agent who made the sale. Their testimony in this regard is controverted by the defendant, but the question of credibility was for the trial court, and in this case we must follow the findings.

It appears from the testimony of the bookkeeper of the company that on the 1st day of October, 1887, the liabilities were §387,054.03, and resources, $357,656.83, and that at that time the loss was $29,-397.20; that on the 1st day of January thereafter the loss had increased to $68,713.55; that the loss was distributed through the year 1887, and the great difference appearing between the 1st day of October and the 1st day of January thereafter was in a measure due to the charging to the profit and loss account the claims that were worthless. On the 1st day of October, 1887, it appears that the company was owing, aside from its capital stock, the sum of $137,054.03; so that if the representations were made, as testified to by the plaintiff and his witness Ferguson, it is quite apparent that they were untrue.

It is claimed, however, that the plaintiff had the means at hand •of discovering the value of the stock, other than the representations of the defendant, and that in the negotiation he did not use the means of knowledge which a prudent man should have done, under the circumstances. The rule is doubtless well stated by Justice Field, in delivering the opinion of the court in the case of Slaughter’s Adm’rs v. Gerson, 13 Wall. 379-383. He says:

> *504“The misrepresentation which will vitiate a contract of sale, and prevent a court of equity from aiding its enforcement, must not only relate to a material matter constituting an inducement to the contract, but it must relate to-a matter respecting which the complaining party did not possess at hand the means of knowledge, and it must be a misrepresentation upon which he relied, and by which he was actually misled, to his injury.”

To this we will add that, where the representation is the mere expression of an opinion as to the value of the property offered for sale, it will not furnish evidence of fraudulent intent, but if the representation is in regard to an extrinsic fact affecting the condition, quality, or value of the subject of the contract, and the purchaser relies thereon, and the same is false, then an action based upon the fraud may be maintained. Schumaker v. Mather, 133 N. Y. 590, 30 N. E. 755; Ellis v. Andrews, 56 N. Y. 83. The representations alleged to have been false were made to the plaintiff' by the defendant, who was the president of the company. It was the practice of the bookkeeper to make a monthly'statement to the officers of the company, showing its financial condition. It is therefore apparent that the defendant knew the condition of the company at the time the representations were made. The representations had reference to the business and condition of the company, which were of vital importance in determining the value of" the stock. The facts in reference to the business and condition doubtless appeared upon the books of the company; but, in order to ascertain the facts from the books, an examination of the accounts by an experienced accountant and bookkeeper, involving time and labor, was required, and it appears to us it cannot be said the plaintiff possessed the means at hand of knowing the facts.

Upon making the sale, the plaintiff accepted, in payment of the purchase price, a mortgage upon the premises for the sum of $2,000, as well as the assignment of the stock in question. It is now claimed that this was a waiver of the vendor’s lien. The rule, as stated in Fish v. Howland, 1 Paige, 20-30, is that the vendor’s lien should be sustained whenever “he has taken the mere personal security of the purchaser only, and to consider any bond, note, or covenant given by the vendee alone as intending only to countervail the receipt of the purchase money contained in the deed, or to show the time and manner in which the payment is to be made, unless there is an express agreement between the parties to waive the equitable lien; and, on the other hand, to consider the lien as-waived whenever any security is taken on land, or otherwise, for the whole or any part of the purchase money, unless there is an express-agreement that the equitable lien on the land shall be retained.”' As we have seen, a mortgage was given for a part of the purchase-money, and the stock in question—of a corporation—was assigned for another portion of the consideration. We shall therefore assume for the purposes of the argument that, under the contract, if valid, the plaintiff’s lien, as vendor, would be deemed waived. But, as we have seen, the plaintiff charges that he was induced to enter into the contract by reason of the false and fraudulent representations made by the defendant—in other words, that the-*505contract was induced by fraud,—and the trial court has so found. If so, he was induced to waive his lien as vendor by reason of the fraud practiced upon him. We think it apparent, therefore, that the rule of waiver invoked has no application where the contract was so induced. Baker v. Lever, 67 N. Y. 304; Seymour v. McKinstry, 106 N. Y. 230, 12 N. E. 348, and 14 N. E. 94; Hammond v. Pennock, 61 N. Y. 145; Krumm v. Beach, 96 N. Y. 398; Bradley v. Bosley, 1 Barb. Ch. 125. The judgment should be affirmed, with costs. All concur.