Case Name: James M. Elliott, Jr., Respondent, v. James B. Brady and Others, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1907-03-08
Citations: 118 A.D. 208
Docket Number: 
Parties: James M. Elliott, Jr., Respondent, v. James B. Brady and Others, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 118
Pages: 208–210

Head Matter:
James M. Elliott, Jr., Respondent, v. James B. Brady and Others, Appellants.
First Department,
March 8, 1907.
Contract — only parties to sealed instrument can sue — principal and agent...
When a contract is under seal, only parties to the contract can sue upon it.
Hence, when defendants are sued upon promissory notes indorsed by them and given in payment of a contract under seal for the purchase of stock executed. by their agent, a defense that the sale was procured by fraud and misrepresentation is not available when the, agent is not a party to the action.
Principals who are sued as indorsers on a promissory note given in payment of a contract -under seal executed by their agent, cannot avoid the force of the rule aforesaid by claiming that being sued as indorsers they may defend by showing that they became such by fraud which induced the execution of, the sealed contract.
Appeal by the defendants, James B, Brady and others, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 9th day of January, .1906, upon the verdict of a jury rendered by direction of the. court after a trial at the New York Trial Term..
Edward W. Hatch [Charles J. Hardy with him on the brief], for the appellants.
H. Aaron, for the respondent.

Opinion:
Scott, J.:
This action is brought upon four promissory notes, aggregating $125,000, made by the Industrial Securities Company and indorsed by defendants.
It appears from the evidence that in the year 1902 the defendants purchased from plaintiff a controlling amount of the common and preferred stock of Southern Car and Foundry Company for upwards of $600,000". By arrangement between the 'parties, and apparently for the convenience of defendants, the actual contract of sale was made between plaintiff and one Martin Paine, who repre-' sented and acted, for defendants, and who had no personal interest in the transaction or in the stock thus purchased by him. t The contract of sale was dated October 21, 1902, was under seal, and was signed by plaintiff and Paine. The contract was within a few days fully carried out and the stock delivered and paid for. As part of the consideration, plaintiff then received promissory notes, indorsed by these defendants, for $259,900, which are the predecessors of the notes now sued upon, the original notes having been partly paid off and renewed from time to time as to the unpaid balance. The defense relied upon is that, as an inducement to defendants 'to enter upon an agreement for the purchase of the stock, plaintiff made certain false representations as to the value thereof, and suppressed certain material facts, and that defendants, relying upon said false statements and being in ignorance of the suppressed facts, were induced to purchase the said stock and to indorse the notes. At the trial, after formal proof of the notes, the defendants undertook to prove the allegations of their answer, and, for the purposes of this appeal, it may be assumed that they proved certain misrepresentations. At the close of defendants' case the court directed a verdict for plaintiff, and the appeal is from a judgment entered on that verdict.' ,
The defense amounts to an attempt on the part of the defendants to avoid the payment of the consideration for the contract between the plaintiff and Paine by showing that they were induced to cause that contract to be entered into, and to become responsible for the consideration thereof,.by the plaintiff's fraud. In our opinion this defense cannot prevail. It is well settled and is not . disputed that, since the agreement was under seal, only Paine, the party to it, could sue upon, it, and it is equally well settled that Paine alone can sue to recover damages for the alleged fraud in its inducement (Denike v. De Graaf, 87 Hun, 61), and the fact that Paine was merely an agent, and that defendants were the real parties in interest does not entitle the latter to sue. ' It follows that defendants cannot offset against their promise to pay the contract price, the damages resulting from plaintiff's fraud in inducing the contract,to be'made. (Gillespie v. Torrance, 25 N. Y. 306; Lasher v. Williamson, 55 id. 619.)
The defendants'seelc to avoid the force of this rule by distinguishing between the contract of purchase, and their contract of indorsement, claiming that as they are sued as indorsers they may defend by showing that they were induced to become indorsers by fraud-. ' This attempted distinction between the contract of purchase ánd-the agreement to pay the consideration for the purchase, cannot' avail the defendants. The'notes are merely the evidence-of the defendants' promise to pay the consideration named in the sealed contract. To attempt to offset against the consideration damages arising from -the alleged fraud in inducing the purchase cannot be permitted to one not.a party to the sealed instrument. (Denike v. De Graaf, supra.)
The judgment should be affirmed, with-costs.
Patterson, P. J., Ingraham, McLaughlin and Houghton, JJ., concurred.
Judgment affirmed, with costs. Order filed.