Case Name: James Moore, Resp't, v. James N. Robertson et al., Impl'd, App'lts
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1891-12-31
Citations: 43 N.Y. St. Rep. 245
Docket Number: 
Parties: James Moore, Resp’t, v. James N. Robertson et al., Impl’d, App’lts.
Judges: 
Reporter: New York State Reporter
Volume: 43
Pages: 245–247

Head Matter:
James Moore, Resp’t, v. James N. Robertson et al., Impl’d, App’lts.
(Supreme Court, General Term, First Department,
Filed December 31, 1891.)
1. Parties—Assignee op claim.
A liability finally to account to the assignor for the proceeds of the litigation does not deprive the assignee of a claim of the right to prosecute and maintain an action thereon.
2. Corporations—Implied trust—Rescission op sale op stock.
Plaintiff’s assignors, who were stockholders in a corporation, bought additional stock of defendants, its officers, on the representation that the moneys so obtained would be used only to obtain the disclosure of a secret, process in order to obtain a patent which would increase the value of the stock. The secret being valueless, defendants loaned the money to the company, which it diverted, to other objects. EM, that plaintiff's; assignors were entitled to rescind their purchase of the stock and to recover the money paid therefor.
Appeal from a judgment recovered on trial before the special term.
JR. Burnham, Moffat, for app’lts; Everett P. Wheeler, for resp’t.

Opinion:
Daniels, J.
The assignments severally made to the-plaintiff of the assignors' respective rights of action are full and complete, and were sufficient for that purpose, although the plaintiff will be liable to account to them for the moneys he may recover in the action. A point quite similar to this arose in the case of Greenwood v. Marvin, 111 N. Y., 423; 19 St. Rep., 612, where it was held very much on the authority of Sheridan v. Mayor, etc., 68 N. Y., 30, that this liability finally to account for the proceeds of the litigation would not deprive the assignee of the right to prosecute and maintain the action. And the English statute declaring such assignments, after express notice of them in writing shall have been given to the debtor, effectual to pass and transfer the legal title to the debt or chose in action from the date of such notice, in no way affects the application of that principle. It does not declare an assignment without being followed by a written notice invalid, and cannot control the law of this state, of which the defendants then were, and since have continued to be, residents, sustaining such assignments when they are 'brought, as these have been, within the scope and effect of this law. The objection taken to the right of the plaintiff to maintain the action was rightly overruled.
There appeared to have been no irregularity or abuse of the proceeding taken to obtain the evidence of the foreign witnesses by commission. And the effect of the depositions was not reduced by anything done in taking them. The case, therefore, differs from and is not affected by anything that was said in Graham v. Carleton, 31 St. Rep., 127, where the deposition was very irregularly taken.
The evidence supplied very ample proof of the fact that the assignors each severally purchased his shares of the stock of the Electric Sugar Befining Company upon the assurances that the defendants, who were the president and treasurer of the company, would use the money paid as its price only to obtain the disclosure of the secret process represented to be used in the refinement of sugar in order that a patent for that process could be obtained for the company, which would have enhanced the value of the company's shares. They were interested in securing that value, and parted with their money for that object, of which the defendants were well aware, and when the latter could not obtain information of that process, for the reason that it had no existence, but was a groundless fraud, it was their duty to return the money when these assignors elected to rescind their purchases, and demanded it, which they did upon the discovery of the fraud. The fact that there was no such process rendered all the shares of the company entirely worthless, and the offer made in the complaint to return those for which the money had been paid and received complied with all the assignors were legally bound to do to render the rescission of their purchases complete. Each purchased a certain number of the shares for himself, and paid his own money for the purchase, and severally was vested, with this right to rescind.
The defendants, instead of holding the money for the benefit of these assignors, loaned it to the company, which with their concurrence, and in great part for the defendants' benefit, diverted the money to other objects, and for that it was just and right that they should be, as they were, personally charged with the liability themselves to refund the money which was misappropriated under their authority.
In the disposition of the case at the special term and the decision of the appeal of the plaintiff from so much of the judgment as dismissed the complaint, so far as it included the receiver of the company, several subjects now discussed have been further examined, and what has been there said does not require to be repeated. But it is sufficient to add that the plaintiff's right to recover against these defendants was well sustained, and the judgment so far as they have.appealed from it should be affirmed, with caste.
Van Brunt, P. J., and Lambert, J., concur.