Court Opinion

ID: 5459333
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:29:32.487212+00
Date Added: 2024-06-11T08:32:48.457220
License: Public Domain

Peabody, J., (dissenting.)
The first ground of demurrer to this complaint is, that neither of the counts states facts sufficient to constitute a cause of action.
As to the first count, the difficulty in deciding on its merits arises quite as much from the surplusage it contains as from any other feature of it; but with an abundance of irrelevant matter there are points in which it is meagre, and the matters indispensable to a recovery are very scantily given.
This count on the whole is intended to state as a cause of action, that the defendants, by issuing pretended stock of the company, have rendered the stock of the plaintiff unsalable, valueless and lost to him ; and it proceeds on the idea not that the company is a loser in any manner; nor on the idea that the stock of the plaintiff is diminished in its value intrinsically as representing an interest in property of less value; nor on the idea that the stock of the company was increased in amount or number of shares, so that the plaintiff’s 800 shares represented a less proportion of the whole amount and therefore a smaller amount of the property of the company; but on the idea that by the creation of false and fictitious stock the market and salable value of the plaintiff’s stock was diminished and destroyed. *588The damage he claims to have sustained is that for the purpose of sale in the market his stock' was damaged and lost to him. He does not aver any special damage, such as that he lost the benefit of a sale he would otherwise have made, or aver that he would have sold, or desired to sell. (Kendall v. Stone, 1 Seld. 14.) The charge is simply that stock which he held, intrinsically -worth all that it would have sold for, was rendered unsalable. This is the only damage for which he states a cause of action; and if such an action will lie at all it will certainly lie at the suit of a stockholder. It will not lie at the suit of the company. It makes no difference in this respect that all the other stock of the company was damaged in the same manner; for if it were, suits for such damage would lie only in favor of individual stockholders. Each man’s stock is his own property, and the corporation is not injured by the unsalableness of the plaintiff’s or other stockholders’ shares in it. The stockholders individually, and as such, and not the corporation, which collectively they constitute, are injured by such a diminution in the salable value of their stock. What are the damages the plaintiff has sustained 1 He has not sold his stock, but still owns it. It is intrinsically worth no less than it -was before. It was then worth the price for which it was selling, and it is now worth the same, about par. It cannot now be sold, to be sure, by reason of the acts of the defendants. But the plaintiff apparently does not wish to sell if he could, and it is worth as much to hold as it ever was. I cannot perceive that he has sustained, on his own showing, any damage, legal or actual. If he had lost a sale which he would otherwise have made, or had been compelled to sell for a diminished price, or had even wished to sell and been unable by reason of these acts of the defendants, his cause of action in this respect would perhaps have been made out, but he does not say he has done either. But there is another difficulty. We cannot perceive judicially, and we are not informed by the complaint, how the issuing of what purported to be, but was not stock, should injure the salable price or value of the real stock of the same company. That a diminution in the market value of the plaintiff’s stock, should follow from-the appearance of pre*589tended stock is not a consequence so natural and necessary that we can perceive, unaided by any averment or suggestion of the manner in which it is produced, that it is the effect following from that cause. It is not pretended that the company were liable for it in any manner. It is not averred that it was offered for sale in the market, nor is it stated whether by being mistaken for genuine or known to be spurious, it produced the damage of which the plaintiff complains. He must show how it produced the consequence of which he complains, or state facts from which the effect can be seen to follow. (11 How. Pr. R. 242, 254.) The issue of spurious stock of the New York and New Haven Rail Road Company diminished the market price of all stocks in the market by creating general distrust, and yet the author of that wrong, no one would pretend, is responsible to the holders of the divers stocks of other corporations for that consequence of his act. So in this case, it is very doubtful from this count whether the plaintiff has any cause of action against these defendants. He certainly has not stated any, I think.
The second count is not less eccentric than the first, and with this as with the first, the great difficulty is to ascertain the intention of the pleader. The plaintiff bought some stock. At the time, the defendants falsely represented the value of it and the position of the company, stating that the affairs of the com■pany were prosperous; and concealed from him the fact that they had issued and were issuing pretended stock beyond the amount authorized by law ; that the representations were made for the purpose of inducing other persons, and particularly the plaintiff, to purchase largely of the stock, and that the plaintiff was influenced thereby in making the purchases; that by the fraudulent over issue, the shares have become valueless, and he has sustained damages thereby, and by reason of the false representations of the defendants, to $50,000. In this count the wrongful acts averred against the defendants are, misrepresentations and concealments, while damages are claimed not only for those, but also for issuing spurious stock. The misrepresentations and concealment are averred, and the former are called false and fraudulent representations, and the latter is called *590concealment of a fact; but it is not averred that the circumstances of the company were not as represented, or that they were not prosperous, or that the representations were untrue in fact; nor is it any where averred that the fact said to be concealed had an actual existence, unless the word fact implies it, which, when used in this manner it does not, more than when a fact is said to be misstated, which in that case will be impossible, for in that sense the statement would not be of a fact, but of something not a fact. If these statements were false and fraudulent, the facts inconsistent with their truth, or on which their untruth depended, should have been stated; and if the fact said to have been concealed existed, its existence should have been distinctly averred. An incidental remark from which the untruth of the former, or the existence of the latter may be inferred, or even must follow, does not properly supply the place of direct negation in the former, or affirmation in the latter case. The claim for damages by reason of the over issue, in this count, is entirely unfounded, there being no averment of an over issue or of any thing from which damage to the plaintiff could arise if there had been.
But the purchase by the plaintiff was not made from or through the defendants, and the misrepresentations were not made to him. Ho relations are shown to have existed between the plaintiff and the defendants which made the disclosure of facts as to the stock the duty of the defendants ; and for aught that appears, the withholding and concealment complained of was proper, and constituted no breach of any duty to the plaintiff. The concealment is said to have been from him, but the representations were not to him,'though both are said to have been for the purpose of influencing and inducing him, among others, to purchase, and it is said he was influenced thereby in the making of the purchases.
When it is considered that the existence of the facts represented is not negatived, nor the existence of the one said to have been concealed affirmed, the intent to defraud and deceive -should at least be required to be fully stated, and the fact that the plaintiff was misled thereby should also be stated; and it *591may be doubted whether these statements added to what already appears, would make out a cause of action. (Addington v. Allen, 11 Wend. 375. Pusley v. Freeman, 3 T. R. 51. Wells v. Jewett, 11 How. Pr. 242. Bell v. Mali, Id. 254.)
For aught that is stated here the affairs of the company were as represented, good and prosperous, and if they were not, there is no allegation of an intent to deceive and defraud the plaintiff, or that he was deceived or defrauded by the misrepresentations.
As to the concealment, there is nothing to show that the fact alleged to have been concealed existed; and if it did, there is nothing to show that it was the duty of the defendants to disclose it; and if both appeared, there is nothing to show that the plaintiff was misled or deceived by the concealment to do any act from which he sustained damage.
The third count, divested of irrelevant matter, states as a cause of action, that the defendants issued fraudulent certificates of the shares of said company which they sold. That the certificates in appearance were identical with those of the genuine stock. That the plaintiff believing them to be certificates of true stock, bought what purported to be 800 shares op the stock op the company, which was transferred to the plaintiff, and which was found to be spurious and fraudulently issued. There is great difficulty in saying that any person to whom spurious stock may go may maintain an action against the original author of the stock. He defrauded the party to whom he sold or passed it; and it may be said gave him the means of defrauding others. The plaintiff certainly may have an action against the party from whom he received it, and so may each person who has received it have an action against his vendor. This action, however, in the absence of guilty knowledge in the vendor, would be on contract, on the warranty, express or implied. A recovery by one against the party issuing it would certainly be a bar to an action by any other subsequently receiving it. The cases cited by the plaintiff were not directly in point to sustain this principle, and I think leave it in doubt. Thomas v. Winchester, (2 Selden, 397,) seems to resemble this case as nearly as any, and tends strongly to show that an action will lie by the *592party injured against the remote author of the act causing the injury, but I think that it is distinguishable from this. There the act was negligence in carelessly selling a poisonous drug not labeled, and thus represented to be a harmless medicine. May any subsequent holder of a note maintain an action for deceit against the party who made the note by forging the signatures to it ? So with a counterfeit bank bill. Is the author of one liable to each person who may subsequently receive it, believing it to be good 1 If so, the author of any spurious article of merchandise is liable to any one to whom it shall be sold by a subsequent holder, for the damage he may sustain by reason of the deceit practiced; which is certainly much more than is warranted by the cases above referred to, and is entirely in harmony with the opinion of the court there. That case (Thomas v. Winchester) seems to proceed on the ground that the article sold and circulated for use was imminently dangerous to human life, and Longmeid v. Holliday, (6 L. and Eq. Rep. 562,) is referred to as recognizing the distinction between such an article and any other, and seems to concede that in any other case the negligent party would be liable only to the party with whom he contracted, and on the ground that the negligence was a breach of his contract.
The case of the Farm. and Mech. Bank of Kent Co. Md. v. The Butchers' and Drovers' Bank, just decided by the court of appeals, does seem to touch this case. There the question was, whether the principal was liable for the acts of the agent. Here it is whether the agent himself is liable to this plaintiff for his own acts. That the principal (the corporation) was hot bound in this case is assumed as a part of the basis of this action, and the effect of the acts of the agent as to himself. What responsibility as to himself follows from this unauthorized act, is the question here; and no question of agency concerning the liability of his principal is involved in this inquiry.
In this case, however, there are defects in the count which are fatal to it. There. is no averment that the defendants intended to deceive and defraud thejffaintiff or any one else, and *593this is indispensable under the cases above cited. (3 T. R. 57. 11 Wend. 375. 11 How. Pr. Rep. 242, 254.)
[New York General Term,
November 2, 1857.
If an action for this cause will lie at all by this plaintiff, it must be in substance an action for deceit, and in that action the averment of this intent was always essential.
Again; it is not averred that the stock purchased by the plaintiff was that issued by the defendants, or even that it was embraced in the certificates made by them and said to be spurious. The whole statement of the case is unlike an .action for deceit. If the plaintiff was deceived by the certificates, and by them, induced to believe that A. B. owned 800 shares of the stock of said company, and under the influence of, and relying upon, the false and fraudulent pretense and representation contained therein, made by the defendants with intent to defraud, &c. <fec. was induced to buy of said A. B. and did contract to buy of him 800 shares of said stock and paid him a certain number of dollars therefor, he may,perhaps on stating such a cause of action in a complaint, be able to recover the damages he has sustained; but he states no such case; and on this count, I think, cannot recover.
There is no misjoinder of causes of action in this case, as claimed by the defendants. All the causes are for torts, and directly by the plaintiff in his own right, against the defendants, for their own acts. The action is properly brought by the plaintiff if at all. If it will lie at all it will be at his suit. It will surely not lie at the suit of the company, who have no rights impaired, and cannot bring it. Nor is the company, as claimed by the defendants, a necessary party to this suit, in any aspect of it.
The judgment below should be reversed, and judgment entered for the defendants.
Order appealed from, affirmed.
Mitchell, Clerke and Peabody, Justices.]