Montague v. Bank for Savings

181 Misc. 863, 43 N.Y.S.2d 321, 1943 N.Y. Misc. LEXIS 2199
CourtNew York Supreme Court
DecidedJune 2, 1943
StatusPublished
Cited by8 cases

This text of 181 Misc. 863 (Montague v. Bank for Savings) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Montague v. Bank for Savings, 181 Misc. 863, 43 N.Y.S.2d 321, 1943 N.Y. Misc. LEXIS 2199 (N.Y. Super. Ct. 1943).

Opinion

Eder, J.

In equity. Action to rescind a contract for the purchase and sale of certain real property. The plaintiff purchased from the defendant a lot and the building erected thereon; the transaction was evidenced by a contract in writing; the agreed consideration was paid, title closed and a deed was executed and delivered to the plaintiff. The contract contained the following provision, among others: The purchaser represents that the purchaser has inspected said premises and knows the condition thereof, is purchasing said premises ‘ as ís ’ and will accept the same in their present condition and repair.”

There is no claim by.plaintiff that he was persuaded to sign the contract by reason of any fraud or artifice practiced upon him; he acknowledges that he read the contract before he signed [865]*865it and understood its terms; that he made some inquiry regarding a certain feature of the contract dealing with an easement in the nature of a license to use an adjoining building as a secondary fire exit; that he called for an explanation concerning it and asked to see the license agreement, which was shown him and which he found was a revocable one and with respect to which some discussion ensued, after which he affixed his signature to the agreement. He was fully informed and understandingly aware of the terms and conditions of the contract and subscribed it as a deliberate and intentional act.

We thus have a case where no feature of fraud, trickery or overreaching is involved; yet plaintiff by this action seeks a rescission of the contract claiming he was induced to enter into it and to purchase the property by virtue of a representation that the building was a fireproof structure, upon which representation he relied, when, in truth, it was not fireproof; that he thus did not get what he had bargained for. The facts in connection therewith are, briefly, these: The defendant decided to dispose of certain of its real estate holdings, among which was the parcel involved in this action; to that end the defendant prepared and distributed among real estate brokers in general a list of the properties it was offering for sale, giving details thereof; one of such real estate brokers who received the listing was a concern known as Adams & Company; it had forwarded to the plaintiff the details of divers parcels, including the one ultimately acquired by him; Adams & Company mistakenly described that building as being fireproof.

Plaintiff concedes that the representation by Adams & Company was the result of an honest mistake; that as a misrepresentation it was unintentional and that no fraud was involved. Plaintiff also concedes that Adams & Company had no authority to make the representation now complained of and did not represent the defendant other than in the usual and customary manner of a real estate broker seeking to find a prospective buyer. It is also conceded by plaintiff that the defendant had no knowledge of the representation made by Adams & Company to him that this was a fireproof building.

It is nonetheless contended by the plaintiff that insofar as his right to seek rescission in equity is concerned, no intentional fraud need be shown; that it is sufficient to warrant rescission that a material misrepresentation was made, even though innocently, upon which the complainant relied and acted; that where.a material misrepresentation is made by an agent it is fully binding on the principal even though he is [866]*866wholly innocent thereof; and that within the rules of decision and doctrines applicable to such a situation, plaintiff is entitled to a decree rescinding the contract and the transaction in toto and to be relieved therefrom.

To represent a building to be fireproof when it is not and induce a transaction in reliance thereon constitutes a false statement as to a material fact and is sufficient to support an action to recover damages for fraud (Dietz v. Yetter, 34 App. Div. 453) and will also suffice to sustain a suit in equity for rescission (Seneca Wire & Mfg. Co. v. Leach & Co., 247 N. Y. 1, 8) if the factual situation renders applicable rules and doctrines effective.

In instances like those appearing in Bloomquist v. Farson (222 N. Y. 375), the Seneca case (supra), African Metals Corp. v. Bullowa (288 N. Y. 78) and Harriss v. Tams (258 N. Y. 229), cases on which the plaintiff relies, the representations were either of a fraudulent nature or were innocently made, but in each case emanated from a selling agent of the defendant acting in the course of his employment, as such, and within the apparent scope of his authority; in the case at bar no such agent of the defendant made any representations to the plaintiff, for Adams & Company was merely acting as a broker and in no other capacity. Incidentally, in the Harriss case the action was not brought against the principal but against the agent.

In the case of one employed as an agent to sell he has the authority, real or apparent, to bind his principal by a formal contract and in consequence the principal is liable for the false representations of the agent (Friedman v. New York Telephone Co., 256 N. Y. 392, 394), but the employment of one as a real estate broker to enter into negotiations with prospective purchasers carries with it no incidental powers to make representations as to the condition of the property or to otherwise bind his employer by representations or by contract. Such broker, it is said, is sent out as a mere negotiator; perhaps he may more appropriately be called a discoverer or finder, but whatever he be styled his service is to seek a potential buyer and to bring him and the seller together. Unlike a selling agent, who is clothed with real or apparent power to bind his principal by a formal contract, such a broker possesses none of these attributes and the transaction must be consummated by the principals (Friedman case, supra); and in that connection it is said that “ It follows that if such a broker, in his zeal and to carry out his own purposes, makes false representations as to the con[867]*867dition of the property, the principal is not bound thereby.” (Friedman case, supra, p. 395.)

Thus the misrepresentation made by Adams & Company, as such broker, could not bind the defendant, whether intentionally or innocently made, and-no sustainable cause of action at law to recover damages for fraud or for equitable rescission can be predicated thereon against the defendant.

I am, furthermore, of the opinion that no basis for a suit for rescission would here exist even if the misrepresentation complained of was intentionally made and by one occupying the status of a selling agent as distinguished from a mere broker, because the proof establishes that the purchase and salé did not finally result from any act of the agent but was the culmination of the negotiations which the principals themselves conducted, and that whatever representation was made to the plaintiff by Adams & Company in the preliminary negotiations the ultimate terms of the contract were those made by and between the principals. Hence, any prior representations, whether made by agent or broker, must be conclusively deemed to have been discarded and unrelied on and superseded by the agreement of the principals ..and such prior representations cannot be revived to later form the basis of a claim for rescission. (Daylight Acetylene Gas Co. v. Hardesty, 112 S. W.

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181 Misc. 863, 43 N.Y.S.2d 321, 1943 N.Y. Misc. LEXIS 2199, Counsel Stack Legal Research, https://law.counselstack.com/opinion/montague-v-bank-for-savings-nysupct-1943.