Van Slochem v. . Villard

101 N.E. 467, 207 N.Y. 587, 1913 N.Y. LEXIS 1303

Opinion

Cullen, Ch. J.

The action was brought to recover damages for fraudulent representation of the defendant by which the plaintiff was induced to purchase stock of a corporation called the British Columbia Railway and Development Company, of which the defendants were the promoters. The representations charged in the complaint to have been made are that the stock was fully paid, non-assessable and of great value, each of which is charged to have been false and known so to be by the defendants, and to have been made with the intent to cheat and defraud the public or such persons as might purchase the stock. It is contended that the representations, even if fraudulently made, will not support an action for deceit. The claim is well founded as to the representation of value, for it has been decided by this court in Ellis v. Andrews (56 N. Y. 83) that a false statement of the value of property made by the vendor for the purpose of obtaining a higher price will not sustain an action for fraud.

The representation that the stock was non-assessable may present a mixed question of law and fact which can be determined only on the trial. If it should appear that it involved merely the expression of opinion on the liability of the stock to assessment under the law of Delaware, then its falsity would not support a cause of action; but if it should appear that the stock was assessable, and assessable because the defendants had not complied with a plain mandate of the statute requisite to give the stock immunity from assessment, then we think it would support the action. The allegations of the complaint in this respect we think are sufficient. It alleges the falsity of the representation and that the defendant knew it to be false. If the question were of liability under the laws of this state it would be one of law, and could be decided as such despite of the allegations of the complaint. But foreign law is a matter of fact, and we cannot say that it is impossible that under the laws of Delaware the stock can be assessed.

As to the remaining allegation, that the stock was fully paid, it is the settled law of this state that the cost of a thing is a material allegation well adapted to affect the action or judgment of the purchaser, for a false statement of which an action will lie. (Sandford v. Handy, 23 Wend. 260; Van Epps v. Harrison, 5 Hill, 63; Fairchild v. McMahon, 139 N. Y. 290; Townsend v. Felthousen, 156 id. 618.) It is true that in the opinion of Chief Justice Bronson in the Van Epps case he makes the statement that the price paid is immaterial, but, as stated by the learned judge, a majority of the court held to the contrary.

It is contended, however, that the representation “fully paid ” is also a mere statement of opinion of what constitutes a full payment under the law of Delaware. We think that it is purely a statement of fact, and that it does not involve any question of law. If in Delaware these words have a different import or definition from that accorded them by the lexicographers, and the contract was made in that state, such matters should be pleaded and proved in defense of the action. In the absence of such proof, the representation should be construed to mean exactly what was said, that the stock was paid in full. The argument that the plaintiff could not have believed the representation because he bought the stock from the company itself for much less than par is a proper one to address to the jury, to whom the plaintiff’s reliance on the representation must be submitted, but it cannot be considered as affecting or qualifying the allegation of the complaint that the plaintiff did rely on that representation. The company might have become the owner of the stock after its original issue for full value. Under the law of' this state the company might have done so, provided the purchase of same was made from surplus profits. (Penal Law, Sec. 664). What'the law of Delaware on the subject is we do not know.

The order appealed from should be affirmed, with costs, and the question certified, which is, does the complaint state facts sufficient to constitute a cause of action, answered in the affirmative.

Werner, Willard Bartlett, Hiscock, Chase, Collin and Hogan, JJ., concur.

Order affirmed.