Ball v. Gerard

Clarke, J.: This is an action at law for damages for deceit and not an action to rescind. The complaint alleges that on or about the 19th day of November, 1906,. defendants fraudulently caused to be prepared, published and delivered and generally distributed a prospectus, a copy of which was attached to the complaint, and fraudulently caused to be delivered to the plaintiff a copy of said prospectus for the purpose of inducing the investing public in general and all persons into whose hands such prospectus should come, including the plaintiff, in reliance upon the statements contained therein, to invest in the shares of stock of the Barnes King Development Company and to persuade said public and this plaintiff that the shares of said company would prove a safe and highly remunerative investment. — 620 — It then sets forth the representations which are claimed to be false and fraudulent. It alleges that the defendants, having delivered or caused to be delivered to plaintiff the aforesaid prospectus, requested plaintiff to become a subscriber to the stock of said company, and thereupon and on or about the 1st day of December, 1906, plaintiff, believing all the statements contained in the said prospectus and in sole and implicit reliance thereon, and in entire ignorance of the nature and character of the mining property referred to, subscribed to 1,000 shares of the stock of said company, agreeing to pay therefor at the rate of $5 per share, and the said defendants thereupon accepted such subscription to the extent of 700 shares. It further alleges that plaintiff paid for said stock $1,750 on December 1, 1906, and the balance of $1,750 on March 1, 1907. Plaintiff further alleges that, continuing to rely solely on. the statements contained in said prospectus, and believing the same to be true, he was thereby induced to and did on December 27, 1906, purchase 300 further shares of said stock" in the open market, paying therefor $1,756.25, and on January 7, 1907, 1,000 further shares in the open market, paying therefor $5,625. He alleges that the value of the shares of stock of said company was not at any time and is not now in excess of ten (10) cents per share, although the par or face value thereof was $5, and if the representations made by the defendants in said prospectus had been true, said stock would at all times have been worth in excess of $10 per share; that by reason of the premises this plaintiff has been damaged in the sum of $20,000, for which he demands judgment with interest from January 2, 1907. The answer, inter alia, set up. as a defense that the action was commenced by the service of a summons on. January 16, 1913, and that the alleged cause or causes of action did not, nor did any of them, accrue within six years next before the commencement of the action. Being required, by an order to that effect, plaintiff replied, admitting that the action was commenced on January 16,1913, and alleging that the cause of action set forth in the complaint did not arise and the Statute of Limitations did not commence to run against the same until the date of the last payment — 621 — made by the plaintiff under his said subscription, to wit, on or about March 1, 1907. Defendants thereafter moved for judgment upon the pleadings, which motion having been denied, an order was entered from which this appeal is taken. While stated in one count there are three separate transactions set up in the complaint. A subscription for 700 shares of stock at $5 per share, which by its acceptance became a firm contract December 1, 1906, under which payment was made in accordance with the terms of the subscription of $1,750 on December 1, 1906, and of the balance of $1,750 on March 1, 1907; second, the purchase in the open market of 300 shares for $1,756.25, on December 27, 1906; and, third, the purchase in the open market of 1,000 shares for $5,625 on January 7, 1907. As no motion was made to separately state and number the various causes of action and as no demurrer was interposed upon the ground of improper joinder of causes of action, we must, upon this motion for judgment upon the pleadings upon the ground of the completed running of the Statute of Limitations, determine if any one of the three transactions contained in the complaint, although not alleged therein to be separate causes of action, accrued within six years prior to the beginning of the same, for, if any one of them did, the order appealed from was correct and defendants were not entitled to judgment upon the pleadings. It is clear that the two purchases in the open market, one on the 27th of December, 1906, and one on January 7, 1907, were complete transactions at said dates. If plaintiff had any cause of action thereon said cause of action accrued on said dates and the Statute of Limitations had run at the time of the commencement of this action on January 16,1913. The debatable question is upon the subscription for the 700 shares made on the 1st day of December, 1906, upon which date $1,750 was paid, the balance being paid on March 1, 1907. When did this cause of action accrue? Upon the making of the firm contract on December 1, 1906, or upon the payment of the balance due thereunder on March 1, 1907 ? The learned Special Term held that the cause of action accrued when the subscription was completed by the payment of — 622 — the last amount due thereunder and the delivery of the certificaos, and, therefore, that the Statute of Limitations pleaded was not a defense. This, we think, was error. It is conceded that the six-year statute applies. It is also conceded that the date of the discoveiy of the falsity of the statements contained in the prospectus does not affect the determination of the date when the statute began to run. That is, the statute begins to run from the consummation of the fraud and not from the discovery thereof. This proposition is settled. The action is at law to recover damages for deceit in having been induced by false and fraudulent representations to make the contract for the purchase of stock. The representations had all been made prior to the subscription. Their falsity, if they were false and fraudulent, existed at that time, because it is not only so alleged in the complaint, but actionable false representations must be of existing facts. Therefore, on the 1st of December, 1906, the plaintiff made his contract and executed it by part payment thereon, induced by the false and fraudulent representations of the defendants. Thereupon his cause of action accrued. In Northrop v. Hill (61 Barb. 136) plaintiff alleged that he was induced to purchase certain premises by means of fraudulent representations on the part of the defendant, who held a mortgage thereon, that there was no other incumbrance, when, in fact, there was to defendant’s knowledge another mortgage thereon. At Special Term Marvin, J., said: “ The position of the plaintiff’s counsel is, that the Statute of Limitations did not commence running in this case until there had arisen a cause of action for real and substantial damages. That no facts existed until the foreclosure of the Fellows mortgage, justifying an action for anything more than nominal damages, and it could not be presumed, until the foreclosure of that mortgage, that any other damages would ever arise. In short, that when the damages actually occurred, then the Statute of Limitations commenced running. * * * Leonard v. Pitney (5 Wend. 30) is in point. It is there decided that the action must be brought within six years after the fraudulent representations. The attempt was there made to evade the running of the statute upon the ground — 623 — that the fraud was not discovered until within six years. This was overruled. * * * In that case it is expressly said that the cause of action arose when the deceit was practiced at the sale, and that being more than six years before the suit was commenced, the plea interposes a complete bar to the action. [See also, Troup v. Smith, 20 Johns. 33.]” At the General Term Johnson, J., said: “The fraud complained of was practiced upon the plaintiff in March, 1854, and this action was not commenced until June, 1869, nearly fifteen years afterwards. * * * There can be no doubt that this cause of action accrued to the plaintiff the moment the bargain was completed by the conveyance of the premises to him. It is of no consequence, whatever, that he did not discover the fraud within the six years. Had the defendant even concealed it from him, it would not have prevented the statute from running. * * * The cause of action was the single act of fraudulent misrepresentation, and the right of action accrued when that representation was made. It was not a continuous act, like a continuing trespass, or a nuisance. It was the act of misrepresentation which constituted the cause of action,' and not the resulting damages. [Whitehouse v. Fellowes, 10 C. B. (N. S.) 765.] ” In affirming, the Court of Appeals said (57 N. Y. 351): “I think, that it is clear that when a party to a contract is guilty of fraud, he commits a wrong for which he is liable to the defrauded party, to pay, at least, nominal damages. The act of entering into contract relations, implies that the parties are to deal in good faith with each other. On no other basis can the minds of the parties be expected to meet. If one of them, professing in this way to act in good faith, in fact, commits a fraud, he breaks the implied obligation he is under, and should be made to respond in damages. * * * It is familiar law that a party may have an action for breach of duty, though he sustains no positive damage and there is no intention to do wrong. * * * This principle was applied to a case of fraud in Allaire v. Whitney (1 Hill, 484). The court said: ‘ But take it that a man fraudulently draws another into a contract to accept and pay for a chattel a month after; the vendee, discovering the fraud on the next day, is it to be tolerated that he shall not — 624 — have an action immediately ? If he pay anything, even no more than a cent, as earnest, there would he no doubt. But actual damage is not necessary to an action. A violation of right, 'with a possibility of damage, forms the ground of the action. * * * ’ The plaintiff,- accordingly, had a complete ' cause of action on the 24th day of March, 1854, when the purchase was completed. Any damage that subsequently followed was merely developed'from the original wrong then committed, and was not a new cause of action.” •.The respondent seizes hold of the phrase “ when the purchase was ctimpleted,” and so cites this case as an authority in his favor. But this being a transaction involving real estate was required to be in writing and so the bargain or contract was completed by the written conveyance. In the case at bar the sale was completed when the contract was made. Reciprocal rights then became fixed. It made no difference that a subsequent part payment was to be made or that certificates were to be delivered. The contract had been made. Either party would have been entitled to sue upon a breach by the other. It was the value of this contract which the plaintiff was entitled to. It was this contract which had been made upon reliance upon the false and fraudulent representations alleged, and it was the damage, caused to the plaintiff by the subject-matter of this contract not being as represented, for which he sues. In Miller v. Wood (116 N. Y. 351) the court said: “The defendants, by false and fraudulent representations, induced the plaintiff to purchase a mortgage which was-without actual value. The sale was consummated on the 12th day of April, 1878. On the 23d day of September, 1885, a little over seven years after the purchase, the plaintiff commenced this action by means of which she sought to recover the amount of damage sustained by reason of the fraud practiced upon her by these defendants. The trial court rightly determined plaintiff’s claim to have been barred by the Statute of Limitations prior to the commencement of this action. The cause of action accrued to plaintiff when the sale and transfer were completed, to wit, -April 12, 1818.” Here, again, is a real estate transaction, and required to be — 625 — evidenced by a written instrument, and, of course, for purposes of litigation, the execution and delivery of that instrument fixes the time. In Isman v. Loring (130 App. Div. 845) the complaint alleged prior negotiations'between the parties for the sale of real estate, resulting in the execution and delivery of a contract in' writing on January 26, 1906, which contract was induced by false representations made by the defendant. The action was to recover damages. Mr. Justice Ingraham said: “It is clearly settled in this State that where there has been fraud in procuring a contract the injured party has at once upon the execution of the contract an action for the fraud and that that action is barred by the Statute of Limitations six years after the actual execution of the contract * * The Statute of Limitations had run at the time of the commencement of this action, and being plead is a complete bar. The order appealed from should be reversed, with ten dollars costs and disbursements, and the motion of the defendants for judgment on the pleadings granted, with ten dollars costs. Ingraham, P. J., Laughlin, Soott and Hotchkiss, JJ., concurred. Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.