Boyer v. Fenn

O’Dwyer, J. From an examination of the complaint and the affidavits upon which the order of arrest was granted, it is manifest that the plaintiff has a cause of action against the defendant for the conversion of the note described in the complaint. The cause of action is good, although the note had not matured at the time the suit was brought. Upon discovery of the falsity of the several representations made by the defendant, the plaintiff had the right to rescind his agreement to subscribe for and take capital stock and to demand back his note. He demanded its return to him. " It was issued in consequence of fraudulent misrepresentations; this gave the plaintiff the right to treat the whole transaction as void ab initio, for the note was vitiated by the false statements; the use of it by the defendant was a conversion of the plaintiff’s property obtained by the defendant through deceit. The defendant’s use of the note, in violation of the promise contained in the receipt which he gave that it should not be negotiated until the capital stock was delivered to' the plaintiff, was also a conversion. It makes no difference whether, at the time of the-commencement of the action, the plaintiff had or had not paid the note. As soon as the note passed out of the defendant’s hands into the hands of a bona fide third person, the plaintiff became liable upon it. ' The defendant had no -title to it in consequence of his false representations.' His retention of it was a conversion. His parting of it was also a conversion. Western Railroad Co. v. Bayne, 75 N. Y. 1; Loomis v. Mowry, 8 Hun, 311. The claim that the transaction alleged in the complaint was illegal for the reason that the law expressly declares that the payment of subscriptions to the capital stock of a corporation must be made in cash or property or services requires no discussion, as [609] it does not appear that the proposed corporation was to be incorporated under the laws of this state. The provisions of the statute cited relate to domestic corporations. The order appealed from should be affirmed, with costs. Van Wyck, Ch. J., and Fitzsimons, J., concur. Order affirmed, with costs.