Seneca Wire & Mfg. Co. v. A.B. Leach & Co.
| Decision Date | 10 January 1928 |
| Citation | 247 N.Y. 1,159 N.E. 700 |
| Parties | SENECA WIRE & MFG. CO. v. A. B. LEACH & CO., Inc. KINN v. SAME. |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
Separate actions by the Seneca Wire & Manufacturing Company and Lucian E. Kinn against A. B. Leach & Co., Inc. Judgments of the Trial Term dissmissing the complaints, after trial to a jury, were affirmed by the Appellate Division (219 App. Div. 702, 219 N. Y. S. 478), and plaintiffs appeal.
Reversed in each case, and new trial granted.Appeal from Supreme Court, Appellate Division, First department.
Robert McC. Marsh and Robert P. Patterson, both of New York City, for appellants.
Charles E. Gately, Harold H. Corbin and Elmer W. Maher, all of New York City, for respondent.
At the end of the plaintiff's case the complaint was dismissed. The judgment of dismissal has been affirmed by the Appellate Division, two of the justices dissenting. We are of the opinion that the facts proved made out a cause of action, and that the rulings below must be reversed.
A. B. Leach & Co., Inc., is a New York corporation engaged in the business of selling and marketing corporate securities. Mr. V. M. Bates was its duly authorized salesman and representative. The plaintiff is an Ohio corporation, of which Lucian E. Kinn is president and general manager. The corporation, and the president individually, bought securities of the defendant through Bates, but in this opinion I shall speak of but one plaintiff, as the evidence is the same for both. Kinn told Bates, when approached about buying securities, that the company was considering the purchase only of listed securities, because the funds available were surplus funds from inventory, and might be needed on quick notice to put back in the business, and also as an additional safety. Bates recommended 8 per cent. notes of the Island Oil & Transport Corporation, calling attention to the fact that application would be made to list the securities. This occurred in September, 1921. On the 23d of that month the defendant, through its Cleveland office, wrote the plaintiff full particulars about these 8 per cent. participating secured gold notes, and stated:
‘The common stock of the company is listed on the New York Stock Exchange, and application will be made to list these securities.’
In closing, the letter stated:
‘Mr. Bates will be glad to call on you and go into further detail on either of these issues, if you desire it.’
A circular accompanying the letter also contained the statement:
‘Application will be made to list these notes on the New York Stock Exchange.’
When Mr. Bates again called shortly after the receipt of this letter and circular, he stated to Mr. Kinn that application ‘had already been made, and that the notes would be listed.’
Kinn testified that, relying upon these representations, he and his company bought the notes, and paid their purchase price to the defendant.
A few months later the company went into the hands of a receiver, and the plaintiff then learned that no application had been made to list the securities, and, what is more, he was informed that the defendant never intended to make such application; that the statements made by Bates were false and untrue. The plaintiff had been deceived in making the purchase. It is not claimed that Bates made willful and fraudulent misrepresentations, but it was insisted in the immediate correspondence between the parties that Bates' statements were false in fact, and that he had knowingly stated that about which he had no positive knowledge.
[1][2][3][4][5] The plaintiff, immediately upon ascertaining the facts, rescinded the sale, offered to return the securities, and demanded back the purchase price. It wrote the defendant to its Cleveland office fully about the transaction, and finally Mr. Kinn called at the Cleveland office and saw Mr. Swetch, the manager. The plaintiff attempted to prove that Mr. Kinn was referred to Mr. Earle of the firm of Earle & Hoar at the New York office of the company. It was admitted on the trial that Mr. Earle was the attorney for the defendant at all the times referred to. The plaintiff offered many letters rescinding the transaction and offering back his securities. Finally, on July 25, 1922, a letter was received from the defendant containing certain admissions which the plaintiff offered in evidence, and which was excluded. This letter was written on the letter paper of A. B. Leach & Co., Inc. It was excluded, apparently because written by Earle, the lawyer. The letter was not from the lawyer as such, or from the attorney for Leach & Co.; it was from the defendant, and was prima facie evidenceof admissions stated therein. All corporations act by agents, and, when a transaction is carried through in the name of the corporation by its agents, the corporation is bound thereby, providing the agents have authority to act. Statements made by agents in the course of authorized transactions may also be binding upon the corporation. The authority of Earle to write and sign the letter was conceded. The plaintiff offered to prove that Kinn had been referred to the New York office of the defendant, and to Earle. This also was improperly excluded. A corporation can only act by its agents. Earle, in signing the name of the defendant, was apparently acting as the defendant's agent, not as an attorney at law. The letter annexed to the record as having been marked for identification contains a statement made by A. B. Leach & Co., Inc., reading as follows:
‘We note all that you say in relation to the statement that the Island notes were to be listed, but there never was any idea whatever of listing them.’
[6] We think this letter should have been received in evidence, and that under the circumstances it was error to exclude it. If it should appear upon the trial that Earle had no authority to make these statements, of course the defendant would not be bound by them.
[7] We therefore have a case where the plaintiff bought securities, relying upon false representations, and immediately rescinded the transaction. Two questions remain. Were the representations material? In the first place, the parties themselves made the representations material, because Kinn told Bates that they only desired to purchase listed securities or those which were to be listed. And in the next place, Michael J. Murphy, vice president of the Federation Bank of New York, testified that it would be a favorable factor from the standpoint of a purchaser to know that securities were listed, or would be listed, on the New York Stock Exchange;...
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