Franc v. Dickinson

• Decision Date: 13 January 1891
• Citation: 26 N.E. 250,125 N.Y. 710
• Parties: FRANC v. DICKINSON.
• Court: New York Court of Appeals Court of Appeals

125 N.Y. 710

26 N.E. 250

FRANC

v.DICKINSON.

Court of Appeals of New York.

Jan. 13, 1891.

Appeal from supreme court, general term, second department.

Action on a promissory note by Charles B. Franc against Henry H. Dickinson. The note was one alleged to have been given by defendant in payment for share, of corporate stock, bought by him of one Sterner. From a judgment for plaintiff, defendant appeals.

James McKeen, for appellant.

John L. Hill, for respondent.

PECKHAM, J.

The proof in this case should have been submitted to the jury. There was sufficient evidence, if believed. for the jury to find that Sterner procured the notes (of which that in suit was one) from defendant fraudulently. Even if the transaction between defendant and Sterner would otherwise have amounted to a sale of the stock, and the giving of notes in payment, yet, if such purchase were procured by fraud, and the notes were obtained in carrying it out, and by virtue of an agreement that they were to be mere memoranda, not to be paid, and not to partake of the nature of promissory notes, then the burden rested on the plaintiff to show that he or some one of its prior holders had taken the note in suit in good faith, before maturity, for full value, in the usual course of business. Bank v. Diefendorf, (N. Y.) 25 N. E. Rep. 402, (decided October term, 1890, by this court;) Vosburgh v. Diefendorf, 119 N. Y. 357, 23 N. E. Rep. 801. If the jury believed the evidence of Dickinson, they might have found that Sterner sold the stock to defendant, and procured the notes from him, by means of the statements contained in the circular, and by falsely pretending it was desirable to have the stock of the company held by a few parties, in order to control it, but that the notes to be given by defendant in exchange for the stock issued to him were to be regarded only as memoranda, and not in any real sense as promissory notes, and that in no event was Dickinson to be called upon to pay them. The inducement offered for such giving of the notes was that defendant should have the benefit of any sale of the stock which Sterner might make over the price which was named to him, for his taking it, and that the notes, although only memoranda, should, in case of the sale of the stock, be then paid out of its proceeds, but in no event should the defendant be called upon to pay any part of them. Taking the whole of defendant's evidence, it might also bear the construction that the transfer of the 50,000 shares to him was merely formal; that Sterner was still to make the sale of the stock; and, to induce defendant to give the notes, it was agreed that defendant should have the profit of the sales over the amount of the notes, and that in no event should the defendant be called upon to pay them, and that they were to be used only as memoranda. In that event, if Sterner made these representations in order to procure the notes which he intended to use for his own benefit, then their acquisition was a fraud, and Sterner could not have maintained any action on them. Nor could any one else who was not a bona fide purchaser. The stock was never sold, and there appears to be no doubt that it was at this very time wholly without value. The jury might have found that the defendant was not aware...