Schwenck v. Naylor

• Decision Date: 01 June 1886
• Parties: SCHWENCK and another v. NAYLOR.
• Court: New York Court of Appeals Court of Appeals

102 N.Y. 683

7 N.E. 788

SCHWENCK and another

v.NAYLOR.¹

Court of Appeals of New York.

June 1, 1886.

Appeal from judgment general term superior court affirming judgment for defendant, dismissing complaint entered upon direction of judge at trial before a jury.

A. R. Dyett and Joseph Fettretch, for appellants, Samuel K. Schwenck and another.

Wm. B. Putney, for respondent, Robert Naylor.

RAPALLO, J.

This action was brought to recover damages claimed to have been sustained by the plaintiffs by reason of fraudulent representations made to them by the defendant in November, 1880, whereby the plaintiffs were induced to purchase from him two-thirds of a mill property in Florida, or of the capital stock of an incorporated saw-mill and lumber company organized under the laws of this state, to which said property had been conveyed by defendant, and to furnish the sum of $15,000 for operating the mill and business of the company.

The representations alleged in the complaint were that the defendant was the holder or owner of all the capital stock of said company, and that the company owned and had title to about 35 acres of land situated at Apalachicola, Florida, having thereon a large and valuable saw-mill, with its machinery, etc., and also having an extensive water front of over 2,000 feet on Turtle harbor, with large and commodious wharves, all of which property was of the value of $125,000, and that said mill was and could be made very profitable, and would yield a profit of $100,000 a year; that the lands of said company included, as a part thereof, and of said water front, the whole of a dock extending in length 250 feet, or thereabouts, in a southwesterly direction along the shore of Turtle harbor, and a tramway leading from the mill to the dock, and the land upon which said dock and tramway were situated, and all the land adjoining, extending, in a south-westerly direction from the mill, to a certain ditch or creek which the defendant showed to the plaintiff, Kilpatrick, and represented to him was the boundary line of the city of Apalachicola, and were part of and used in connection with said mill.

The complaint further alleged that the whole of said dock and tramway, so represented by the defendant to be included in the lands of said company, were material and necessary to the mill, and the operation thereof, and that without the same the mill could not be successfully and profitably operated; that, believing and relying upon said representations, the plaintiffs were induced by the defendant to enter into an agreement with him to take and purchase two-thirds of the capital stock, and to provide and furnish the sum of $15,000 to operate the mill, and did also, at the request of the defendant, furnish and advance further sums, which the defendant represented to be necessary for the operation of said mill and business; and that such advances were induced by the representations alleged to be false and fraudulent. The representations were alleged to be false in this: that the lands of said corporation did not, as the defendant then well knew, include the whole of said dock and tramway, nor the whole of the land on which they were situated, nor any of said dock, tramway, or land, except a small and inconsiderable part thereof, nor did the land of the company, as the defendant then well knew, include all the land which the defendant represented that the same did include, nor was the ditch or creek, before mentioned, the boundary line of the city of Apalachicola, and that said false representations were fraudulently made, with intent to deceive and defraud the plaintiffs.

The complaint further alleged that, as part of the agreement, the defendant took charge of the mill and business at Florida, and the plaintiffs paid out, for the purpose of said business, in addition to the $15,000 first mentioned, the further sum of $20,000 on the faith of said false representations; that said mill and property, without the whole of said dock, tramway, and land, were worth $35,000 less than they would have been worth had the representations been true, and they would not have entered into the agreement, or furnished any of the money, or purchased the stock, if they had known that the representations were false, and they claim damages to the amount of $35,000.

The answer admitted the making of the agreement alleged in the complaint; and stated that, at the time it was made, the defendant owned or controlled all the capital stock of the company, but denied the false representations charged, and set up other matters of defense.

On the trial the plaintiff Kilpatrick was called as a witness on his own behalf, and produced a written agreement between himself and his co-plaintiff, Schwenck, of the one part, and the defendant of the other part, dated November 11, 1880, whereby the defendant agreed to sell to the plaintiffs, and they agreed to purchase, one undivided third interest each, of and in the mill, and machinery therein, unfinished tug, real estate, and all other property at Apalachicola, Florida, belonging to said Naylor, on the following terms, viz.: That the plaintiffs should provide and furnish $15,000, as required for working the mill and business effectually; that all profits of the business for three years should belong to Naylor, in payment for said two-thirds interest, except $55,000, which should be paid to the plaintiffs out of two-thirds share of profits; that, a company having been already incorporated under the laws of the state of New York for the purchase and working of the mills, the sole control of which was then in the hands of the defendant, the capital stock of said company should be divided equally between all the parties to the agreement, immediately upon said working capital being furnished; that the defendant having furnished a list of the property and machinery at Apalachicola, which list was attached to the agreement, the only condition of the contract was that all the property stated in said list should be found there when the plaintiffs, or one of them, should visit the mill, and, if not so found, they should be free to withdraw from the agreement should they so determine; that one of them should visit the mill within 30 days, or the condition should be deemed waived, and the property be considered finally accepted by them. The agreement contains other provisions not important to the present inquiry. Attached to the agreement was a list entitled, ‘Machinery in Saw-mills and Premises at Apalachicola, Florida, belonging to R. Naylor.’ Then follows a minute inventory, covering several pages, of the various articles of machinery, but the only reference to real estate was: ‘These saw-mills have an extensive water front of some 2,000 feet immediately on Turtle harbor, with wharf, etc.’ ‘The site comprises about thirty acres.’ ‘The log-pond will store 10,000,000 feet of logs.’ ‘The buildings comprise large saw-mill, 50 ft. x 150; two stories.’ ‘Engine and boiler houses, 40 x 60 ft.’

The plaintiff Kilpatrick testified that the defendant made representations to him at the time the agreement was made; that the defendant stated to him the condition of the mill, the formation of the company, the necessity of capital to complete the machinery, and its worthlessness in its then present condition, but its capacity of being made very profitable with a small outlay of money; and the witness proceeded to set forth the negotiation which ensued. The witness testified that the defendant stated that the water front embraced docks from 500 to 600 feet long; that the water front attached to the mill, and available for its use, was at least 2,000 feet, and that already a dock had been built, 500 or 600 feet long, on the portion of the water front adjoining the mill; that after the agreement had been executed, the witness went down to the mill, where the defendant had preceded him; that he found the mill there, and the heavy machinery, and the defendant took him down to the dock, and pointed out what he said was the water front, and the line between the town of Apalachicola and the mill property, which ran to the line of the town; that he pointed out a little creek, from 800 to 850 feet south of the mill, and basides that, in the distance, a little bay or ditch, that formed the line between the town of Apalachicola and the mill property; that the witness was accustomed to measure distances with his eye, and he should judge that from the end of the dock to that line was about 800 feet, and they agreed that, if they had so much land on that side of the mill, it was abundant room for all practical purposes; that when the defendant made these representations to the witness in regard to the wharf and the lines of the city of Apalachicola, he (witness) believed them, and did not doubt them for a moment, and then returned to New York, having authorized the defendant to draw upon him for the required funds; that this wharf and the tramway, which ran the whole length of the wharf, were indispensably necessary for the operation of the mill; that to the north of it was all swamp land.

From the testimony of this witness it appears that the wharf, as then standing, was about 250 feet long, part of it having been previously carried away; that the line pointed out to him by the defendant as the line between the mill property and the city of Apalachicola was about 800 feet...