Selcow v. Floersheimer

• Decision Date: 30 April 1964
• Parties: Jack SELCOW and Excelsior Thread Mills, Inc., Plaintiffs-Respondents, v. Walter D. FLOERSHEIMER et al., Defendants-Appellants.
• Court: New York Supreme Court — Appellate Division

Page 934

248 N.Y.S.2d 934

20 A.D.2d 889

Jack SELCOW and Excelsior Thread Mills, Inc., Plaintiffs-Respondents, v. Walter D. FLOERSHEIMER et al., Defendants-Appellants.

Supreme Court, Appellate Division, First Department.

April 30, 1964.

A. Lipper, New York City, for plaintiff-respondents.

J. Kern, New York City, for defendants-appellants.

Before BREITEL, J. P., and VALENTE, McNALLY, STEVENS and EAGER, JJ.

PER CURIAM.

Judgment entered on June 7, 1963, in favor of plaintiff Selcow in the sum of $22,693.13 and plaintiff Excelsior Thread Mills, Inc., in the sum of $11,346.56, unanimously reversed, on the law and on the facts, as against the weight of the credible evidence, and a new trial directed in the interests of justice, with costs to abide the event. This action by plaintiffs against defendant stockbrokers is grounded in fraud. Defendants were required to exercise the 'utmost good faith and loyalty and not to act in any manner inconsistent with [their] agency or trust.' (John J. Reynolds, Inc. v. Snow, 11 A.D.2d 653, 201 N.Y.S.2d 704, affd. 9 N.Y.2d 785, 215 N.Y.S.2d 84, 174 N.E.2d 753.) Plaintiffs allege they were fraudulently induced to sell stock held by them. Defendants are alleged to have represented regarding the corporation whose stock plaintiffs owned: 'Something disturbing has happened to Development Corporation. I can't go into details now * * * but it is of great urgency to get out of the stock immediately. * * * How come you don't sell your own? * * * I can't sell. We have a secret agreement. I am not allowed to sell. * * * This is cancerous. Get out.' Further, one of the defendants testified 'there is nothing new.' Defendant Walter D. Floersheimer was a director, chairman of the executive committee and the largest stockholder of the corporation. The evidence is that defendants held themselves out as possessing special knowledge of the internal affairs of the corporation and that plaintiffs by reason thereof relied on defendants' representations and opinions as to its financial condition. (See Hickey v. Morrell, 102 N.Y. 454, 7 N.E. 321.) If plaintiffs had been content with proof that the corporation was progressing and its prospects were favorable, rather than bleak, they might have established a basis for recovery. Instead, however, plaintiffs assumed to prove the defendants fraudulently withheld from them information as to pending corporate opportunities. The difficulty on that score is that the record fails to establish the...