Verene Trott, as Executrix, etc., of William Trott, Deceased, Respondent, v. Valentin Schmitt, Appellant

Verene Trott, as Executrix, etc., of William Trott, Deceased, Respondent, v. Valentin Schmitt, Appellant. Second Department, May 3, 1907. Money had and received — alleged deception in sale of stock—prompt disaffirmance of sale prerequisite to action — facts not showing fraud' ■—■ evidence. An action to recover moneys had and received brought on the theory that the defendant having' received money of the plaintiffs testator for the purchase of specific stock owned by another person substituted instead similar stock owned by himself, cannot be maintained unless it be shown that there was a prompt disaffirmance of the transaction on the ground of deception' as soon as the same was discovered.' A disaffirmance a year after knowledge .of the alleged fraud is too late. • When in such action it appeared that the decedent, not being bound by anenforcible contract of purchase from other parties, gave a check for the stock to tho' , order of the defendant and received from him stock issued to the defendant and indorsed by him in blank, the evidence fails to establish fraud of the defendant, but points to an intentional purchase from him. Under a claim that the decedent supposed that he was purchasing-the stock of a third person, evidence concerning payment of dividends on the stock and that the defendant voted on it after assigning to the decedent is irrelevant, for the. sole issue is whether on discovering the right to disaffirm, the decedent tendered the stock and demanded the money paid. Appeal by the defendant, Valentin Schmitt, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Kings on the 14th day of June, .1906, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 7th day of July, 1906, denying the defendant’s motion for a new trial made upon the minutes. Ter?'y Smith, for the appellant. Edward W. S. Johnston \Herman G. Loew .with him on the brief], for the respondent. [MAJORITY — Gaynor, J. :] Gaynor, J. : The complaint, is simply for $5,000 had and received by the defendant of the plaintiff. The plaintiff died before trial,'and his e-xecutor, his widow, was substituted. The following facts are undisputed, for, both sides proved them on the trial, viz.: On May 10th, 1903, the decedent was at the defendant’s place of business, and met the defendant and one Kotz there. Both the defendant and Kotz were stockholders in a brewery company. The defendant told Kotz that the decedent wanted to buy some of the stock, and Kotz and,the decedent talked on the subject, with the result ■ that it was orally agreed that next day the former wás to deliver to the latter 50 shares at par, viz., for $5,000. Next day the decedent gave the defendant his check for $5,000 to the defendant’s order, and the defendant delivered to him several certificates of shares of the said stock, aggregating 50 shares. They were made out and issued to the defendant, and he signed the blank endorsement on the back of them. The decedent never asked Kotz for the shares of stock he had agreed to buy of him, and Kotz never tendered them to the decedent. These naked facts stand alone for lack of the evidence of the- decedent and the defendant in respect of the transaction. The theory on which the plaintiff tried the case was that the defendant took the decedent’s check to him for'.$5,000 to pay for Kotz’s stock, but instead the defendant delivered' his own, and that therefore, as he never applied the payment to the purpose for which it was made, he received and still had it to the decedent’s use; and on that theory the learned trial judge sent the caseto the jury. There ■ was some slight pretence that the money was loaned, but the learned . t.rial judge properly refrained from submitting such a question to-the jury. He charged that if the defendant substituted his own shares for. those of Kotz, the decedent supposing that he was getting Kotz’s, th'e latter had a right to-disaffirm. The attorney for the decedent'had tendered the shares back to the defendant in June, 1904, before this action was begun, and-demanded the $’o,000 back, according to his testimony ; on no such basis of disaffirmance, however, but apparently on the theory that the money had been loaned 'on the security of the stock. The action was not maintainable except on a-prompt disaffirmance on the ground of such deception, as. soon as it was discovered, and should have been dismissed (Gould v. Cayuga County Nat. Bank, 86 N. Y. 75). Moreover, there is no evidence to support the theory that the defendant covertly gave the decedent'his own shares of stock, while the decedent supposed that he was buying and getting shares óf stock belonging-to Kotz. On the contrary^ the decedent gave his check not to Kotz,.. but to the defendant, and received of the defendant certificates of stock made out. to him and endorsed by him in blank to the decedent. This all shows a purchase of the defendant. It would be not at all extraordinary for him to purchase of the defendant instead of Kotzt; he was not bound by his oral agreement with Kotz. There is much irrelevant evidence in. the case concerning tlie • payment of dividends on the stock, and whether the defendant voted on it after transferring it to the decedent, and the like, which has to be disregarded. It being admitted that the decedent purchased 50 shares of stock, supposing, howe ver, that'it was Kotz’s stock, all such evidence was plainly irrelevant; for the sole qnes- ■ tion' on that assumption Was' whether on discovering it was not Kotz’s stock, he had the right to disaffirm, tender the shares back and demand the money he liad paid. This is all said' without passing ón the question whether it made any legal difference to the decedent who owned the stock. ' Also, under the rule of prompt disaffirmance on the discovery tif fraud, the decedent would have been too late with a disaffirmance in June, 1904, when the demand and tender were made by his attorney, as above mentioned ; for it appears in evidence that a month after he received the stock he was told by Kotz that it was not his stock (Gould v. Cayuga County Nat. Bank, supra). The judgment should be reversed. Woodward, Jerks and Rich, JJ., concurred.' Judgment and order reversed and new trial granted, costs to abide the event.