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Allen Kingston Motor Car Co. v. Consolidated National Bank of City of New York

Supreme Court of New York, Appellate Division

June 2, 1911

ALLEN-KINGSTON MOTOR CAR COMPANY, Respondent,
v.
CONSOLIDATED NATIONAL BANK OF THE CITY OF NEW YORK, Defendant, Impleaded with WILLIAM O. ALLISON and Others, Appellants.

APPEAL by the defendants, William O. Allison and others, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 27th day of May, 1910, upon the verdict of a jury, and also from an order entered in said clerk's office on the 31st day of May, 1910, denying the defendants' motion for a new trial, as resettled, by an order entered on the 14th day of June, 1910, and also from an order made at the conclusion of the trial granting the plaintiff an extra allowance.

COUNSEL

Royall Victor, for the appellants.

William F. Goldbeck, for the respondent

Page 295

SCOTT, J.:

Appeal from judgment against defendants Allison, Chapman and Lewis, and from an order denying a new trial in an action for damages for deceit and false representations, the complaint having been dismissed as to Consolidated National Bank.

The controversy arises out of the financial difficulties of E. R. and Orlando F. Thomas in the year 1907, and the alleged false statements are said to have been made respecting a corporation known as the New York Car and Truck Company.

The truck company was organized in May, 1906, for the purpose of manufacturing street car trucks. It acquired from the Peckham Manufacturing Company a plant at Kingston comprising about six acres of land, with buildings, machinery, etc. Orlando F. Thomas was president, one Steigerwald vice-president and treasurer, and Joseph Tracy secretary. E. R. Thomas was a director. In June, 1907, the Kingston Motor Car Company was organized by the two Thomases to build motor cars designed by one Moscovics, who became general manager, E. R. Thomas' secretary being president. This company leased from the truck company a part of its plant at Kingston. In July, 1907, one Allen, an automobile salesman, made a contract with the Kingston Motor Car Company whereby that company agreed to build motor cars for him. He was to deposit $25,000, of which $250 was to be credited on the purchase of each car. He did put up $16,500 of this amount. E. R. and Orlando Thomas guaranteed the performance of this agreement by the motor car company, such guaranty to remain good unless and until the contract should be taken over by some other company satisfactory to Allen. Allen thereupon organized the plaintiff corporation and assigned the contract to it. E. R. Thomas and Moscovics, with Allen, became directors. Orlando F. Thomas was president of the Consolidated National Bank, to which the truck company was indebted for about $61,000, and he was also president, with E. R. Thomas as vice-president, of the Hudson Trust Company, to which the truck company was indebted in about the sum of $20,000.

In October, 1907, when the panic had got well under way, the two Thomases resigned from the bank and trust company.

Page 296

The defendant Allison became president of the bank. He had been for years a publisher, and had no banking experience except that he had been a director of the Consolidated Bank. Defendant Chapman, who had previously been a broker with no particular experience in banking and who had just returned from abroad, was made president of the trust company. Defendant Lewis, who had been for many years connected with the Consolidated Bank, having become cashier, now became its vice-president. In the meantime the Kingston Motor Car Company had found itself unable to fulfill its agreement to deliver cars to Allen or plaintiff. It had sent Allen six unfinished cars for purposes of exhibition and which he held as security for the $16,500 which he had paid. On November 15, 1907, a meeting was held at the Consolidated Bank to devise a plan to carry out the agreement. At this meeting was present Allen and his counsel, Steigerwald, vice-president and treasurer of the truck company, and Tracy, its secretary, Moscovics, general manager of the Kingston Motor Car Company and director of plaintiff, and Allison, Chapman and Lewis. At this meeting after much discussion it was arranged that the truck company should assume the undertaking of the Kingston Motor Car Company to build and furnish motor cars to plaintiff; that plaintiff should put up the balance of the $25,000 to the truck company and should return the six cars which it held in New York. The truck company did not carry out this agreement, and in March, 1908, went into bankruptcy. The specific false representation charged against defendants is that at this meeting of November 15, 1907, they falsely stated and represented that 'said New York Car and Truck Company was a solvent, going concern, in sound financial condition, and in all respects able to carry out the engagements and obligations of the Kingston Motor Car Company under said contract.' Without attempting to analyze the testimony in detail, it is sufficient to say that the evidence is clear that no one at the meeting made the precise statement charged, and neither of the defendants made any statement at all as to the financial condition of the truck company. What happened appears to be this: Mr. Allen's counsel was unwilling to allow his client to go into the arrangement without knowing something about the condition

Page 297

of the truck company, and thereupon Allison called upon Steigerwald, treasurer of the company, to state how it stood. He stated generally that it was about $30,000 to the good, and afterwards went to counsel's office and made a detailed statement showing a surplus of $30,000.

There is nothing to indicate that either of the defendants made any statement, or indorsed anything that Steigerwald said, or knew anything about the financial condition of the company. Indeed they, like every one else at the conference, seem to have relied entirely upon Steigerwald. Respondent, forced by the testimony of its own witnesses to concede that defendants themselves made no representation as to the solvency of the truck company, falls back upon the proposition that they are chargeable because they sat silently by and permitted Steigerwald to make a false statement. But there is not the slightest evidence that they knew whether his statement was true or false, and there was no reason why they should have known. They were not interested in the fulfillment of the contract between plaintiff and the motor car company, except as the contemplated arrangement involved a further advance by the bank to the truck company. In point of fact the appellants Allison and Lewis so far believed Steigerwald's statement to be true that they agreed, on behalf of the Consolidated Bank, to advance $25,000 to the truck company toward carrying out the agreement of the motor car company with plaintiff. It is true that this promise was only partially performed, and great use was made of that fact on the trial, but this was not a representation as to an existing fact, and the failure to fulfill the promise had no bearing upon the cause of action alleged against the appellants. Much use was also made upon the trial of the fact that at the time the conference was held the truck company was indebted to the Consolidated Bank and to the ...


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