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Kearney v. National Grain Yeast Corp.

Decided: April 3, 1941.

LEO KEARNEY, PLAINTIFF-APPELLANT,
v.
NATIONAL GRAIN YEAST CORPORATION (A CORPORATION), SAMUEL BRASS, FRANK HALE AND HAROLD GOLDMAN, DEFENDANTS-RESPONDENTS



On appeal from the Supreme Court, Bergen County.

For the appellant, Whiting & Moore (Ira C. Moore, Jr., of counsel).

For the defendants National Grain Yeast Corporation, Frank Hale and Harold Goldman, Winne & Banta (John J. Breslin and Walter G. Winne, of counsel).

For the defendant Samuel Brass, Slavitt & Slavitt (Arthur Slavitt, of counsel).

Perskie

The opinion of the court was delivered by

PERSKIE, J. We are asked to decide, amongst other things, whether plaintiff's release to the defendant corporation and to its president, Samuel Brass, which release plaintiff alleges was induced by the fraud of all the defendants, bars plaintiff's action at law for deceit against any or all of the defendants.

The plaintiff, Leo Kearney, and the defendants Samuel Brass, Frank Hale and Harold Goldman, together with one George Porrazzo, agreed to form a corporation and orally agreed on the financial interest each party to the agreement was to receive in the proposed corporation. Pursuant to this agreement, the defendant corporation was formed and between December 1st, 1926, and December 1st, 1927, plaintiff

advanced to it the sum of $43,055.59. Despite plaintiff's requests and demands, no stock in this corporation was ever issued or delivered to him nor was any other written evidence of his right in or against the corporation given to him.

On or about January 12th, 1932, the plaintiff brought an action against the defendant corporation in the New Jersey Supreme Court to recover the $43,055.59 with interest. Plaintiff elected to treat the money so advanced as a loan to the corporation. During the pendency of this suit, plaintiff alleged, in substance, that each of the defendants fraudulently represented that the affairs of the corporation were in dire and hopeless condition and "that the financial condition of said corporation was so bad that his said claim against it was not worth five cents." Plaintiff further alleged that he did not learn of the fraud so practiced upon him until June, 1935, at which time he learned that the corporation had been in a "flourishing condition" and was "suffering no financial reverses."

Believing and relying upon these false representations, plaintiff alleged that on or about February 15th, 1932, he settled his cause of action against the defendant corporation for the sum of $26,024.15, executed a general release to the defendant corporation and to its president, Samuel Brass, and discontinued the action.

On or about June 29th, 1936, plaintiff began an action in the New York Supreme Court against the three individual defendants, Brass, Hale and Goldman. Plaintiff, in that action, elected to treat his advancement of the $43,055.59 as an investment in the corporation. He alleged that the $26,024.15 which he received in settlement thereof, was in fact, in payment of the sale of his interest in the corporation to the individual defendants and claimed that since the sale was induced by their fraud, he was entitled to damages. Defendants moved their motion for judgment on the pleadings. The court granted the motion on the ground that the plaintiff, having treated the transaction as a loan in his prior suit in ...


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