This is an action to rescind the purchase of stock of the defendant corporation, The Reade-Duane Cold Storage Company, and to recover from the corporation and its directors the amount paid on the ground that the purchase was induced by false and fraudulent statements in a circular or prospectus alleged to have been issued and circulated by the defendants. In an action brought by one Lehman-Charley against the same defendants, based on the same circular, a recovery was sustained by the Appellate Division and by this court. (135 App. Div. 674; 202 N.Y. 524.) In that action the appellants defended on the ground that the prospectus was not fraudulent, but did not deny participation in the preparation of the circular or knowledge of its contents. On the trial of this action they denied any responsibility whatever for its issuance and circulation. In that action the court found that the defendants Bartlett, De Selding and Tubby, together with the defendant Hill, who was not served with the summons, prepared and issued the circular with intent that it should be distributed among the investing public for the purpose of inviting subscriptions. It is claimed on this appeal that the findings on that important question of fact are so inconsistent and contradictory as to be insufficient to sustain the judgment, and that presents the important question for determination.
The cause of action pleaded is based on fraud and deceit. The trial court found in accordance with the averments of the complaint that the defendants prepared and issued the said circular with the intent that it should be distributed among the investing public for the purpose of inviting subscriptions, but it also found at the request of the appellants De Selding and Tubby that they "did *Page 36 not assist Bartlett in the preparation, and did not join with him in the issuing of the circular complained of," and at the request of the defendant Hill "that he had not been consulted, and was not aware of the character of the circular complained of at the time of its issuance; that he did not authorize it or its issuance by any affirmative act," and "that the defendant Bartlett was not a partner, employee or agent of the defendant Hill, nor under any contractual relation with him, but was a co-director and the agent of the corporation only." Those findings at least appear to be inconsistent. The respondent argues that it is possible to reconcile them on the theory that the findings made at the request of the appellants were intended to refer only to physical acts, but the opinion of the trial court shows that that construction is not permissible. He said: "I am thoroughly convinced that it [referring to the prospectus] was the work of the defendant Bartlett, and that the defending litigants, other than Bartlett, were not aware of its character at the time of its issuance, nor did they authorize (sic) by any affirmative act antedating its circulation, but notwithstanding they seemingly are not relieved from responsibility and they must respond in judgment (Downey v.Finucane et al., N.Y. Court of Appeals)." The findings are thus explained on a theory totally at variance with that suggested by the respondent. The court was of the opinion that the appellants were not aware of the character of the circular, had no share in its preparation and did not authorize its issuance or circulation, but held, on the authority of Downey v. Finucane (205 N.Y. 251), that they were responsible for the acts of their co-director Bartlett. The finding that they prepared and issued the circular was intended to mean simply that the act of their agent, Bartlett, was their act.
The doctrine of the Finucane case has no application to the facts of this case. In that case the defendants were held liable for the acts of Fenn, not on the ground *Page 37 that he was a co-director, but because they had constituted him an agent of a syndicate organized for their personal profit, and because he acted as agent of the syndicate and not as agent of the corporation. In this case there is nothing upon which to base a claim that Bartlett was the agent of the appellants except the bare fact that he was a co-director, and that is not sufficient. (Arthur v. Griswold, 55 N.Y. 400.)
A majority of the Appellate Division were of the opinion that the evidence was sufficient to sustain a finding that the appellants knew of the circular and the purpose for which it was issued prior to the time when it was sent to the plaintiff. But a judgment founded upon an untenable proposition should not be sustained merely because there is some evidence to sustain a finding which, if it had been made, would support the judgment. The defendants should not be cast in judgment for fraud and deceit until that issue has been tried and found against them.
The record does not present a case of inconsistent findings resulting from mere inadvertence or mistake, nor is the case one in which there is room for doubt as to what was actually decided. In truth, the trial court found against the plaintiff on the issue of fact raised by the pleadings but rendered a judgment against the defendants on an erroneous view of the law. Whilst we reconcile findings when possible, we do that to give effect to what was actually decided, not to evolve findings which we know the trial court did not intend to make.
Though the learned counsel for the plaintiff frankly avowed that he had attempted to hold the appellants personally liable on the ground that they had had a hand in the preparation or circulation of the fraudulent prospectus, the suggestion was thrown out on oral argument that they might be held liable for negligence. Even if we were disposed to hold that a director of a corporation may be liable for negligence to one who is misled into *Page 38 purchasing its shares, no such issue was presented by the pleadings or tried.
I entertain no doubt that the Appellate Division has the power under section 1317 of the Code of Civil Procedure to substitute new findings for those of the trial court to support a judgment. Having that power, the Appellate Division did not see fit to exercise it in this case, and we may be quite certain that it did not refrain from any doubt as to the existence of the power. The Appellate Division construed the findings of the trial court as meaning that the defendants were personally guilty of the fraud charged against them and the opinion of Presiding Justice INGRAHAM is to the effect that there is evidence to sustain a finding that the defendants had actual knowledge of the issuance of the fraudulent circular, but that is very far from holding that the evidence so preponderates in favor of such a finding that the Appellate Division would be justified in reversing a contrary finding. We interpret the decision of the trial court differently. As I have pointed out the apparent inconsistency in the findings is superficial only. If we are to consider the substance, and not the mere form of the decision, we are permitted to know that the trial court actually decided as a fact that the defendants had no knowledge of the issuance of the fraudulent circular and was able to find that they issued it only by erroneously ruling as a matter of law that Bartlett was their agent.
The decision of the trial judge on the facts should not be lightly disturbed by a court which can glean the facts only from the printed pages of a record and the practice on appeal of granting final judgments on a different view of the facts to that taken by the trial court may, except in reasonably plain cases, lead to grave injustice. Certainly we have no reason to think that the Appellate Divisions need encouragement from this court to exercise that power. Whilst under the new practice it sometimes *Page 39 becomes necessary in the interest of justice to remit a cause to the Appellate Division for further consideration as, e.g., when otherwise a party might be deprived of the right to have the facts reviewed, there are serious objections to the extension of that practice. This case is to be decided upon the record before us, and I think the defendants are entitled to have the question of their guilt decided in the first instance by the trial court.
The judgment should be reversed and a new trial granted, with costs to abide the event.