Sternlieb v. Normandie National Securities Corp.
188 N.E. 726, 90 A.L.R. 1437, 263 N.Y. 245 (1934)
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Rule of Law:
An infant's fraudulent misrepresentation of age, made to induce a contract, does not prevent the infant from disaffirming that contract, but the infant must make restitution for any benefits received or deterioration of property if seeking to recover money or property.
Facts:
- On September 21, 1929, the plaintiff, who was under twenty-one years of age, purchased five shares of capital stock of the Bank of United States and of the Bankus Corporation from the defendant.
- The plaintiff paid $990 to the defendant for the stock.
- The purchased stock subsequently dropped in value until it became worthless.
- On September 14, 1932, the plaintiff notified the defendant that he rescinded his purchase and offered to tender and return the stock certificates.
- The defendant alleged that before and at the time of purchase, the plaintiff falsely and fraudulently represented and warranted to the defendant that he was over twenty-one years of age.
- The defendant relied upon these representations from the plaintiff when parting with the stock.
Procedural Posture:
- The plaintiff commenced an action in the Municipal Court of the City of New York.
- The plaintiff moved to strike out the defendant's defense that the plaintiff falsely and fraudulently represented his age.
- The Municipal Court denied the plaintiff's motion to strike the defense.
- The plaintiff, as appellant, appealed the Municipal Court's decision to the Appellate Term, which affirmed the denial.
- The plaintiff, as appellant, appealed to the Appellate Division, which reversed the decision of the lower courts and ordered the defense stricken.
- The Appellate Division certified a question to the Court of Appeals regarding the sufficiency of the defense.
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Issue:
Does an infant's fraudulent misrepresentation of age, made to induce a contract, prevent the infant from disaffirming that contract and recovering payments made?
Opinions:
Majority - Crane, J.
No, an infant's fraudulent misrepresentation of age does not prevent the infant from disaffirming a contract. The court affirmed the long-standing common-law doctrine that contracts made by an infant, except for necessaries, are voidable at the infant's election. An infant is not estopped from pleading infancy by any representation as to age made to induce a contract, nor can they be sued for damages in tort for such misrepresentations if the tort claim arises from the contract. The court held that the fundamental principle remains the same whether the infant is the plaintiff or defendant in an action. While an infant may repudiate and rescind a contract, the party with whom they dealt is entitled to recoup losses under certain circumstances, such as for the use or deterioration of property. Citing precedent from other jurisdictions and previous New York cases like Rice v. Butler and the U.S. Supreme Court case Myers v. Hurley Motor Co., the court emphasized the requirement for the infant to do equity and make restitution, not only of profits but also for the use or deterioration of property being returned. Therefore, the defense alleging the infant's fraudulent misrepresentation of age was insufficient in law and was properly stricken.
Analysis:
This case reaffirms New York's adherence to the common law principle of protecting infants from their own improvidence in contractual matters, even when they make fraudulent misrepresentations of age. It clarifies that while such misrepresentation does not bar an infant's right to disaffirm a contract, it does impose a duty of restitution. This decision balances the protection of minors with equitable considerations for the adult party, establishing that an infant cannot use their infancy as a sword for profit without accounting for benefits received or damages caused. The court also subtly invites legislative intervention, acknowledging that some states have modified this common law rule through statutes.
