Instead of having been employed in the Manchester commission tea trade

in the year 1824, as the defendant had stated to the plaintiffs, it

appeared that he had, at the recommendation of the defendant, been taken

into partnership without any capital by Mr. R. C. Stewart, a

warehouseman in London, in July, 1823; but great losses having been

incurred in that concern, aggravated by a robbery to some amount, Mr.

Stewart closed the concern and dissolved the partnership in October,

1824.

Jacque was then indebted to Stewart in the sum of £800, which he

undertook by deed, dated November 13, 1824, to pay by instalments, in

two, three, and four years; but nothing was ever paid.

All this was known to the defendant, who had acted throughout for

Jacque, and had negotiated the terms of the dissolution of partnership.

Letters were also put in, written by the defendant to Jacque, after the

exposure of the Manchester transactions, in which the defendant exhorted

Jacque to write various falsehoods to the plaintiffs with a view to the

exculpation of the defendant, and to conceal from the plaintiffs his

knowledge of some of the transactions at Manchester.

When the defendant was first applied to on the subject by the

plaintiffs, he expressed his regret that his house should have been the

means of introducing an unworthy agent to the plaintiffs; but that as

they had been instrumental in bringing the loss on the plaintiffs, he

would see his partner on the subject, and see what could be done towards

relieving them from it. No step of that kind having been taken, the

present action was commenced.

Tindal, C. J., told the jury to consider whether the representation

complained of by the plaintiffs had ever been made, and if made, whether

it was false within the knowledge of the defendant; for unless it were

false within his knowledge, the action did not lie.

The jury returned a verdict for the defendant, which was set aside by

the Court. [6 Bingham, 396.]

Upon a new trial, Tindal, C. J., told the jury that if the defendant

made representations concerning Jacque, the tendency of which was to

occasion loss to the plaintiff, knowing such representations to be

false, and intending thereby to benefit himself, he was guilty of fraud

in the common acceptation of the term; if he made such representations,

knowing them to be false, without proposing thereby any advantage to

himself, but proposing, perhaps, to benefit a third person, he was

guilty of fraud in the legal acceptation of the term, and responsible to

the plaintiff for any injury resulting from such representations.

The jury thereupon found for the plaintiff, damages £800; but added: “We

consider there was no actual fraud on the part of the defendant, and

that he had no fraudulent intention, although what he has done

constituted a fraud in the legal acceptation of the term.”

_Jones_, Serjt., now contended that this amounted to a verdict for the

defendant; and therefore moved that the verdict might be entered for

him, instead of the plaintiff.

He urged, at some length, nearly the same arguments as he had advanced

on a former occasion, and adverted to the same authorities (see 6 Bing.

402); contending that this action was substituted for the ancient writ

of deceit; that the gist of the action was a fraudulent intent on the

part of the defendant to injure the plaintiff by deceiving him; that a

defendant was not responsible for the consequences of a statement,

merely because he knew it to be false; he was not responsible for the

consequences of a bare lie; in order to render him responsible, it ought

to be shown that he intended to defraud the plaintiff of something by

the deceit he had practised. That if a party were responsible for the

consequences of a lie told without any intention to defraud the hearer

of something, no line could be drawn, and parties might be called on to

answer for those excusable untruths, which were sometimes told for the

purpose of avoiding a greater mischief.

TINDAL, C. J. No sufficient ground has been laid to induce us to disturb

the verdict which has been found for the plaintiff. The application

arises on a misconception of what the jury have found. They first

deliver a verdict for the plaintiff, with damages, and then add, that in

point of fact they consider the defendant had no fraudulent intention,

although he had been guilty of fraud in the legal acceptation of the

term.

Their attention had been drawn by me to two classes of motives possible

on the part of the defendant; first, a desire to benefit himself by

making a statement which he knew to be false; secondly, a desire to

benefit some third person; and I stated that, although there might be no

intention on his part to obtain an advantage for himself, it would still

be a fraud, for which he was responsible in law, if he made

representations productive of loss to another, knowing such

representations to be false.

The jury in finding that he had no intention to defraud mean only that

he was not actuated by the baser motive of obtaining an advantage for

himself, but that he was guilty of fraud in law by stating that which he

knew to be false, and which was the cause of loss to the plaintiff.

The question, therefore, is, whether, if a party makes representations

which he knows to be false, and occasions injury thereby, he is not

liable for the consequences of his falsehood.

It would be most dangerous to hold that he is not.

The confusion seems to have arisen from not distinguishing between what

is fraud in law and the motives for actual fraud. It is fraud in law if

a party makes representations which he knows to be false, and injury

ensues, although the motive from which the representations proceeded may

not have been bad; the person who makes such representations is

responsible for the consequences; and the verdict, therefore, in this

case ought not to be disturbed.

PARK, J. I am of the same opinion. In what fell from this Court in the

case of Tapp _v._ Lee, and upon the former decision of the present case,

the doctrine has been laid down most accurately. It would be unfair to

take the expressions of the jury, without connecting them with what the

Chief Justice had just presented for their consideration. It is clear

that the jury meant to draw the distinction between the sordid motive of

personal advantage and the legal fraud which might be committed by a

representation false within the knowledge of the speaker, although made

without any view to his own advantage. For such a representation the

defendant is responsible if mischief ensues, whatever may have been his

motive; and as to its being necessary to prove the motive by which he

was actuated: when the case was last before the Court, Tindal, C. J.,

said, “I am not aware of any authority for such a position, nor that it

can be material what the motive was; the law will infer an improper

motive, if what the defendant says is false within his own knowledge,

and is the occasion of damage to the plaintiff.”

Here the defendant said “That his friend was so excellent a young man,

that he would rather trust him without security than most men with;”

when he knew the contrary to be the fact, he was guilty of a fraud in

law in making such a representation; and fraud in law is sufficient to

support this action.

GASELEE, J. When this verdict is taken in connection with the direction

of the Chief Justice, there is an end to all doubt as to the meaning of

the jury, and the finding is a perfect finding. What the jury meant by

actual fraud was a sordid regard to self-interest; but the legal fraud,

which is sufficient to sustain the action, was complete when the

intention to mislead was followed by actual injury.

BOSANQUET, J. There seems to me to be no reason for disturbing this

verdict. In the course of the trial, it is probable that improper

motives had been ascribed to the defendant. The Chief Justice,

therefore, stated to the jury, and stated correctly, that motives of

that description in the defendant were not essential to the plaintiff’s

action. If a person tells a falsehood, the natural and obvious

consequence of which, if acted on, is injury to another, that is fraud

in law. Coupling that with what the Chief Justice addressed to the jury,

their verdict only means that the defendant did not propose to benefit

himself, perhaps intended to benefit another; but that what he said,

intending to benefit another, was false within his own knowledge,

injurious to the party who received the communication, and,

consequently, a fraud in the legal acceptation of the term.

_Rule refused._[346]

POLHILL _v._ WALTER

IN THE KING’S BENCH, JANUARY 20, 1832.

_Reported in 3 Barnewall & Adolphus, 114._

LORD TENTERDEN, C. J.[347] In this case, in which the defendant obtained

a verdict on the trial before me at the sittings after Hilary Term, a

rule _nisi_ was obtained to enter a verdict for the plaintiff, and cause

was shown during the last term. The declaration contained two counts:

the first stated, that a foreign bill of exchange was drawn on a person

of the name of Hancorne, and that the defendant falsely, fraudulently,

and deceitfully did represent and pretend that he was duly authorized to

accept the bill by the procuration, and on behalf of Hancorne, and did

falsely and fraudulently pretend to accept the same by the procuration

of Hancorne. It then proceeded to allege several indorsements of the

bill, and that the plaintiff, relying on the pretended acceptance, and

believing that the defendant had authority from Hancorne to accept,

received the bill from the last indorsee in discharge of a debt; that

the bill was dishonored, and that the plaintiff brought an unsuccessful

action against Hancorne. The second count contained a similar statement

of the false representation by the defendant, and that he accepted the

bill in writing under pretence of the procuration from Hancorne; and

then proceeded to describe the indorsements to the plaintiff, and the

dishonor of the bill, and alleged, that thereupon it became and was the

duty of the defendant to pay the bill as the acceptor thereof, but that

he had not done so.

On the trial it appeared, that when the bill was presented for

acceptance by a person named Armfield, who was one of the payees of the

bill, Hancorne was absent; and that the defendant, who lived in the same

house with him, was induced to write on the bill an acceptance as by the

procuration of Hancorne, Armfield assuring him that the bill was

perfectly regular, and the defendant fully believing that the acceptance

would be sanctioned, and the bill paid at maturity, by the drawee. It

was afterwards passed into the plaintiff’s hands, and being dishonored

when due an action was brought against Hancorne; the defendant was

called as a witness on the trial of that action, and he negativing any

authority from Hancorne, the plaintiff was nonsuited. I left to the jury

the question of deceit and fraud in the defendant, as a question of fact

on the evidence, and the jury having negatived all fraud, the defendant

had a verdict, liberty being reserved to the plaintiff to move to enter

a verdict, if the Court should think the action maintainable

notwithstanding that finding.

On the argument, two points were made by the plaintiff’s counsel. It was

contended, in the first place, that although the defendant was not

guilty of any fraud or deceit, he might be made liable as acceptor of

the bill; that the second count was applicable to that view of the case;

and that, after rejecting the allegations of fraud and falsehood in that

count, it contained a sufficient statement of a cause of action against

him, as acceptor. But we are clearly of opinion that the defendant

cannot be made responsible in that character. It is enough to say that

no one can be liable as acceptor but the person to whom the bill is

addressed, unless he be an acceptor for honor, which the defendant

certainly was not.

This distinguishes the present case from that of a pretended agent

making a promissory note (referred to in Mr. Roscoe’s Digest of the Law

of Bills of Exchange, note 9, p. 47), or purchasing goods in the name of

a supposed principal. And, indeed, it may well be doubted if the

defendant, by writing this acceptance, entered into any contract or

warranty at all, that he had authority to do so; and if he did, it would

be an insuperable objection to an action as on a contract by this

plaintiff, that at all events there was no contract with, or warranty to

him.

It was in the next place contended that the allegation of falsehood and

fraud in the first count was supported by the evidence; and that, in

order to maintain this species of action, it is not necessary to prove

that the false representation was made from a corrupt motive of gain to

the defendant, or a wicked motive of injury to the plaintiff; it was

said to be enough if a representation is made which the party making it

knows to be untrue, and which is intended by him, or which, from the

mode in which it is made, is calculated to induce another to act on the

faith of it, in such a way as that he may incur damage, and that damage

is actually incurred. A wilful falsehood of such a nature was contended

to be, in the legal sense of the word, a fraud; and for this position

was cited the case of Foster _v._ Charles, 6 Bing. 396; 7 Bing. 105,

which was twice under the consideration of the Court of Common Pleas,

and to which may be added the recent case of Corbet _v._ Brown, 8 Bing.

33. The principle of these cases appears to us to be well founded, and

to apply to the present.

It is true that there the representation was made immediately to the

plaintiff, and was intended by the defendant to induce the plaintiff to

do the act which caused him damage. Here, the representation is made to

all to whom the bill may be offered in the course of circulation, and

is, in fact, intended to be made to all, and the plaintiff is one of

those; and the defendant must be taken to have intended, that all such

persons should give credit to the acceptance, and thereby act upon the

faith of that representation, because that, in the ordinary course of

business, is its natural and necessary result.

If, then, the defendant, when he wrote the acceptance, and thereby, in

substance, represented that he had authority from the drawee to make it,

knew that he had no such authority (and upon the evidence there can be

no doubt that he did), the representation was untrue to his knowledge,

and we think that an action will lie against him by the plaintiff for

the damage sustained in consequence.

If the defendant had had good reason to believe his representation to be

true, as, for instance, if he had acted upon a power of attorney which

he supposed to be genuine, but which was, in fact, a forgery, he would

have incurred no liability, for he would have made no statement which he

knew to be false: a case very different from the present, in which it is

clear that he stated what he knew to be untrue, though with no corrupt

motive.

It is of the greatest importance in all transactions that the truth

should be strictly adhered to. In the present case, the defendant no

doubt believed that the acceptance would be ratified, and the bill paid

when due, and if he had done no more than to make a statement of that

belief, according to the strict truth, by a memorandum appended to the

bill, he would have been blameless. But then the bill would never have

circulated as an accepted bill, and it was only in consequence of the

false statement of the defendant that he actually had authority to

accept, that the bill gained its credit, and the plaintiff sustained a

loss. For these reasons we are of opinion that the rule should be made

absolute to enter a verdict for the plaintiff.

_Rule absolute._[348]

BUTTERFIELD _v._ BARBER

SUPREME COURT, RHODE ISLAND, MAY 15, 1897.

_Reported in 20 Rhode Island Reports, 99._

Case for deceitful representations by a debtor to his creditor, the

plaintiff having subsequently purchased the claim from the latter in the

form of a promissory note. Heard on defendant’s petition for new trial.

PER CURIAM. Assuming that the representations testified to by the

plaintiff were made by the defendant, the testimony shows that they were

made for the purpose of being communicated to Murphy, to procure an

extension of time for the payment of his claim against the defendant. At

the time they were made the defendant had no expectation that the note,

which was subsequently made, was to be taken by the plaintiff, who, in

the meantime, had purchased the claim from Murphy. We do not think that

in these circumstances the plaintiff had the right to rely on the

representations, if they were made, because they were not made with the

intention of inducing his action, and consequently that he has no ground

to maintain an action for deceit.

Case remitted to the Common Pleas Division, with direction to enter

judgment for the defendant for costs.[349]

ALDEN _v._ WRIGHT

SUPREME COURT, MINNESOTA, SEPTEMBER 30, 1891.

_Reported in 47 Minnesota Reports, 225._

Action for deceit in the exchange of real property for shares of

corporate stock. Plaintiff alleged fraudulent representations on the

part of defendants as to the value of the shares, whereby he was induced

to make the exchange. Trial. Verdict for defendants. Plaintiff appealed

from an order denying a new trial.[350]

COLLINS, J....

2. At defendants’ request the court charged the jury, in substance, that

they must find for defendants, unless it appeared by a preponderance of

testimony that the property conveyed by plaintiff in exchange for the

shares of stock was worth more than the latter; and to this plaintiff

excepted, on the ground that it prevented the jury from returning a

verdict in his favor for nominal damages; that, even if the jury should

fail to find that the property conveyed by plaintiff was of greater

value than the shares of stock transferred to him,—passing on all other

questions in his favor,—they might award him nominal damages at least;

and that the possibility of such an award was excluded by the charge.

But, at plaintiff’s request, the jury was instructed that, if they found

for him, the amount he would be entitled to recover would be the amount

of the difference between the actual value of the property which he

conveyed and the actual value of the stock received by him. The rule as

to the measure of damages in the case was stated in better form in

plaintiff’s than in defendants’ request, but one was, in effect, a

repetition of the other. The rule was correctly stated in each, and the

same proposition of law was elsewhere in the charge laid down by the

court in very concise and proper, but different, language. The essential

elements which constitute a cause of action for deceit are well stated

in Busterud _v._ Farrington, 36 Minn. 320 (31 N. W. Rep. 360), and one

is that the party induced to act has been damaged. He must have acted on

the faith of the false representations _to his damage_. A party cannot

sustain an action of this character where no harm has come to him.

Deceit and injury must concur,—Doran _v._ Eaton, 40 Minn. 35 (41 N. W.

Rep. 244);—or, as it has frequently been put by the courts, fraud

without damage or damage without fraud will not sustain the action for

deceit. Taylor _v._ Guest, 58 N. Y. 262; Nye _v._ Merriam, 35 Vt. 438;

Freeman _v._ McDaniel, 23 Ga. 354; Byard _v._ Holmes, 34 N. J. Law, 296;

3 Suth. Dam. 594; Cooley, Torts, 474; Bailey, Onus Probandi, 770. If,

therefore, the shares of stock were worth what plaintiff gave for them,

were of equal value with the property exchanged, the plaintiff was not

damaged, and was not entitled to recover; for the proper measure of

damages was the difference in value between the shares of stock and the

property conveyed by plaintiff for them. Redding _v._ Godwin, 44 Minn.

355 (46 N. W. Rep. 563), and cases cited. The plaintiff, under such a

rule, would not be permitted to recover nominal damages even without

proof of loss or injury, and there is nothing said in Potter _v._

Mellen, 36 Minn. 122 (30 N. W. Rep. 438), as counsel has contended,

indicating a contrary view. Damage is of the essence of the action of

deceit; an essential element to the right of action, and not merely a

consequence flowing from it.

_Order affirmed._[351]

FREEMAN _v._ VENNER

SUPREME JUDICIAL COURT, MASSACHUSETTS, JUNE 23, 1876.

_Reported in 120 Massachusetts Reports, 424._

Action of tort. Writ dated Dec. 22, 1873. Plaintiff held the

negotiable promissory note of J. W. and J. H. Cox, dated July 16,

1873, payable to plaintiff or order in two years from date; and he

also held a mortgage conditioned to secure the note. In consideration

of land to be conveyed to him by the defendant, plaintiff agreed to

assign to defendant the mortgage and note; but he did not agree to

make an unrestricted indorsement of the note, and the defendant was

not entitled to have the personal liability of the plaintiff as

indorser of the note. Plaintiff, through ignorance of the law, and by

reason of the false and fraudulent representations of defendant, on

Dec. 1, 1873, indorsed the note in blank without any qualification. As

soon as the plaintiff became aware of the obligation he had thus

assumed, and before defendant had negotiated the note or altered his

position in any way, plaintiff demanded to be allowed to qualify his

indorsement so that it should merely transfer the title according to

the agreement. Defendant refused to allow this. Thereupon plaintiff

forbade defendant to negotiate the note; but defendant,

notwithstanding, negotiated the note before maturity to one Tenney, a

_bona fide_ holder for value.

Upon a trial by a judge, without a jury, the foregoing facts were

found, substantially as alleged in the declaration.

It also appeared, that, before commencing his action, or at any time

before said trial, the plaintiff had made no payment on account or by

reason of the indorsement; that, before the commencement of this

action and before the maturity of the note, the makers thereof had

become bankrupts; that since the commencement a semi-annual instalment

of interest had become due; that Tenney had caused the real estate to

be sold by virtue of the power contained in the mortgage, had applied

a part of the proceeds of the sale in liquidation of that interest,

and, since the maturity of the note, had applied the balance of the

proceeds in part payment of the note, and had commenced an action

against the plaintiff to recover the balance of said note (due demand

having been made and notice given), which action is now pending.

Defendant requested the judge to rule that, upon the foregoing facts

the plaintiff could not maintain his action, but, if he could, that he

was entitled to recover only nominal damages. The judge declined so to

rule, and held that defendant was liable for the conversion of the

note, and that the measure of the plaintiff’s damages was the amount

which the plaintiff was legally compellable to pay to the holder of

the note, namely, the face of the note and interest, less the amount

realized from the sale under the mortgage, treating the same as a

partial payment. Defendant excepted.[352]

COLT, J. [After deciding that there was no conversion of the note.]

The further objection is, that treating this as an action to recover

damages for an alleged fraud, the plaintiff shows no damages sustained

at the time his action was commenced. It was then uncertain and

contingent whether he would ever be called on to pay the note. It was

payable to the plaintiff or order in two years, and was dated in July,

1873, shortly before its transfer by his indorsement to the defendant.

The liability of the plaintiff depended on the failure of the makers

to pay and the giving of due notice to him as indorser. No payment has

in fact ever been made by him. If the holder receives his pay from the

makers through the mortgage security or otherwise, the plaintiff will

have suffered no actionable wrong. There will have been no concurrence

of damage with fraud, within the rule on which such actions are

founded. And as there has been no invasion of the plaintiff’s rights,

no breach of promise, and no interference with his property, there can

be no recovery of even nominal damages in this action. Pasley _v._

Freeman, 3 T. R. 51; 2 Smith Lead. Cas. (6th Am. ed.) 157, and notes.

_Exceptions sustained._[353]

LUETZKE _v._ ROBERTS

SUPREME COURT, WISCONSIN, DECEMBER 4, 1906.

_Reported in 130 Wisconsin Reports, 97, 106._

[Plaintiffs, by fraudulent representations of defendants, were induced

to execute promissory notes to defendants. Upon a proceeding to cancel

and annul the notes, it appeared that the notes had been transferred

to, and were then held by, _bona fide_ purchasers for value; and hence

could not be decreed to be cancelled. It was _held_, that the court

having jurisdiction of the defendants personally, had power to render

judgment for damages. The opinion then proceeds as follows:—][354]

SIEBECKER, J. It is urged that compensatory damages cannot be awarded

because they are not ascertainable under the facts found, and that

plaintiffs must wait until they have made actual payment of the notes.

This contention cannot be sustained. The court properly held that

these notes in the hands of _bona fide_ purchasers for value

established a liability according to their terms against these

plaintiffs, and that such liability was measured by the amount they

call for on their face with interest. We deem this the correct measure

of damages in the case, and within the principle of the case of Lyle

_v._ McCormick H. M. Co., 108 Wisc. 81, 84 N. W. 18.[355]

FOTTLER _v._ MOSELEY

SUPREME JUDICIAL COURT, MASSACHUSETTS, JUNE 18, 1901.

_Reported in 179 Massachusetts Reports, 295._

Tort for deceit, alleging that, relying upon the false and fraudulent

representations of the defendant, a broker, that certain sales of the

stock of the Franklin Park Land Improvement Company in the Boston

Stock Exchange from January 1, to March 27, 1893, were genuine

transactions, the plaintiff revoked an order for the sale of certain

shares of that stock held for him by the defendant, whereby the

plaintiff suffered loss. Writ dated February 17, 1896.[356]

At the trial in the Superior Court, Hopkins, J., at the close of the

evidence, directed the jury to return a verdict for the defendant. The

verdict was returned as directed; and the plaintiff alleged

exceptions. The findings warranted by the evidence are stated in the

opinion of the court.

* * * * *

HAMMOND, J. The parties to this action testified in flat contradiction

of each other on many of the material issues, but the evidence in

behalf of the plaintiff would warrant a finding by the jury, that on

March 25, 1893, the plaintiff, being then the owner of certain shares

of stock in the Franklin Park Land and Improvement Company, gave an

order to the defendant, a broker who was carrying the stock for him on

a margin, to sell it at a price not less than $28.50 per share; that

on March 27 the defendant, for the purpose of inducing the plaintiff

to withdraw the order and refrain from selling, represented to the

plaintiff that the sales which had been made of said stock in the

market had all been made in good faith and had been “actual true sales

throughout”; that these statements were made as of the personal

knowledge of the defendant, and that the plaintiff, believing them to

be true and relying upon them, was thereby induced to and did cancel

his oral order to the defendant to sell, and did refrain from selling;

and that the statements were not true, as to some of the sales in the

open market, of which the last was in December, 1892, and that the

defendant knew it at the time he made the representations. The

evidence would warrant a further finding that in continuous reliance

upon such representations the plaintiff kept his stock, when he

otherwise would have sold it, until the following July, when its

market value depreciated, and he thereby suffered loss. The defendant,

protesting that he made no such representation and that the jury would

not be justified in finding that he had, says that even upon such a

finding the plaintiff would have no case. He contends that the

representation was not material, that a false representation to be

material must not only induce action but must be adequate to induce it

by offering a motive sufficient to influence the conduct of a man of

average intelligence and prudence, and that in this case the

representation complained of, so far as it was false, was not adequate

to induce action because the fictitious sales were so few and distant

in time, and that therefore it was not material.

It may be assumed that the plaintiff desired to handle his stock in

the manner most advantageous to himself, and that the question whether

he would withdraw his order to sell was dependent, somewhat, at least,

upon his view of the present or future market value of the stock; and

upon that question a man of ordinary intelligence and prudence would

consider whether the reported sales in the market were “true sales

throughout” or were fictitious, and what was the extent of each. It is

true that a corporation may be of so long standing and of such a

nature, and the number of the shares so great and the daily sales of

the stock in the open market so many and heavy, that the knowledge

that a certain percentage of the sales reported are not actual

business transactions would have no effect upon the conduct of an

ordinary man. On the other hand a corporation may be so small and of

such a nature and have so slight a hold upon the public, and the

number of its shares may be so small and the buyers so few, that the

question whether certain reported sales are fictitious may have a very

important bearing upon the action of such a man. Upon the evidence in

this case, we cannot say, as matter of law, that the representation so

far as false was not material. This question is for the jury, who are

to consider it in the light of the nature of the corporation and its

standing in the market, and of other matters, including such as those

of which we have spoken.

It is further urged by the defendant that one of the fundamental

principles in a suit like this is that the representation should have

been acted upon by the complaining party and to his injury; that at

most the plaintiff simply refrained from action, and that “refraining

from action is not acting upon representation” within the meaning of

the rule; and further that it is not shown that the damages, if any,

suffered by the plaintiff are the direct result of the deceit.

Fraud is sometimes defined as the “deception practised in order to

induce another to part with property or to surrender some legal

right,” Cooley, Torts (2d ed.), 555, and sometimes as the deception

which leads “a man into damage by wilfully or recklessly causing him

to believe and act on a falsehood.” Pollock, Torts (Webb’s ed.), 348,

349. The second definition seems to be more comprehensive than the

first (see for instance Barley _v._ Walford, 9 Q. B. 197, and Butler

_v._ Watkins, 13 Wall. 456), and while the authorities establishing

what is a cause of action for deceit are to a large extent convertible

with those which define the right to rescind a contract for fraud or

misrepresentation and the two classes of cases are generally cited

without any express discrimination, still discrimination is sometimes

needful in the comparison of the two classes of cases. Pollock, Torts

(Webb’s ed.), 352.

It is true that it must appear that the fraud should have been acted

upon. It is a little difficult to see precisely what is meant by the

contention that “refraining from action is not acting upon

representation.” If by refraining from action it is meant simply that

the person defrauded makes no change but goes on as he has been going

and would go whether the fraud had been committed or not, then the

proposition is doubtless true. Such a person has been in no way

influenced, nor has his conduct been in any way changed by the fraud.

He has not acted in reliance upon it. If, however, it is meant to

include the case where the person defrauded does not do what he had

intended and started to do and would have done save for the fraud

practised upon him, the proposition cannot be true. So far as respects

the owner of property, his change of conduct between keeping the

property on the one hand and selling it on the other, is equally

great, whether the first intended action be to keep or to sell; and if

by reason of fraud practised upon him the plaintiff was induced to

recall his order to sell, and, being continuously under the influence

of this fraud, kept his stock when, save for such fraud, he would have

sold it, then with reference to this property he acted upon the

representation within the meaning of the rule as applicable to cases

like this. Barley _v._ Walford, 9 Q. B. 197; Butler _v._ Watkins, 13

Wall. 456.

The cases of Lamb _v._ Stone, 11 Pick. 527; Wellington _v._ Small, 3

Cush. 145; and Bradley _v._ Fuller, 118 Mass. 239, upon which the

defendant relies, are not authorities for the proposition that

“refraining from action is not acting upon representation.”

As to whether the loss suffered by the plaintiff is legally

attributable to the fraud, much can be said in favor of the defendant,

and a verdict in his favor on this as well as on other material points

might be the one most reasonably to be expected upon the evidence,

especially when it is considered that during the years 1892 and 1893

the plaintiff was a director in the company; but we cannot decide the

question as a matter of law. If the fraud operated on the plaintiff’s

mind continuously, up to the time of the depreciation of the stock in

June, 1893, so that he kept his stock when otherwise he would have

sold it, and such was the direct, natural and intended result, then we

think the causal relation between the fraud and the loss is

sufficiently made out. See Reeve _v._ Dennett, 145 Mass. 23, 29.

_Exceptions sustained._[357]

FOTTLER _v._ MOSELEY

SUPREME JUDICIAL COURT, MASSACHUSETTS, MAY 19, 1904.

_Reported in 185 Massachusetts Reports, 563._

Tort for deceit, alleging, that, relying upon the false and fraudulent

representations of the defendant, a broker, that certain sales of the

stock of the Franklin Park Land Improvement Company in the Boston

Stock Exchange from January 1 to March 27, 1893, were genuine

transactions, the plaintiff revoked an order for the sale of certain

shares of that stock held for him by the defendant, whereby the

plaintiff suffered loss. Writ dated February 17, 1896.

At the first trial of the case in the Superior Court a verdict was

ordered for the defendant, and the exceptions of the plaintiff were

sustained by this court in a decision reported in 179 Mass. 295. At

the new trial in the Superior Court before Sherman, J., it appeared

that one Moody Merrill, a director and officer of the Franklin Park

Land Improvement Company, absconded late in May or early in June of

1893, and that immediately upon his departure it was discovered that

he had embezzled nearly $100,000 of the funds of that company, the

result of which was that the market price of the stock immediately

fell and the stock could not be sold; that the plaintiff from the time

of the discovery of the defendant’s alleged fraud did his best to sell

his stock, but was unable to do so at more than $3 a share, at which

price he sold it after bringing this action.

The plaintiff among other requests asked the judge to rule, “That it

is of no consequence so far as the defendant’s liability is concerned

that an outside intervening cause has been the sole or contributing

cause of the decline in price to which the plaintiff’s loss is due.”

The judge refused this and other rulings requested by the plaintiff,

and instructed the jury, among other things, as follows:—

“If you find the fair market value of that stock was always above what

it was fictitiously quoted, or equal to it, and that it was so on the

25th of March, 1893, and remained so and would have remained so,

except for the embezzlement and absconding of Moody Merrill, then the

plaintiff is not entitled to recover.

“If you find that Moody Merrill’s going away did destroy the value of

the stock, practically destroy its value, then the plaintiff is not

entitled to recover anything.

“You may take all the evidence on this subject, the fact of what Moody

Merrill did, and what effect it had upon the market value of this

stock, and if that destroyed the market value, then, as I have told

you, the plaintiff is not entitled to recover anything. If his going

away and embezzlement did not affect the market value of this stock,

then the plaintiff may recover the full value of it.”

The judge submitted to the jury the following questions, which the

jury answered as stated below:—

“1. Did the defendant make a representation to the plaintiff on or

about March 25, 1893, that the quotations in the Boston Stock Exchange

of Franklin Park Land and Improvement Company stock were quotations of

actual and true sales?” The jury answered “Yes.”

“2. Were such quotations at or about the same sum as the quotations of

actual sales and the sales at public auction?” The jury answered

“Yes.”

“3. What was the fair market value of said stock on or about March 25,

1893?” The jury answered “$28.50 per share.”

“4. What was the fair market value of said stock on the last day of

May, or immediately prior to June, 1893, the day before Moody

Merrill’s absconding?” The jury answered “$27.75 per share.”

The jury returned a verdict for the defendant; and the plaintiff

alleged exceptions.

KNOWLTON, C. J. The parties and the court seem to have assumed that

the evidence was such as to warrant a verdict for the plaintiff under

the law stated at the previous decision in this case, reported in 179

Mass. 295, if the diminution in the selling price of the stock came

from common causes. The defendant’s contention is that the

embezzlement of an officer of a corporation, being an unlawful act of

a third person, should be treated as a new and independent cause of

the loss, not contemplated by the defendant, for which he is not

liable.

To create a liability, it never is necessary that a wrong-doer should

contemplate the particulars of the injury from his wrongful act, nor

the precise way in which the damages will be inflicted. He need not

even expect that damage will result at all, if he does that which is

unlawful and which involves a risk of injury. An embezzler is

criminally liable, notwithstanding that he expects to return the money

appropriated after having used it. If the defendant fraudulently

induced the plaintiff to refrain from selling his stock when he was

about to sell it, he did him a wrong, and a natural consequence of the

wrong for which he was liable was the possibility of loss from

diminution in the value of the stock, from any one of numerous causes.

Most, if not all, of the causes which would be likely to affect the

value of the stock, would be acts of third persons, or at least

conditions for which neither the plaintiff nor the defendant would be

primarily responsible. Acts of the officers, honest or dishonest, in

the management of the corporation, would be among the most common

causes of a change in value. The defendant, if he fraudulently induced

the plaintiff to keep his stock, took the risk of all such changes.

The loss to the plaintiff from the fraud is as direct and proximate,

if he was induced to hold his stock until an embezzlement was

discovered, as if the value had been diminished by a fire which

destroyed a large part of the property of the corporation, or by the

unexpected bankruptcy of a debtor who owed the corporation a large

sum. Neither the plaintiff nor the defendant would be presumed to have

contemplated all the particulars of the risk of diminution in value

for which the defendant made himself liable by his fraudulent

representations. It would be unjust to the plaintiff in such a case,

and impracticable, to enter upon an inquiry as to the cause of the

fall in value, if the plaintiff suffered from the fall wholly by

reason of the defendant’s fraud. The risk of a fall, from whatever

cause, is presumed to have been contemplated by the defendant when he

falsely and fraudulently induced the plaintiff to retain his stock.

We do not intimate that these circumstances, as well as others, may

not properly be considered in determining whether the plaintiff was

acting under the inducement of the fraudulent representations in

continuing to hold the stock up to the time of the discovery of the

embezzlement. The false representations may or may not have ceased to

operate as an inducement as to the disposition of his stock before

that time. Of course there can be no recovery, except for the direct

results of the fraud. But if the case is so far established that the

plaintiff, immediately upon the discovery of the embezzlement, was

entitled to recover on the ground that he was then holding the stock

in reliance upon the fraudulent statements, and if the great

diminution in value came while he was holding it, the fact that this

diminution was brought about by the embezzlement of an officer leaves

the plaintiff’s right no less than if it had come from an ordinary

loss.

_Exceptions sustained._[358]

MORSE _v._ HUTCHINS

SUPREME JUDICIAL COURT, MASSACHUSETTS, OCTOBER TERM, 1869.

_Reported in 102 Massachusetts Reports, 439._

Tort for deceit in making false and fraudulent representations to the

plaintiff touching the business and profits of a firm of which the

defendant was a member, and thereby inducing the plaintiff to buy the

interest of the defendant in the stock and good will of the firm. A

count in contract for the same cause of action was joined. Answer, a

general denial and a plea of a discharge in bankruptcy.

At the trial in the Superior Court, Brigham, C. J., ruled that the

discharge in bankruptcy was a defence to the second count, but not to

the first count; and the plaintiff relied on the first count only.

The judge instructed the jury that “the measure of damages would be

the difference between the actual value of the stock and good will

purchased at the time of the purchase and the value of the same had

the representation been true.”

The jury returned a verdict for the plaintiff, and the defendant

alleged exceptions.

GRAY, J. The objections that either the joinder of a count in contract

with the count in tort, or the certificate of discharge in bankruptcy,

would defeat the plaintiff’s right of action in tort for the

defendant’s false and fraudulent representations, were hardly relied

on at the argument, and are groundless. Gen. Sts. c. 129, § 2, cl. 5.

Crafts _v._ Belden, 99 Mass. 535. U. S. St. 1867, c. 176, § 33.

The rule of damages was rightly stated to the jury. It is now well

settled that, in actions for deceit or breach of warranty, the measure

of damages is the difference between the actual value of the property

at the time of the purchase and its value if the property had been

what it was represented or warranted to be. Stiles _v._ White, 11 Met.

356; Tuttle _v._ Brown, 4 Gray, 457; Whitemore _v._ South Boston Iron

Co., 2 Allen, 52; Fisk _v._ Hicks, 11 Foster, 535; Woodward _v._

Thacher, 21 Verm. 580; Muller _v._ Eno, 4 Kernan, 597; Sherwood _v._

Sutton, 5 Mason, 1; Loder _v._ Kekulé, 3 C. B. N. S. 128; Dingle _v._

Hare, 7 C. B. N. S. 145; Jones _v._ Just, Law Rep. 3 Q. B. 197. This

is the only rule which will give the purchaser adequate damages for

not having the thing which the defendant undertook to sell him. To

allow to the plaintiff (as the learned counsel for the defendant

argued in this case) only the difference between the real value of the

property and the price which he was induced to pay for it would be to

make any advantage lawfully secured to the innocent purchaser in the

original bargain inure to the benefit of the wrong-doer; and, in

proportion as the original price was low, would afford a protection to

the party who had broken, at the expense of the party who was ready to

abide by, the terms of the contract. The fact that the property sold

was of such a character as to make it difficult to ascertain with

exactness what its value would have been if it had conformed to the

contract affords no reason for exempting the defendant from any part

of the direct consequences of his fraud. And the value may be

estimated as easily in this action as in an action against him for an

entire refusal to perform his contract.

_Exceptions overruled._

SMITH _v._ BOLLES

SUPREME COURT OF THE UNITED STATES, NOVEMBER 11, 1889.

_Reported in 132 United States Reports, 125._

Error to the United States Circuit Court for the Northern District of

Ohio.

Action to recover damages for fraudulent representations in the sale

of shares of mining stock.

The amended petition alleged (_inter alia_) that plaintiff was induced

by defendant’s fraudulent representations to buy of defendant four

thousand shares of mining stock at $1.50 per share, amounting to

$6000; that “said stock and mining property was then, and still is,

wholly worthless; and that had the same been as represented by

defendant it would have been worth at least ten dollars per share; and

so plaintiff says that by reason of the premises he has sustained

damages to the amount of forty thousand dollars.”

Answer, denying plaintiff’s material allegations. Trial by jury. The

instructions given as to damages are stated in the opinion. Verdict

for plaintiff. Motion for new trial overruled. Judgment for plaintiff.

Defendant brought error.[359]

FULLER, C. J. The bill of exceptions states that the court charged the

jury “as to the law by which the jury were to be governed in the

assessment of damages under the issues made in the case,” that “the

measure of recovery is generally the difference between the contract

price and the reasonable market value, if the property had been as

represented to be, or in case the property or stock is entirely

worthless, then its value is what it would have been worth if it had

been as represented by the defendant, and as may be shown in the

evidence before you.”

In this there was error. The measure of damages was not the difference

between the contract price and the reasonable market value if the

property had been as represented to be, even if the stock had been

worth the price paid for it; nor if the stock were worthless, could

the plaintiff have recovered the value it would have had if the

property had been equal to the representations. What the plaintiff

might have gained is not the question, but what he had lost by being

deceived into the purchase. The suit was not brought for breach of

contract. The gist of the action was that the plaintiff was

fraudulently induced by the defendant to purchase stock upon the faith

of certain false and fraudulent representations, and so as to the

other persons on whose claims the plaintiff sought to recover. If the

jury believed from the evidence that the defendant was guilty of the

fraudulent and false representations alleged, and that the purchase of

stock had been made in reliance thereon, then the defendant was liable

to respond in such damages as naturally and proximately resulted from

the fraud. He was bound to make good the loss sustained, such as the

moneys the plaintiff had paid out and interest, and any other outlay

legitimately attributable to defendant’s fraudulent conduct; but this

liability did not include the expected fruits of an unrealized

speculation. The reasonable market value, if the property had been as

represented, afforded, therefore, no proper element of recovery.

Nor had the contract price the bearing given to it by the court. What

the plaintiff paid for the stock was properly put in evidence, not as

the basis of the application of the rule in relation to the difference

between the contract price and the market or actual value, but as

establishing the loss he had sustained in that particular. If the

stock had a value in fact, that would necessarily be applied in

reduction of the damages. “The damage to be recovered must always be

the _natural and proximate consequence_ of the act complained of,”

says Mr. Greenleaf, vol. ii, § 256; and “the test is,” adds Chief

Justice Beasley in Crater _v._ Binninger, 33 N. J. Law (4 Vroom), 513,

518, “that those results are proximate which the wrong-doer from his

position must have contemplated as the probable consequence of his

fraud or breach of contract.” In that case, the plaintiff had been

induced by the deceit of the defendant to enter into an oil

speculation, and the defendant was held responsible for the moneys put

into the scheme by the plaintiff in the ordinary course of the

business, which moneys were lost, less the value of the interest which

the plaintiff retained in the property held by those associated in the

speculation.

[Remainder of opinion omitted.]

_Judgment reversed. Cause remanded with a direction to grant a new

trial._[360]

SCHWABACKER _v._ RIDDLE

SUPREME COURT, ILLINOIS, JUNE 20, 1891.

_Reported in 99 Illinois Reports, 343._

Action for deceit, brought by Riddle against Schwabacker _et als._,

alleging that, in the purchase of property to be taken at the invoice

price, Riddle was cheated out of the sum of $2677.09 by fraudulent

representations made by defendants in regard to the amount the goods

purchased inventoried. On trial there was a verdict for plaintiff. Some

of the instructions are stated in the opinion. Judgment in favor of

Riddle. Schwabacker _et als._ appealed.[361]

CRAIG, C. J.... Instruction No. 2 reads as follows:—

“If a party misrepresents a fact within his own knowledge, to the injury

of a third party, an action will lie for damages, if any, for such

misrepresentation.”

This instruction is liable to several serious objections. In the first

place, a misrepresentation, to be actionable, must be a material one, or

no action will lie. In the second place, in an action for deceit no

recovery can be had unless the plaintiff himself exercised ordinary

prudence to guard against the deception and fraud practised upon him,

unless he has been thrown off his guard by the other party. These two

principles were entirely ignored by the instruction, and the jury, under

this direction of the court, was at liberty to find against the

defendants if they misrepresented any immaterial fact, however remote,

and the plaintiff exercised no precaution whatever to guard against

imposition. This is not a sound rule to be adopted, and as the

instruction was calculated to mislead the jury, it ought not to have

been given.

* * * * *

Instruction No. 13, given for the plaintiff, reads as follows:—

“It is not necessary, in this case, that the plaintiff should show any

prior conspiracy or combination between the defendants to defraud the

plaintiff; it is enough if the evidence shows that a sale was made to

Riddle, or Riddle and Fosbender, and that the agreed price was for the

value of the property, as shown by a certain invoice, and that notes

were to be taken for the amount, and that the defendants had notes drawn

for $2677.09 more than the value of the property as shown by such

invoice; and if the plaintiff, before signing the notes, asked if they

were for the amount of the invoice, and Fosbender said they were, in the

presence and hearing of the other defendants, and if Riddle relied upon

such statement in signing the notes, which was known to the defendants,

then such conduct and representations would amount to a fraud in the

other defendants, if they resulted in damages to the plaintiff.”

[After stating an objection to this instruction.]

Again, under this instruction a recovery may be had although the

plaintiff was deceived from a total want of reasonable care on his part.

At the time the notes were signed, as we understand the evidence of

plaintiff himself, the invoice, which showed the correct amount of the

goods, was present, and in the hands of one of the defendants. If that

be true, and it could have been obtained and inspected by the plaintiff,

and he failed and neglected to do so, but relied upon a statement made

by Fosbender at the time, it was for the jury to determine whether,

under the evidence, he had exercised proper diligence to guard against

deception, and if he did not, he could not recover. But this principle

was ignored in this and other instructions given for the plaintiff.

Indeed, this principle is not stated, but seems to be ignored in all of

the instructions given for the plaintiff. This last instruction, in our

judgment, was calculated to mislead the jury.

* * * * *

_Judgment reversed._[362]

FARGO GAS & COKE COMPANY _v._ FARGO GAS & ELECTRIC COMPANY

SUPREME COURT, NORTH DAKOTA, JULY 23, 1894.

_Reported in 4 North Dakota Reports, 219._

CORLISS, J.[363] The plaintiff has recovered judgment for the balance of

the purchase price of a gas and electric plant located in the City of

Fargo, N. D., sold by plaintiff to the defendant. A portion of the

consideration was paid, and, upon being sued for the unpaid portion of

the purchase price, defendant set up as a defence a partial failure of

consideration from the non-delivery of some of the property purchased,

and also a counterclaim for damages arising out of the alleged deceit of

the plaintiff in making the sale. The view we take of the case renders a

more particular reference to the defence of partial failure of

consideration unnecessary. We will confine ourselves to the single

question of fraud. The property purchased consisted of a gas plant, with

mains and all the other classes of property which go to make up such a

plant, and also an arc electric light plant, with poles, wires, and

other fixtures distributed over different parts of the City of Fargo.

These two plants were used by the plaintiff at the time of making the

sale thereof to defendant, to light the public streets of the City of

Fargo, its public buildings, stores, hotels, and dwelling houses, and

had been so used for some time prior to such sale. The alleged

fraudulent representations were of two classes,—one class relating to

the physical condition of the plant, embracing statements as to the

number of miles of wire, the number of poles, the gas mains, and as to

the condition of the plant in other respects; and the other class

related to the net earnings of the plant for the previous year, and the

prices charged customers for gas and electric light. It appears that

defendant relied chiefly upon the earning capacity of the plant in

making the purchase, and was induced to believe that its net annual

earnings would equal 10 per cent of the purchase price ($85,300),

because of the statements of the plaintiff’s officers that its net

earnings during the past year had been $8913. There was evidence tending

to show that this statement was false, and that it must have been known

to be false by plaintiff’s officers who negotiated the sale. Having in

this brief manner set forth the general character of the property sold,

and the general nature of the fraudulent representations upon which

defendant’s counterclaim for deceit was founded, we can now

intelligently turn to what we regard as a fatal error in the case.

In the course of his charge to the jury, the learned trial judge

instructed them as follows: “If the means were at the defendant’s hands

to discover the truth or untruth of the plaintiff’s statements with

regard to the amount and character of the property, defendant must be

presumed to have had a knowledge of the actual facts.” This instruction

must be considered in the light of the refusal of the court to charge

the jury as follows, at the request of defendant’s counsel: “If you find

that, during the negotiations, statements were made by the plaintiff as

to the earnings of the plant, the defendant had a right to rely upon

these statements; and if they were so relied on, and were false, and the

defendant suffered injury thereby, the defendant would be entitled to

recover the damages which it suffered in consequence thereof.” It is

apparent from this refusal to charge, and from the charge as cited

given, that the court told the jury that, as a matter of law, defendant

did not have the right implicitly to rely upon the representations of

the plaintiff touching the character of the plant, but must make

inquiries concerning them, and must make investigation as to their truth

or falsity. It is true that the word “investigate” is not used; but,

when we consider the nature of the property and the character of the

representations made, it is obvious that something more than a mere

inspection of an object present before a purchaser was necessary in

order to enable the purchaser in this case to “discover” the truth or

falsity of plaintiff’s statements. Such an instruction to a jury might

be appropriate in an action in which fraud in the sale of a horse was

set up, the seller having represented the horse to be perfectly sound,

and it appearing that the horse stood before the purchaser at the time

the representation was made, and that the only defect consisted in the

absence of a leg, easily discernible by the ordinary use of eyesight.

But in the case at bar the means of discovering the truth or untruth of

these false statements were not at hand in the sense that they must have

been employed before the seller could be held responsible for his

fraudulent representations; and, when this language was used, the jury

must have drawn the inference from the fact that this plant was in the

same city, and could be investigated with respect to its condition and

its earnings, and the prices charged customers for gas and electric

light, and with reference to the other features embraced in the

statements made by plaintiff on the sale, that therefore the means were

at hand, within the rule laid down by the court requiring the purchaser

to discover at its peril the truth or falsity of the statements made.

Such a rule of law would be unjust and intolerable. When parties deal at

arm’s length, the doctrine of _caveat emptor_ applies; but the moment

the vendor makes a false statement of fact, and its falsity is not

palpable to the purchaser, he has an undoubted right implicitly to rely

upon it. That would, indeed, be a strange rule of law which, when the

seller had successfully entrapped his victim by false statements, and

was called to account in a court of justice for his deceit, would permit

him to escape by urging the folly of his dupe for not suspecting that

he, the seller, was a knave. In the absence of such a suspicion, it is

entirely reasonable for one to put faith in the deliberate

representations of another. The jury must have understood that the means

were at hand to discover the claim, because the defendant might have

measured the wire, counted the poles, examined the gas mains,

ascertained how much customers were paying for gas and electric light,

and might have hired an expert to examine into the earnings and expenses

of the plaintiff in running the plant, with a view to discovering

whether a business man had told the truth. It should not have been left

to the jury to determine whether the means were at hand to discover the

falsity of the statements made, in view of the character of such

statements and the nature of the property sold. The defendant, as a

matter of law, had a right to rely implicitly upon the statements made

by plaintiff touching the character of this plant. So long as defendant

did not actually know the representations to be false, it was under no

obligation to investigate to determine their truth or falsity. In Mead

_v._ Bunn, 32 N. Y. 280, the court say: “Every contracting party has an

absolute right to rely on the express statements of an existing fact,

the truth of which is known to the opposite party and unknown to him, as

a basis of mutual engagement, and he is under no obligation to

investigate and verify statements, to the truth of which the other party

to the contract, with full means of knowledge, has deliberately pledged

his faith.” In Redding _v._ Wright, (Minn.) 51 N. W. 1056 (a case very

much in point), the court say: “If the representations were fraudulently

made with the intent to induce the plaintiff to rely upon the fact being

as represented, and to act upon the belief thus induced, the wrong-doer

who succeeds in such a purpose is not to be shielded from responsibility

by the plea that the defrauded party would have discovered the falsity

of the representation if he had pursued such means of information as

were available to him.” While the rule has been in some cases stated in

terms more favorable to plaintiff, yet no decision can be found which

establishes a doctrine under which defendant would be bound, under the

circumstances of this case, to make any investigation or inquiry

touching the truth or falsity of the statements made in connection with

the sale. There are many well considered cases which sustain our view

that defendant had a right implicitly to rely upon the representations

made by plaintiff with respect to the character of the property to be

purchased by defendant. In addition to the cases already cited, we refer

to Maxfield _v._ Schwartz, 45 Minn. 150, 47 N. W. 448; Gardner _v._

Trenary, 65 Iowa, 646, 22 N. W. 912; Schumaker _v._ Mather, 133 N. Y.

590, 30 N. E. 755; McClellan _v._ Scott, 24 Wis. 81; Caldwell _v._

Henry, 76 Mo. 254; Oswald _v._ McGehee, 28 Miss. 340; Cottrill _v._

Krum, 100 Mo. 397, 13 S. W. 753; Campbell _v._ Frankern, 65 Ind. 591;

Kerr, Fraud & M. 77, 80, 81; Erickson _v._ Fisher, (Minn.) 53 N. W. 638;

Alfred Shrimpton & Sons _v._ Philbrik, (Minn.) 55 N. W. 551; Barndt _v._

Frederick, (Wis.) 47 N. W. 6; Bigelow, Fraud, 522, 528. We are aware

that cases can be found which exact from the buyer more care in

ascertaining the truth or falsity of representations than the decisions

just cited. These cases appear to us to have been rightfully decided, in

view of the facts. In determining what the courts in such cases intended

to hold, the language of each opinion must be read, in the light of the

facts of the particular case. The unmistakable drift is towards the just

doctrine that the wrong-doer cannot shield himself from liability by

asking the law to condemn the credulity of his victim. The falsity of

the statement may be apparent because the thing misrepresented is before

the buyer, and the most casual look will suffice to discover the

falsehood, no artifice being used to divert his attention; or the

statement may carry its own refutation upon its face,—may be so absurd

or monstrous that it is palpably false, as a statement by a person

carrying on a business known to the purchaser to be very small that the

receipts of the business are a million dollars a year. In these and

other similar cases the law will not allow a person to assert that he

was deceived. But the general rule is, and, upon principle, must be,

that the question is one of reliance by the buyer upon the false

statement of the seller. Whether it was wise for him to rely upon it,

whether he was prudent in so doing, whether he is not chargeable with

negligence in a certain sense in not investigating,—these inquiries are,

in general, immaterial, provided the purchaser has in fact been

deceived. The circumstances under which fraud is accomplished are so

varied, the nature of the property and the character of the

misrepresentations are so widely different, in different cases, that it

is unwise to attempt to enunciate with precision a general rule by which

all cases shall be governed. It is better to decide the cases as they

arise, keeping in view the general principle that courts will not

readily listen to the plea that the defrauded party was too easily

deceived. For this error in the charge, the judgment will be reversed,

and a new trial granted.

[Omitting opinion on another point.]

_Judgment reversed. New trial ordered._[364]

STARKWEATHER _v._ BENJAMIN

SUPREME COURT, MICHIGAN, JUNE TERM, 1875.

_Reported in 32 Michigan Reports, 305._

Error to Macomb Circuit.

CAMPBELL, J. This action was brought to recover damages arising from

alleged misrepresentations made by Starkweather to Benjamin concerning

the quantity of land in a parcel purchased from Starkweather and

others, for whom he acted, and which was bought by the acre.

The defence rested mainly on the ground that the purchaser saw the

land, and was as able to judge of its size as Starkweather.

We do not think the doctrine that where both parties have equal means

of judging there is no fraud applies to such a case. The maxim is

equally valid, that one who dissuades another from inquiry and

deceives him to his prejudice is responsible. It cannot be generally

true that persons can judge of the contents of a parcel of land by the

eye. When any approach to accuracy is needed, there must be

measurement. When a positive assurance of the area of a parcel of land

is made by the vendor to the vendee with the design of making the

vendee believe it, that assurance is very material, and equivalent to

an assurance of measurement. In this case the testimony goes very far,

and shows that the assertions and representations, which the jury must

have found to be true, were of such a nature that if believed, as they

were, a re-survey must have been an idle ceremony. They were

calculated to deceive, and as the jury have found, they did deceive

Benjamin, and he had a clear right of action for the fraud.

[Omitting remainder of opinion.]

_Judgment affirmed._[365]

MABARDY _v._ McHUGH

SUPREME JUDICIAL COURT, MASSACHUSETTS, MAY 21, 1909.

_Reported in 202 Massachusetts Reports, 148._

Tort for deceit in the sale of land. Writ in the Superior Court for

the county of Middlesex dated January 18, 1906.

The case was tried before Stevens, J. The facts are stated in the

opinion. The jury found for the defendants; and the plaintiffs alleged

exceptions.

RUGG, J. This is an action of tort sounding in deceit. There was

evidence tending to show that the plaintiffs went upon a certain

irregularly shaped tract of land (for false representations inducing

the purchase of which this action was brought) with one of the

defendants, who pointed out the true boundaries and fraudulently

stated that the tract contained sixty-five acres, when in fact it

contained forty and three-fourths acres. Upon this aspect of the

evidence, the trial judge instructed the jury that “if the

plaintiffs ... were taken over the farm by the defendants ... or [and]

were shown the bounds so that the plaintiffs knew where the farm was

and what was comprised within the bounds, it would not be of any

consequence that representations may have been made by the defendant

in relation to the acreage.” The evidence being conflicting as to

whether the boundaries were shown, the jury were further instructed

that if the defendant, who talked with the plaintiffs, “knew that

there were not sixty-five or nearly sixty-five acres, or if he did not

know anything about it and stated it as a fact within his personal

knowledge, then it would be a false representation for which he would

be liable provided” the other elements essential to a recovery were

found to exist.

The correctness of the first of these instructions is challenged. It

is in exact accordance with the law as laid down in Gordon _v._

Parmelee, 2 Allen, 212, and Mooney _v._ Miller, 102 Mass. 217. The

facts in the case at bar are similar in all material respects to these

cases. An attempt is made to distinguish them on the ground that the

present plaintiffs were Syrians, ignorant of our language, and that

hence a trust relation existed between them and the defendant. But

whatever else may be said of this contention, it fails because they

were accompanied by two of their own countrymen, who were thoroughly

familiar with our language and acted as interpreters for them. In

effect, the contention of the plaintiffs amounts to a request to

overrule these two cases. They have been cited with approval in

Roberts _v._ French, 153 Mass. 60, and as supporting authorities,

without criticism, in other opinions. The court, however, has refused

to apply the rule of those decisions to other facts closely analogous.

See Lewis _v._ Jewell, 151 Mass. 345; Holst _v._ Stewart, 161 Mass.

516; Whiting _v._ Price, 172 Mass. 240; Kilgore _v._ Bruce, 166 Mass.

136. This court in recent years, by pointed language and by

conclusions reached, has indicated a plain disposition not to extend

legal immunity for the falsehood of vendors in the course of

negotiations for sales beyond the bounds already established....

This judicial attitude perhaps reflects an increasingly pervasive

moral sense in some of the common transactions of trade. While the

science of jurisprudence is not, and under present conditions cannot

be, co-extensive with the domain of morality, nor generally undertake

to differentiate between motives which mark acts as good or bad, yet

it is true, as was said by Mr. Justice Brett, in Robinson _v._

Mollett, L. R. 7 H. L. 802, 817, that “The courts have applied to the

mercantile business brought before them what have been called legal

principles, which have almost always been the fundamental ethical

rules of right and wrong.” This is only a concrete expression of the

broader generalization that law is the manifestation of the conscience

of the Commonwealth.

In many other jurisdictions the rule of Gordon _v._ Parmelee and

Mooney _v._ Miller has not been followed and false representations as

to area of land, even though true boundaries were pointed out, have

been held actionable. McGhee _v._ Bell, 170 Mo. 121, 135, 150. May

_v._ Loomis, 140 N. C. 350. Boddy _v._ Henry, 113 Iowa, 462, 465; S.

C. 126 Iowa, 31. Antle _v._ Sexton, 137 Ill. 410. Estes _v._ Odom, 91

Ga. 600, 609. Lovejoy _v._ Isbell, 73 Conn. 368, 375. Cawston _v._

Sturgis, 20 Ore. 331. Starkweather _v._ Benjamin, 32 Mich. 305. Paine

_v._ Upton, 87 N. Y. 327. Mitchell _v._ Zimmerman, 4 Texas, 75.

Walling _v._ Kinnard, 10 Texas, 508. Speed _v._ Hollingsworth, 54

Kans. 436. See also Fairchild _v._ McMahon, 139 N. Y. 290; Schumaker

_v._ Mather, 133 N. Y. 590.

Other cases apparently opposed to the Massachusetts rule, on

examination prove to go no further than to decide that

misrepresentations as to area, when there is no evidence that

boundaries were shown, constitute deceit. Griswold _v._ Gebbie, 126

Penn. St. 353. Cabot _v._ Christie, 42 Vt. 121. Coon _v._ Atwell, 46

N. H. 510. Ledbetter _v._ Davis, 121 Ind. 119. Perkins Manuf. Co. _v._

Williams, 98 Ga. 388. Sears _v._ Stinson, 3 Wash. 615. Hill _v._

Brower, 76 N. C. 124. Stearns _v._ Kennedy, 94 Minn. 439. This is the

substance of the latter part of the instruction given in the Superior

Court, and is the law of this Commonwealth.

The rule of Mooney _v._ Miller seemingly has been approved or followed

in Lynch _v._ Mercantile Trust Co., 18 Fed. Rep. 486; Crown _v._

Carriger, 66 Ala. 590; and Mires _v._ Summerville, 85 Mo. App. 183,

although the last case has been overruled in Judd _v._ Walker, 114 Mo.

App. 128, 135.

If the point were now presented for the first time, it is possible

that we might be convinced by the argument of the plaintiffs and the

great weight of persuasive authority in its support, especially in

view of Lewis _v._ Jewell, 151 Mass. 345. But there is something to be

said in support of the two earlier decisions now questioned. A

purchase and a sale of real estate is a transaction of importance and

cannot be treated as entered into lightly. People must use their own

faculties for their protection and information, and cannot assume that

the law will relieve them from the natural effects of their

heedlessness or take better care of their interests than they

themselves do. Thrift, foresight and self-reliance would be undermined

if it was the policy of the law to attempt to afford relief for mere

want of sagacity. It is an ancient and widely, if not universally,

accepted principle of the law of deceit that, where representations

are made respecting a subject as to which the complaining party has at

hand reasonably available means for ascertaining the truth and the

matter is open to inspection, if, without being fraudulently diverted

therefrom, he does not take advantage of this opportunity, he cannot

be heard to impeach the transaction on the ground of the falsehoods of

the other party. Salem India Rubber Co. _v._ Adams, 23 Pick. 256, 265.

Slaughter _v._ Gerson, 13 Wall. 379, 383. Long _v._ Warren, 68 N. Y.

426, 432. Baily _v._ Merrell, 3 Bulstr. 94. This rule in its general

statement applies to such a case as that before us. It is easy for one

disappointed in the fruits of a trade to imagine, and perhaps persuade

himself, that the cause of his loss is the deceit of the other party,

rather than his own want of judgment.

It is highly desirable that laws for conduct in ordinary affairs, in

themselves easy of comprehension and memory, when once established,

should remain fast. The doctrine of _stare decisis_ is as salutary as

it is well recognized.... While perhaps it is more important as to

far-reaching juridical principles that the court should be right, in

the light of higher civilization, later and more careful examination

of authorities, wider and more thorough discussion and more mature

reflection upon the policy of the law, than merely in harmony with

previous decisions (Barden _v._ Northern Pacific Railroad, 154 U. S.

288, 322), it nevertheless is vital that there be stability in the

courts in adhering to decisions deliberately made after ample

consideration. Parties should not be encouraged to seek re-examination

of determined principles and speculate on a fluctuation of the law

with every change in the expounders of it. As to many matters of

frequent occurrence, the establishment of some certain guide is of

more significance than the precise form of the rule. It is likely that

no positive rule of law can be laid down that will not at some time

impinge with great apparent severity upon a morally innocent person.

The law of gravitation acts indifferently upon the just and the

unjust. A renewed declaration of law that is already in force,

supported by sound reason and not plainly wrong, in the long run

probably works out substantial justice, although it may seem harsh in

its application to some particular case. These considerations are

regarded as so weighty by the House of Lords that it cannot overrule

any of its own decisions. London Tramways Co. _v._ London County

Council, [1898] A. C. 375.

The conclusion is that we do not overrule the decisions whose

soundness has been debated at the bar, although we do not extend their

scope, but confine them strictly to their precise point, namely, that

where the seller of real estate shows upon the face of the earth its

true boundaries to the purchaser and does not fraudulently dissuade

him from making full examination and measurement and the estate is not

so extensive or of such character as to be reasonably incapable of

inspection and estimate, and there is no relation of trust between the

parties, the purchaser has no remedy for a misrepresentation as to the

area alone....

_Exceptions overruled._[366]

EASTERN TRUST & BANKING COMPANY _v._ CUNNINGHAM

SUPREME COURT, MAINE, FEBRUARY 20, 1908.

_Reported in 103 Maine Reports, 455._

SAVAGE, J. But the defendant contends further, that, if the plaintiff

did not know, it ought to have known, and would have known but for its

own negligence. We think this defence cannot avail. There are cases

which hold that where one carelessly relies upon a pretence of

inherent absurdity and incredibility upon mere idle talk, or upon a

device so shadowy as not to be capable of imposing upon any one, he

must bear his misfortune, if injured. He must not shut his eyes to

what is palpably before him. But that doctrine, if sound, is not

applicable here. We think the well-settled rule to be applied here is

that if one intentionally misrepresents to another facts particularly

within his own knowledge, with an intent that the other shall act upon

them, and he does so act, he cannot afterwards excuse himself by

saying, “You were foolish to believe me.” It does not lie in his mouth

to say that the one trusting him was negligent. In this case the fact

whether or not there were funds in the Gardiner bank to meet the

checks was peculiarly within the knowledge of the defendant. The rule

is stated in Pollock on Torts, § 252, as follows: “It is now settled

law that one who chooses to make positive assertions without warrant

shall not excuse himself by saying that the other party need not have

relied upon them. He must show that his representation was not in fact

relied upon. In short, nothing will excuse a culpable

misrepresentation short of proof that it was not relied upon, either

because the other party knew the truth, or because he relied wholly on

his own investigations, or because the alleged fact did not influence

his action at all.” In Linington _v._ Strong, 107 Ill. 295, we find

this language: “The doctrine is well settled that as a rule a party

guilty of fraudulent conduct shall not be allowed to cry ‘negligence’

as against his own deliberate fraud.... While the law does require of

all parties the exercise of reasonable prudence in the business of

life, and does not permit one to rest indifferent in reliance upon the

interested representations of an adverse party, still, as before

suggested, there is a certain limitation to this rule; and, as between

the original parties to the transaction we consider that, when it

appears that one party has been guilty of an intentional and

deliberate fraud by which to his knowledge the other party has been

misled or influenced in his action, he cannot escape the legal

consequences of his fraudulent conduct by saying that the fraud might

have been discovered had the party whom he deceived exercised

reasonable diligence and care.” See Griffin _v._ Roanoke R. & Lumber

Co., 140 N. C. 514, 53 S. E. 307, 6 L. R. A. (N. S.) 463.[367]

S. PEARSON & SON, LIMITED, _v._ LORD MAYOR OF DUBLIN

IN THE HOUSE OF LORDS, MAY 30, 1907.

_Reported in [1907] Appeal Cases, 351._

The Dublin Corporation having by their agents furnished the appellants

with plans, drawings, and specifications, the appellants contracted to

execute certain sewage outfall works according to the plans, &c. In

the plans, &c., representations were made as to the existence and

position of a certain wall. In the contract (clauses 43, 46, 47, 48)

it was stipulated that the contractor should satisfy himself as to the

dimensions, levels and nature of all existing works and other things

connected with the contract works; that the corporation did not hold

itself responsible for the accuracy of the information as to the

sections or foundations of existing walls and works; and that no

charges for extra work or otherwise would be allowed in consequence of

incorrect information or inaccuracies in the drawings or

specifications. The appellants performed the contract, and brought an

action of deceit against the corporation, claiming damages for false

representations as to the position, dimensions and foundations of the

wall, whereby the appellants were compelled to execute more costly

works than would otherwise have been required. The plans, drawings and

specifications were prepared by engineers employed by the

corporation.[368]

[At the trial before PALLES, C. B., the plaintiffs offered evidence

tending to show that the aforesaid representations were not sincerely

believed by the engineers to be true.] PALLES, C. B., refused to leave

any question to the jury, and entered judgment for the respondents on

the ground that the contractors were bound by their contract to verify

for themselves all the information given in the plans, &c.

The King’s Bench Division (Wright, Boyd, and Gibson, JJ., Lord

O’Brien, C. J., dissenting) reversed the decision of Palles, C. B.,

and entered judgment for the appellants on the ground that there was a

question of fact for the jury upon the allegation of fraud.

The Court of Appeal (Sir Samuel Walker, L. C., Fitzgibbon and Holmes,

L.JJ.) reversed that decision, and restored the decision of Palles, C.

B.

Plaintiff appealed to the House of Lords.

The House of Lords (LORDS LOREBURN, HALSBURY, ASHBOURNE, MACNAGHTEN,

JAMES OF HEREFORD, ROBERTSON, ATKINSON, and COLLINS) reversed the

order of the Court of Appeal, and restored the judgment of the King’s

Bench Division. Portions of the opinions are as follows:—

LORD LOREBURN, L. C.... Now it seems clear that no one can escape

liability for his own fraudulent statements by inserting in a contract

a clause that the other party shall not rely upon them. I will not say

that a man himself innocent may not under any circumstances, however

peculiar, guard himself by apt and express clauses from liability for

the fraud of his own agents. It suffices to say that in my opinion the

clauses before us do not admit of such a construction. They

contemplate honesty on both sides and protect only against honest

mistakes. The principal and the agent are one, and it does not signify

which of them made the incriminated statement or which of them

possessed the guilty knowledge.

* * * * *

EARL OF HALSBURY.... The action is based on the allegation of fraud,

and no subtilty of language, no craft or machinery in the form of

contract, can estop a person who complains that he has been defrauded

from having that question of fact submitted to a jury....

LORD ASHBOURNE.... [As to clause 43.] Such a clause might in some

cases be part of a fraud, and might advance and disguise a fraud, and

I cannot think that on the facts and circumstances of this case it can

have such a wide and perilous application as was contended for. Such a

clause may be appropriate and fairly apply to errors, inaccuracies,

and mistakes, but not to cases like the present....

LORD JAMES OF HEREFORD.... Now the learned Chief Baron in respect of

this clause expressed the opinion that the contractor was not entitled

in point of law to say he acted upon the statement contained in the

plans. He was told to act upon his own judgment, and ought to have

done so.

If this dictum be read as general in its terms, and so applied, it may

be read as conferring considerable advantage upon the designers of

fraud. At any rate, by inserting such a clause those who framed it

would run a fair chance of the contractor saying, “I assume that those

with whom I deal are honest and honorable men. I scout the idea of

their being guilty of fraud. An inquiry testing the plan will be

expensive and difficult, and so I will not make it.” The protecting

clause might be inserted fraudulently, with the purpose and hope that,

notwithstanding its terms, no test would take place. When the fraud

succeeds, surely those who designed the fraudulent protection cannot

take advantage of it. Such a clause would be good protection against

any mistake or miscalculation, but fraud vitiates every contract and

every clause in it. As a general principle I incline to the view that

an express term that fraud shall not vitiate a contract would be bad

in law, but it is unnecessary in this case to determine whether

special circumstances may not create an exception to that rule.

* * * * *

LORD ATKINSON.... If, therefore, the _direction_ given to the jury is

to be upheld on the grounds upon which it was purported to be based,

it must, in my opinion, be because these several articles of the

contract, on their true construction, are to be held to embody a

contract by the plaintiffs that they in effect are not, under any

circumstances, to have a remedy by action for deceit for any fraud

which may be practised upon them by the defendants or by those acting

on their behalf in the nature of a false representation, that is a

contract to submit to a fraud.

As at present advised I am inclined to think, on the authority of

Tullis _v._ Jacson, [1892] 3 Ch. 441, and Brownlie _v._ Campbell,

(1880) 5 App. Cas. 925, 937, 956, that such a contract would be

illegal in point of law. And, with the most profound respect for the

Chief Baron, I do not think that the articles of the contract relied

upon can, on their true construction, be held to have had fraud,

whether conscious or unconscious, within their purview or

contemplation, or to apply at all to such a case of fraud as the

present is alleged to be. They were, I think, intended to apply, and

do apply, to inaccuracies, errors, and mistakes, or matters of that

sort, but not to fraud, whether of principal or agent, or of both

combined.[369]

* * * * *