Francis H. (Francis Hermann) Bohlen.

Cases on the law of torts (Volume 1) online

. (page 105 of 124)
Font size
QR-code for this ebook

would otherwise ha\:£_matle. SmitlTrj., Bradbury x^ Haines, 60 N. H. 123
(1880) ; Estell v. Myers, 54 Miss. 174 (1876) ; Stewart v. Stearns. 63 N. H. 99
(1884), statements that a stock of goods were "clean," "desirable," "of good
style and salable" held actionable if made to a purchaser who through inex-
perience could have learned little, if anything, by an inspection: Cornelius v.
MoUoy, 7 Barr. 293 (Pa. 1848), false statements of character or quality of an
article actionable "if it appear that the purchaser, not enjoying equal means
of knowledge, trusted to such representation," Bell, J., p. 297.



FAIRCHILD Z'. MC MAHON. 745

execution and delivery were had, or with aj^^ents acting for him or
in his interest. The defense is fraud practiced upon the defendant,
by means of which she was induced to make and deHver the mort-
gage and the accompanying bond. The facts to sustain this defense
are stated with considerable detail, the substance of which, in brief,
is as follows :

On the 9th of April, prior to the execution of the mortgage, the
defendant, through her husband acting for her, entered into an
'agreement with Cain to exchange real estate. Each owned a house
and lot incumbered by. mortgage, the equity of redemption in which
was to be conveyed to the other, and the agreement was actually
carried out by the execution and delivery of proper conveyances.
The mortgage in question was executed and delivered in pursu-
ance of this agreement. It is alleged in substance that one Yoran,
the plainjiff's son, was the principal actor in the transaction and the
real party to be benefited. That though' the record title to the real
estate to be conveyed to the defendant was in Cain, yet his title was
nominal, as his name was simply used by Yoran in the purchase
of the property and in the negotiations for its sale to the defendant
and in the conveyance. It is then charged in substance that Yoran,
Cain and their broker, and another broker employed by and acting
for the defendant's husband, her agent, conspired together to cheat
and defraud the defendant by false and fraudulent representations
concerning the value and condition of the house wdiich the defend-
ant by the agreement was to receive in exchange for her property
and which she subsequently conveyed, and that, in reliance upon the
truth of the statements, she, through her husband, entered into and
executed the agreement and made the exchange. It is further
averred that upon discovery of the fraud the defendant offered to
rescind the whole transaction. The courts below have sustained the
defense, and the charges of fraud and other facts alleged by the
defendant are found by the learned trial judge to be substantially
true. The testimony upon the issues of fact was very conflicting,
but after considering it with all the circumstances we are unable to
say that any of the findings, material to the defense, and challenged
by exception, are without support and, therefore, feel concluded by
them as to the facts.

There are one or two questions of law, however, that should
be noticed. One of the false representations made by Yoran and
his broker to the defendant's husband, as appeared from the findings,
which was relied upon, and which influenced her action in making
the exchange and giving the bond and mortgage in suit, and upon
which the finding of fraud is based, was that the house and lot
transferred to the defendant in the exchange, was worth $15,000.
That Cain had just purchased it at the price of $12,000, from the
executors of the deceased owners, who were compelled to sell at a
price below the real value, and that such was the consideration ex-
pressed in the deed to him from the executors, as would appear
from the record in the county clerk's office.

It is further found that the defendant's husband, before enter-
ing i.-to the transaction, did examine the deed in the clerk's office



746 FAIRCHILD V. MC MAHON.

under which Cain took the title, and that it appeared from the
same that the consideration was $12,000, and that the defendant
and her husband beheved the statement. That while it was true that
the consideration stated in the deed was $12,000, it was not true
that the real consideration paid was that sum, but, on the contrary,
the fact was that about twenty-four days before the transaction,
Yoran had purchased the property for $7,000, which was its true
value, and had taken the deed in the name of Cain, expressing a
fictitious consideration, for the purpose of deceiving investors, and J
that the defendant had procured the consideration to be falsely/
stated in the deed. This finding raises the question w-hether a false
statement, deliberately made, by a party about to sell property, to
the party about to purchase it, with respect to the price which he
had paid for it to a former owner, is a sufficient basis upoh which
to predicate a finding of fraud, when the statement is relied upon hyj
the party to whom made. ^

It has been held that a false statement by a vendor to a vendee
concerning the value of property about to be sold, will not sustain an
action for fraud, but the vendee in such cases must rely on his own
judgment. {Ellis v. Andrezvs, 56 N. Y. 83.)

It may be that the rule in such cases would be different if the
purchaser was prevented by any act or artifice of the seller from
exercising his judgment in ascertaining the value. ^

But the question here is not one arising out of a representation''
as to value. The representation was with respect to a fact which
might, in the ordinary course of business, influence the action and
control the judgment of the purchaser, namely, the price paid for
the property about to be sold by the vendor, within less than a
month prior to the transaction ; and so, w^e think, that a false state
ment with respect to the price paid under such circumstances, whicl
is intended to influence the purchaser, and does influence him, con,
stitutes a sufficient basis for a finding of fraud.

It was so held in Sanford v. Handy (23 Wend. 260), where a
new trial was granted to the plaintiff in an action of this character,
on the ground that the proof of such representations was improperly
excluded at the trial. Ch. J, Nelson, delivering the opinion of the
court (p. 269), said :

'T am also inclined to think that any misrepresentation as to



'In Way v. Ryther, 165 Mass. 226 (1896), it was held that though
the mere statement that goods sold for $300 were billed to the vendor at
$394, would not go beyond the limits of permissible "dealer's talk"; (see
Medbury v. M'aisoti, post), if the vendor in answer to the vendee's re-
quest to see the bill and understanding that the latter took him to as-
sert that the contents of the bill were in accordance with his statement of it,
falsely asserted that the bill was lost in order to prevent vendee from finding
out that this was not so, "The case would present a different aspect. The let-
ter under such circumstances, adhered to without correction, becomes a more
deliberate affirmation and gains in its power to deceive;" per Holmes, J., p.
229; and in Leonard v. Springer, 197 111. 532 (1902), the defendant, who, in
order to deceive purchasers of certificates of indebtedness secured by a dee<i-
of trust of land purchased by him, induced the vendor to grossly overstate in
the deed the consideration paid, was held liable in deceit.



FAIRCIIILD V. MC MAIION'. 747

the actual cost of the property is a material fact, and naturally cal-
culated to mislead the i)urchaser. . . . Misrepresentation as to
the cost of an article stands somewhat on the same footing-. It is a
material fact, which not only tends to enhance the value, but gives
to it a firmness and effect beyond the force of mere opinion.

"The vendor is not bound to speak on the subject, but if he
does, I think, he should speak the truth."

The same principle received the sanction of the court in Van
Epps V. Harrison (5 Hill 63), and is apparently recognized in
Smith V. Countryman (30 N. Y. 655), Hammond v. Pcnnock (61
id. 151), and Goldcnbcrgh v. Hoffman (69 id. 326).

There is another question in the case as to how far these state-
ments as to the cost of the property made by a broker employed
by Yoran can bind the plaintiff or Cain, her assignor. But it suffi-
ciently appears that Yoran used Cain's name in the transactions with
his consent, and that he also employed the broker to sell the property
or negotiate the agreement for an exchange. All persons who acted
for or in the name of Cain, or with his consent, in bringing about the
transaction must now be deemed to be his agents, and as he accepted
the fruits of their efforts in this regard and took the title to the bond
and mortgage, which was part of the result of their negotiations, and
transferred them to the plaintiff, all the methods employed by either
Yoran or his broker to procure the agreement for an exchange and
the mortgage in suit are imputable to the person in whose name they
acted^ and who voluntarily received the securities thus procured.
He could not, even though innocent, receive a mortgage thus pro-
cured, and at the same time disclaim responsibility for the fraud by
means of which the defendant was induced to deliver it. (Kriimui
v. Beach, g6 N. Y. 398.) The findings imply that the broker was
the general agent of Cain, and as such his statements bound his
principal, and those findings are sustained by the evidence.

The plaintiff took no" other or different title to the bond and
mortgage than Cain had. The record discloses no estoppel or other
principle of equity which can protect the plaintiff against any de-
fense which migh't have been urged if the securities had remained
in the hands of the original parties.

We have examined the other exceptions in the case, and as they
do not present any question requiring discussion or any error that
affects the judgment it should be affirmed, with costs.

All concur.

Judgment affirmed. -



'Accord: Grinnell v. Hill, 1 Cal. App. 492 (1905), false statements of
price paid by vendor for stock sold to plaintiff; Dorr v. Cory. 108 Iowa 725
(1899), false statement of price paid bv vendor for land sold by him; Stoney
Creek Woolen Co. v. Sviallcy. Ill Mich. 321 (1896), defendant in order to
enable one Davis to induce the plaintiff to subscribe to a corporation to be
formed to take over his land, which he had contracted to sell to Davis, gave
the latter a receipt falselv statins? the price at which it had been sold; llokan-
son v. Oatvian. 165 Mich. 512 (1911). scmhle: Kohl v. Taylor. 62 Wash. 678
(1911); false statements by vendor of price paid for corporate stock sold
by him.

In all these cases the vendor's fraud is held to vitiate the contract, in
actions to enforce the contract by the vendor, or in proceedings to rescind the



748 MATTAUCII r. WALSH BROS. & MILLER,

MATTAUCH z: WALSH BROS. & ]\IILLER.
Supreme Court of Iowa. 136 Iowa 225. 1907.

Appeal from District Court, Polk County, Hugh Brennan,
Judge.

Action for damages caused by deceit alleged to have been prac-
ticed on plaintifif resulted in a direct verdict for defendants. The
plaintiff appeals.

Allen & Lingenfelter, for appellant. Sullivan and Sullivan, for
appellees.

Ladd, J. The plaintiff exchanged a stock of millinery of the
estimated value of $2,000 to one Bannister for eighty acres of land
near Cooper at $60 per acre. Deceit with respect to the value and
character of the land is alleged, and the evidence such that this issue
should have been submitted to the jury. The plaintiff testified that
some time previous to the transaction she had said to Benkert that
she would sell the stock if she could get a good price ; that Benkert
replied that he would get a deal ; that later, when she had been pur-
chasing goods in Des Moines and was about to take the train for
Earlham, Benkert and Walsh met her at the depot, and the latter
informed her that they had been over to see her stock, and that he
had a fine deal for her ; that the land he proposed to exchange was
all tillable, with forty acres under cultivation, and had certain build-
ings on it ; that he had been over every foot of it, as he had a farm
nearby, and that he knew it was worth $60 per acre ; that she told
him she knew nothing about land and would like to wait until her
husband returned, to which Walsh replied : "It is a fine thing, and
the land is worth $60 per acre and do not, on any account, let it slip."



contract by the vendee. In Thompson v. Koewing, 79 N. J. L. 246 (1910), an
action of deceit was held to lie against the vendor by one induced to purchase
a mortgage by false statements of price paid for the mortgaged property, and
the same distinction is drawn as in the principal case as between mere state-
ments of the value of the property mortgaged and statements of the price paid
for it.

So false statements by the vendor that he has been offered a certain price
for his property are actionable in deceit or vitiate the contract induced there-
by : Seaman, v. Becar, 38 N. Y. S. 69 (1896) ; Ives v. Carter, 24 Conn. 393
(1856), the vendor held liable in deceit for falsely stating that a third party
had offered a certain price for the property sold and was willing to take the
property off the purchaser's hands at that price if the latter became dissatis-
fied with his bargain; Strickland v. Graybill, 97 Va. 602 (1899), vendor of
patent right falsely stated that he had refused an offer of a certain sum for
the right to sell his patent in a particular territory; Somers v. Richards, 46 Vt.
170 (1873), false statements of the price at which the defendant had sold the
patent right for certain states made with the intent to make the plaintiff pur-
chase the residue of such rights held actionable in deceit.

So false statements by a vendee that the vendor's competitors had offered
him similar goods at a certain price is a defense to an action on a contract
of sale induced thereby; Smith v. Smith, 166 Pa. 563 (1895) : and see Weaver
V. Cone, 174 Pa. St. 104 (1896), the vendor of minority stock recovered in
deceit from the purchaser's agent, who had falsely stated, as an indi'cement
to the plaintiff to sell his stock, that he had sold his own majority stock at the
price offered the plaintiff, and Kilgorc v. Bruce, 166 Mass. 136 (1896).



MATTALXII v. WALSH BROS. & MILLER. 749

At this time a mutual acquaintance came up, and, upon being in-
formed of the negotiations, cautioned Walsh not to take advantage
of the lady, when \\alsh assured him of the value of the land, and
that she was getting a line deal. Thereupon plaintiff decided to stay
over and examine the land the next day, and telephoned her sister-
in-law at Van Meter to accompany her. They went to the depot in
the morning, and while waiting for the train to go to Cooper in
came Benkert and Walsh, who invited them to another part of the
room to talk over the affair. Here it developed that she and Walsh
belonged to the same church, and they talked until it was found the
train had gone. Walsh then assured her that she could trust him ;
that the land was worth what he said ; that in looking at it she would
occasion an expense without benefit ; that he was an Irish Catholic
like herself, and would not cheat her ; that the deal would wait no
longer, and she had better take advantage of it. They then went
to defendants' otifice, and after some conversation with tlie owner
and Miller, who assured she could rely upon Walsh and another,
the deal was consummated. Plaintiff was corroborated in her ac-
count of the transaction in the morning by the testimony of her sis-
ter-in-law, and much of the testimony of both is contradicted by the
evidence adduced on the part of defendants.

As verdict was directed, however, we are concerned only in
ascertaining whether there was affirmative evidence tending to sup-
port the charge of deceit. It turned out that the Coon River runs
through the farm a distance of 65 or 70 rods, and also that a high-
way extended through it from north to south, that but 15 to 22
acres in patches were in cultivation ; that the river Ijank is high, and
a portion of the land hilly, some of it a hundred feet above the river.
The witnesses of plaintiff estimated the value of the land, at $25 to
$30, and those of the defendants from $40 to $45 per acre, except
one, who placed it from $40 to $60. So that the jury might have
found: (i) That the value of the land was asserted to be $60 per
acre as a fact, and not as of opinion, and the character of the land
was described; (2) that the land was worth at least $20 per acre
less, and was not of the character represented; (3) that plaintiff' in
exchanging relied upon the representations made, and was deceived
thereby to her damage. The only doubt is as to whether the evi-
dence was such that the jury might have found that the represen-
tations, when made, if at all, were known to be false and made with
intent to deceive. In view of what might be regarded as a scheme
to prevent plaintiff' from examining the land, the assurance of Walsh
that she could trust him, his testimony that he had never seen the
land, that he knew that a part of it was rough with the river through
it, and that it was worth from $40 to $50 per acre only, we think the
evidence was ample to carry these issues also to the jury. Counsel
have discussed somewhat the question as to whether a statement of
value may be regarded as an assertion of fact, or should be treate 1
as the expression merely. This must necessarily depend on the cir-
cumstances of each case, and usually upon the intention of the parly
making the statement. Here the evidence in behalf of plaintiff
clearlv indicated the intention of Walsh that his assertion of the



750 MEDBURV Z\ WATSON.

value of the land should be acted upon as true, and not merely as his
estimate, and, if so, and it was knowingly false and induced an ex-
change by plaintiff to her damage, it was actionable. Dorr v. Cory,
io8 Iowa 725, 78 N. W. 682; Hansen v. Kline, (Iowa) 113 N. W.
504. See Brozvn v. Holden, 120 Iowa 195, 94 N. W. 482; also
Brozvn v, Krouse, 132 111. 177, 2^, N. E. 1012, where the court held
that "if the vendor dissuades the vendee from examining the prop-
erty upon the assurance that it is useless expense, and that his state-
ments may be relied upon, the statements, if false, will be grounds
for setting aside the sale." The cause should have been submitted
to the jury.



MEDBURY V. WATSON.
Supreme Judicial Court of Massachusetts, 1843. 6 Metcalf Rep. 246 (1843)

Hubbard, J. Xo objection is made to the instructions given
to the jury, and no motion for a new trial has been made, on the
ground of its being a verdict against evidence ; but the defendant
moves in arrest of judgment, on the ground that no action can be
maintained upon the allegations in the writ. The allegations are in
substance these : that the plaintiffs, wishing to purchase a tannery
for the purpose of carrying on a joint business in the making and
vending of leather, inquired of the defendant, if he could inform
them where they could purchase such an establishment ; that the
defendant, intending to deceive and defraud them, and to induce
them to purchase a tannery in Worthington, belonging to one
Thomas D. Wasson, and to give a much greater sum for it than it
was worth, falsely asserted and affirmed to them, that he knew of
such a tannery as they wanted, belonging to Thomas D. Wasson,
who was ready to sell it, and that it could be purchased for $4,000,
being the same sum which Thomas D. paid one James Wasson for
it; and that he would aid the plaintiffs in making the purchase; at
the same time knowing that Thomas D. Wasson paid only $3,000
for it, and that it was not worth that sum at the time Thomas D.
Wasson purchased, nor at the time of his (the defendant's ) making
the false representation, and that he wrongfully and deceitfully en-
couraged them to make the purchase, and pay for it a much larger
price than it was worth, namely, $4,000; and that the plaintiffs,
confiding in his false assertions and affirmations, and believing them
to be true, and being ignorant of the value of the property, made the
purchase, etc. The evidence fully sustained all the allegations in
the writ ; but the question is, whether these facts, as thus alleged
and proved, are in themselves actionable. The action on the case
for deceit is one well known ; and, for a long series of years, has
been maintained in the English courts. It has also been sustained
by us as an efficient means for the punishment of frauds, and for
the protection of the weak and the ignorant against the designs and
artifices of the crafty.

But in actions on the case for deceit, founded upon false affirma-



MEDBURV Z'. WATSON. 751

tions, there has always existed the exception, that naked assertions,
though known to l)e false, are not the ground of action, as between
vendor and vendee ; and in re.i,^ard to affirmations and representations
respecting real estate, the maxim of caveat emptor has ever been
held to apply. When, therefore, a vendor of real estate affirms to
the vendee that his estate is worth so much, that he gave so much
for it, that he has been offered so much for it, or has refused such
a sum for it ; such assertions, though known by him to be false, and
though uttered with a view to deceive, are not actionable. They
are mere affirmations of the vendor, on which the vendee cannot
safely place confidence, and will not excuse his neglect in not ex-
amining for himself, and ascertaining what the facts are, and what
credit is to be given to the assertions.^ But even this is qualified

^Accord: MacKenzie v. Seeberger, 76 Fed. 108 (C. C. A. 1896) ; statements
made by the vendor of land of the price paid by him therefor; Banta v.
Palmer, 47 111. 99 (1868) ; Ripy v. Cronan, 131 Ky. 631 (1909) ; Holbrook v.
Connor, 60 Maine 578 (1872) ; but see dissenting opinion of Dixon, J. ; Bishop
V. Small, 63 Maine 12 (1874) ; Davis v. Reynolds, 107 Maine 61 (1910), state-
ments of what third party had paid for an undivided interest; Hemmer v.
Cooper, 8 Allen 334 (Mass. 1864) ; Boles v. Merrill, 173 Mass. 491 (1899) ;
Page v. Parker, 43 N. H. 363 (1861), semble; Beare v. Wright, 14 N. Dak. 26
(1905) ; in Horsey v. McAlecr. 35 Md. 439 (1871), a distinction is suggested
between the price paid for land and for shares in a mining claim.

So false statements by a vendor that he has been offered a certain sum for
the property in question are not actionable in the absence of fiduciary relation
between the parties, proof that they do not stand on equal terms, or, that some
artifice was practiced to prevent the vendee from securing information which
he might otherwise obtain; Boles v. Merrill, 173 ]\Iass. 491 (1899) ; Noetlinff
V. Wright, 72 III. 390 (1874) ; Mooney v. Miller, 102 Mass. 217 (1870), semble,
where the vendor has falsely asserted that he has been offered a certain figure
for his property and would take it unless plaintiff bought it at once.

Even in these jurisdictions, however, recovery is allowed if a fiduciary re-
lation exists between the parties; Banta v. Palmer, A7 111. 99 (1868) ; Beare v.
Wright, 14 N. Dak. 26 (1905); Dillman v. Nadlchoffer, 119 111. 567 (1886);
misrepresentations by one negotiating for the purchase of land for another as
to the price asked for it, entitled the purchaser to recovery in an action of
deceit; Hughes v. Lockington, 221 111. 571 (1906) ; Green v. Bryant, 2 Ga. 66
(1847) ; so one buying property on joint account for himself and the plaintiff
is liable for misstatements of the price he has paid for the propertv; Hauk v.
Broivnell, 120 111. 161 (1887) ; Yeoman v. Laslcy, 40 Ohio St. 190 (1883).

In Beare v. Wright, 14 N. Dak. 26, Engerud, J., says: "The term 'fidu-
ciary relation' is not used in its technical sense. We apply it to any situation
where trust or confidence are imposed by one party in another, under such
circumstances as to impose on the person trusted the obligation to act in good
faith." So it is held that representation of the actual cost to the defendant of
property which he has turned over to a corporation to be organized to pur-
chase it, will sustain an action of deceit by one buying stock in such corpora-
tion on the faith thereof; Teachout v. J'anHoescn, 76 Iowa 113 (1888) ; but
see contra, Holbrook v. Connor, 60i ]\Iaine 578; Tuck v. Doivning, 76 III. 71
(1875) ; so the statement by the agent of a company, if made to the subscriber
for stock, that its land cost a certain sum, is, if false, a ground for rescinding
the contract for subscription; Zang v. Adams, 23 Colo. 408 (1897) ; Alabama