Francis H. (Francis Hermann) Bohlen.

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also that the road should be constructed and equipped within one
year; also that the company would pay large dividends upon its
capital stock ; that where farmers and others became subscribers for
stock, and gave their mortgages for the same on long time, drawing
eight per cent, interest, that the company, from its dividends, would
pay the interest on such notes, and that the balance of the dividends,
after paying the interest, would be sufficient to pay the principal of
said notes when the same should become payable ; and the defendant
testifies that it was represented to his wife that it would be an ever-
lasting benefit to her to sign the mortgage ; that the railroad would



^Even a prophecy as to future events, if made by one having peculiar
knowledge of fact making its fulfilment impossible, is actionable, French v.
Ryan, 104 Mich. 625 (18^5); statements of probable earnings so made held
actionable; Murray v. Tolman. 162 111. 417 (18^6) : Hedin v. }fiHncapo!{s Med-
ical Institute. 62 Minn. 146 (18<^5). statements that an obviously incurable dis-
ease could be cured made to induce plaintiff to undergo an expensive treat-
ment, held actionable.



V



6/8 SAWYER V. PRICKETT.

probably make thirty per cent., and that it would give her and her
family six hundred dollars a year always.

It is scarcely credible that Prickett should have believed that
the persons making representations like these, intended to bind them-
selves to their fulfilment. That Prickett may have believed the
prophecies, is possible ; that he may have understood the makers to
believe them is possible, as it is possible the makers did believe them.
But that Prickett believed the makers to have undertaken for the
accomplishment of the results promised, is not to be believed. It is
contradicted by all the facts of the case. A man of common intelli-
gence, or of ordinary prudence and caution could not have so be-
lieved.

He did not ask that they should enter into such engagements.
He did not stipulate that his obligation to pay his note and mortgage
should depend upon the realization of the rich promises made to him.
On the contrary he made his subscription, gave his note and mort-
gage to secure its payment, and relied upon the success of the enter-
prise to indemnify and to enrich him. If there were dividends to
pay the interest, he would not be required to pay it. If there were
dividends applicable to the payment of the principal, the principal
would also be discharged. If there were no dividends, or dividends
to pay a portion only of his obligation, he must have known and
understood that he had pledged his farm to the payment of the resi-
due. If his present theory is correct, instead of giving security to
them, Prickett should have required a bond and mortgage from the
company, as the actual responsibility for results would rest on the
company alone. We are satisfied that such representations, if made,
were not relied upon by Prickett ; that they did not form the induce-
ment and consideration of his subscription.

It is alleged that the representation was made that the road
should be constructed and equipped, and in full operation, within
one year from the date of the giving of the note and mortgage.
Such a promise by parties having the means of knowledge of its
falsity, from their position as managers and directors of a railroad,
might in law stand upon a different basis. We do not examine this
point, as there is no evidence of such statement by any one profess-
ing to have knowledge, or that there was knowledge of its falsity,
if made. Prickett testifies that Conover stated that the rolling stock
\vould be on in eighteen months. His allegation in his answer and
his evidence do not agree. It is not proved that Conover was author- j
ized to make the statement, or that he did not believe it to be true.

■ It is difficult to see how an action or a defense can be based
^^\"^r^\ pr'^'-^^gg^'-]^ -rt^prfx ^tations of the character we have consid-
ered, and we are of the opinion that they were the expressions of
hopes, expectations, and beliefs, and that neither party understood,
or had the right to understand, that they were to be received as state-
ments of facts which any one was botmd to make good, or upon
which the validity of the subscription should depencL^N

■Pedrick v. Porter. 5 Allen 324 (Mass. 1862), statements as to probable
profits; Taylor v. Commercial Bank, 174 X. Y. 181 (1903), p. 184; defendar.L



EDGINGTON' V. FITZ.M AURICE. 679

EDGINGTON v. FITZMAURICE. ^ —

1882. Law Reports, 29 Chancery Division, 459.

f

This action was brought by Edgington against Fitzmaurice et
als., directors ; Hunt the secretary and Hanley the manager of the
Army aiid Navy Provision Market (Limited), asking for the repay-
ment by them of £1,500, advanced by the plaintiff on the debentures
of the Company on the grounds that he was induced to advance the
money by the fraudulent misrepresentations of the defendants. The
plaintiff was a shareholder in the Company and received a pros-
pectus or circular issued by the order of the Board of Directors in-
viting subscriptions for debenture bonds, which contained the state-
ment that the Society purchased a valuable property known as
"Newman's Yard," and had expended on the property £20,679, ^"^
in fittings £2,943. The objects for which the issu^ of debentures was
made were stated to be :

(i) To ^nable the society to complete the present alterations
and additions to the buildings and to purchase their own horses and
vans, whereby a large saving will be effected in the cost of transport.

(2) To further develop the arrangements at present existing
for the direct supply of cheap fish from the coast, which are still
in their infancy.

The prospectus also made certain statements iit respect to a
mortgage of £21,500 but was silent as to a second mortgage of
£5,000.

The plaintiff took the debenture bonds to the amount of £1,500
and testified that he understood the prospectus as holding that the
debentures would be a charge upon the property, and that he would
not have taken them unless he had understood they were such a
charge. He also said that he relied on the fact that the Company
wanted the money for the objects stated in the prospectus.^ At
the hearing before Denman, J., plaintiff oft'ered evidence tending
to show that the Company was in difficulties and that the real



alleged to have induced plaintiff to sell goods to a third person by statements
that the United States government would pay such person a certain sum
claimed to be due under a contract with it; McComb v. C. R. Brewer Lumber
Co., 184 Mass. 276 (1903).

Mere statements of intention though not carried out, are not fraudulent,
Richter v. Irzviu, 28 Ind. 26 (1867) : nor do thev work an estoppel, Jordan v. »
Money. 5 H. L. C. 185 (1854), pp. 214-215.

See as to such statements as foundation for criminal charge of obtaining
goods under false pretenses, Ranttev v. Peof^le, 22 N. Y. 413 (1860) ; Glackan
v. Cflnnnanwealth. 3 Mete. 232 (Kv. 1860) ; State v. Magee, 11 Ind. 154
(1858 V

'That the plaintiff may testify to the effect of the defendant's statements
upon his mind and conduct is expresslv decided in Pease v. Brown, 104 Mass.
291 (1870) ; Weaver v. Cone, 174 Pa. 104 (1896.).



680 EDGIXGTON V. FITZMAURICE.

object of the Directors in issuing the debentures was to pay off
pressing Habihties, inchiding a second mortgage of £5,000 not men-
tioned in the prospectus.

Sir F. Herschell, S. G., Rigby, O. C, and WilHs Bund, for
plaintiff. •

Davey,«Q. C, W. W. Karslake, O. C, and J. Kaye, for Fitz-
niaurice.

There was no misrepresentation of any fact, and the Directors
merely stated their intention as to the money, which of course they
might alter. There is every difference between the two : Maddison ^
V. Alderson, 8 App. Cases 467. Unless it amounts to a contract, a
mere statement that you will do something is of no effect : Jordan
V. Money, 5 H. L. C. 185, and if it was a contract then it was with
the Company, and the Directors cannot be sued: Ferguson v. Wil-
son, L. R. 2 Chan. yy.

Crossley, O. C, J. Cutler, S. Hall, A. Young, S. Brice, and F.
A. Lewin for other defendants.

Sir F. Herscll^U, in reply. An allegation of intention may be
fraudulent : Ex parte Whittaker, L. R. 10 Chan. 446.

Denman, J., gave judgment for the plaintifiP against Fitz-
maurice, et als.' Directors of the Company, but dismissed the action
against Hunt and Hanley, secretary and manager. He found that
the statements in regard to the mortgage of £21,500 were false and
fraudulent, and that the plaintiff was thereby materially induced
to purchase t]je debentures. He also found that the defendants did
not intend to apply any substantial part of the svmi raised by the sale
of the debentures to the alteration of their property and the im-
provement of their facilities but intended to apply it to the liquida-
tion of their pressing liabilities.

From this judgment, the defendants, Fitzmaurice, et als. and
the other Directors of the Company appealed.

Davey, Q. C, Crossley, Q. C, and A. Young for the defendants.

Sir F. Herschell, S. G., Rigby, Q. C, and Willis Bund for the
plaintiff. ^

It is contended that the objects for which the money was re-
quired are immaterial. This is a fallacy. Whether the plaintiff ex-
pected to have the charge or not, it made a great difference whether
the Company was in a position to expend the money raised in im-
proving its premises and developing its business, or would have to
spend the greatest part in paying off pressing liabilities. In fact as
the Directors well knew, the Company was in financial difficulties
and the money was needed to relieve them from pressing liabilities.

Cotton, L. J., after holding that there was nothing in the pros-
pectus justifying the plaintiff in believing that the debentures were
a charge upon the property discusses the statement as to the mort-
gage for £21,500 and the omission to state the existence of the other
mortgage of £5,000. "As regards the first mortgage the defendants
say that they had reasonable grounds for making the statement
which they made, and as to the second mortgage they say that they
did not mean to imply that there was no other mortgage affecting the



EDGINCroX V. riTZMAL'RICE. 68l

company's property. But it is not necessary to give any decision
respecting these statements because, giving credit to the defendants
for having made them fairly, there are other statements which fol-
low, which, in my opinion, cannot be justified. 1 allude to state-
ments respecting the objects for which the loan was etfected: — (His
Lordship read the passage from the prospectus in which the objects
of the issue of the debentures were stated, and proceeded: — ; It
was argued that this was only the statement of an intention, and that
the mere fact that an intention was not carried into effect could not
make the defendants liable to the plaintiff. I agree that it was a
statement of inlrn'^^j I'Mt- it if^_ nevertheless a statement of fact,
"a mTif i t couj^iiot_l) ^f airly said tliat tlie obj ects ot the issue of the
debentures~were those which were stated in the prospecttlS' the de^
fcndants were.stating a fact which was not true; and if they knew
that it was not true, or made it recklessly, not caring whether it
was true or not, they would be liable. Did the defendants know or
believe that the company was in a flourishing condition? I think
they must have thought that it would turn out w^ell and that the
loan could be paid back, for they had shewn their confidence in the
company by advancing money of their own. But the question is
whether they did not make a statement of a fnrt wliirh yag n ^f mr -
rect, and w'lTTch~Th€T~"kfbew - te-4^e-rn3t~"coTT'ecf^w-hen they stated the
obJecfszfDr w^tridi^j^iplnan^^^ do ncil s'dj that it \Vas-4aec-

essary to she\v~that tlicy InteiicTed that all the money raised should
be applied in carrying out those particular 'objects, but certainly they
ought to shew that it was to be spent in improving the property and
business of the company. What is the fact? The financial state of
the company was openly discussed at the board meetings, at which
the defendants were all present, and it is cl^ar that tliey were in
great financial difficulties at the time. Although I should not, as I
have said, have held the defendants liable merely for not referring '
to the second mortgage in the prospectus, yet the existence of that
mortgage was strong evidence of their financial difficulties ; and, con-
sidering all the other evidence, and the admissions of the defendants
in tlitir cross-examination, I cannot doubt that the real object of
the issue of the debentures was to meet the pressing liabilities of the
company and not to improve the property or develop the business of
the company. I cannot but come to the conclusion that however
hopeful the directors may have been of the ultimate success of the
company, this statement was such as ought not to have been made. .
It was said, How could those who advanced the money have relied
on this statement as material ? I think it was material. A man who
lends money reasonably wishes to know for w-hat purpose it is bor-
rowed, and he is more willing to advance it if he knows it is not
wanted to pay off liabilities already incurred.

A part of the opinion of Cotton, L. ]., and the concurring*-
opinion of Fry, L. J., is omitted.

BowEN, J. (After discussing two statements in regard to the
mortgages and expressing his opinion that it does not appear clear
to him that these statements were fraudulently made.) "But when



682 EDGINGTON V. FITZMAURICE.

we come to the third alleged misstatement I feel that the plaintiff's
case is made out. I mean the statement of the objects for which the
money was to be raised. These were stated to be to complete the
alterations and additions to the buildings, to purchase horses and
vans, and to develop the supply of fish. A mere suggestion of
possible purposes to which a portion of the money might be applied
would not have formed a basis for an action of deceit. There must
be a misstatement of an existing fact : but the state of a man's rnind
is as much a fact as the state of his digestion. It is true that it is
very difficult to prove what the state of a man's mind at a particular
time is, but if it can be ascertained it is as much a fact as anything
else. A misrepresentation as to the state of a man's mind is, there-
fore, a misstatement of fact.- Having applied as careful considera-
tion to the evidence as I could, I have reluctantly come to the con-
clusion that the true objects of the defendants in raising the
money were not' those stated in the circular. I will not go through
the evidence, but looking only to the cross-examination of the de-
fendants, I am satisfied that the objects for which the loan was
wanted were misstated by the defendants, I will not say knowingly,
but so recklessly as to be fraudulent in the eye of the law.

Then the question remains — Did this misstatement contribute to
induce the plaintiff to advance his money? Mr. Davey's argument
has not convinced me that they did not. He contended that the
plaintiff admits that he would not have taken the debentures unless
he had thought they woufd give him a charge on the property, and
therefore he was induced to take them by his own mistake, and the
misstatement in the circular was not material. But such misstate-
ment was material if it was actively present to his mind when
he decided to advance'his money. The real question is, what was the



■Accord: Jones v. Crazvford, 107 Ga. 318 (1899); statement made to
married woman in order to induce her to sign promissory note, that the de-
fendant, the payee, "did not intend to use it, so as to make her liable," held
actionable, pave'e having transferred note to innocent purchaser for value;
Bowe V. Gage, 127 Wis. 245 (1906) ; statement by an owner of land, t^at he
had decided to withdraw it from sale, whereby he induced an agent who
had its sale in charge, to accept a small sum for his past services and forego
his right to commissions, held actionable; Sweet v. Kimball, 166 Mass. 332
»(1896) ; defendant, who induced plaintiff, his insolvent debtor, to come from
jProvidence to Boston by promising to agree to a compromise and to induce
/other creditors to do the same, and instead, caused his arrest, held liable in
/an action of deceit for the amount paid by plaintiff to secure his release;
Lynch v. Hall, 41 Conn. 238 (1874), defendant, who had induced the plain-
tiff to pay money to him by the false statement that he would pay it over to
a third party, held liable in deceit; Adams v. Anderson, 4 H. & J. (Md.) 558
(1819); Price v. Read, 2 H. & G. 291. (Ky. 1846); and Oldham and Kerr
Iv. Bentley, 6 B. Mon. (Ky.) 428 (1846) ; all cases where the plaintiff was m-
jduced to sell his slaves on the defendant's assurance that they would not be
Lresold outside the state. And see Wolter's Exrs. v. Fidelity Trust Company,
7Z N. J. L. 57 (1905), and contra, Dickinson v. Atkins, 100 111. App. 401
(1902), statements inducing plaintiff to sign a note by representations that the
proceeds would be used to pay off overdue taxes and interest on his property,
held not actionable; President of Hartsville University v. Hamilton, 34 Ind.
506 (1870) ; and see the curious case of Bennett ^MrT^t.lri>^ ^\ |nd. 2.31
/X(1889).



GALLAGKR AND MASOX Z'. BRUXEL. 683

state of the plaintiff's mind, and if his mind was disturbed by the
misstatements of tlie defendants, and sueh disturbance was in part
the cause of what he did, llie mere fact of his also making a mistake
himself could make no difference.^ It resolves itself into a mere
question of fact. I have felt some difficulty about the pleadings, be-
cause in the statement of claim this point is not clearly put forward,
and I had some doubt whetiier this contention as to the third mis-
statement was not an afterthought. But the balance of my judgment
is weighed down by the probability of the case. What is the first
question which a man asks when he advances money ? It is, what is
it wanted for? Therefore I think that the statement is material, and
that the plaintiff w^ould be unlike the rest of his race if he was not
influenced by the statement of the objects for which the loan was re-
quired. The learned Judge in the Court below came to the con-
clusion that the misstatement did influence him, and I think he came
to the right conclusion.

The opinion of Fry, L. J., is omitted.

Appeal Dismissed.



GALLAGER AND MASON v. BRUNEL. ^^wvd^
Supreme Court of New York, 1826. 6 Cozven, 346.

Curia, per WoonwoRTii, J. The ground of complaint is, that
the defendant fraudulently and deceitfully represented and held out
to the plaintiffs, that the defendant was willing to, and would
endorse the note of Castro & Henriques, in case the plaintiffs should
sell and deliver the cotton ; but that in fact he was not willing, and
did not intend, nor has he endorsed the note, whereby the plaintiffs
are injured. The second count alleges that Castro & Henriques
were, at the time of the purchase, in bad credit, which the defendant
knew ; that intending to defraud the plaintiffs, and enable Castro &
Henriques to obtain possession of the cotton, he represented, that if
the plaintiffs would sell and deliver, he would become answerable by
endorsing for the purchasers ; that the plaintiffs did sell and deliver
the cotton ; that the defendant did not intend, nor has he made him-
self answerable, or paid ; nor has any other person paid and satisfied
the plaintiffs, whereby they were deceived, and have sustained dam-
age.

The attempt here, is to sustain the action, not on a contract,
which, if in writing, might perhaps be obligatory; but on a deceitful
representation. If the promise was in writing, I perceive no objec-
tion to its validity, inasmuch as a good consideration is stated, viz..
that if the plaintiffs would sell and deliver the defendant would
endorse. If, then, there is a binding contract existing between the
parties, and on which the defendant is liable, I apprehend it is not
competent for the plaintiffs to say they have an election to turn this



* See Addington v. Allen, post., and cases cited in the note thereto.



684 GALLAGER AND MASOX V. BRUNEL.

into an action for deceit, and recover in that form, unless the case is
such as to render the party hable, not only on the contract ; but, in
addition, contains facts sufficient to sustain an action for deceit.
For example, suppose A. represents B. to be solvent, knowing it to
be false, whereby B. obtains credit ; but notwithstanding this repre-
sentation, the seller takes from A. his written stipulation to guar-
antee the payment. In this case, I perceive no object to a creditor's
election of the remedy. The fraudulent representation of solvency
would sustain the action for deceit. The written guaranty would
support an action on the contract. It seems, therefore, immaterial
here, whether the plaintiffs have or have not a demand which may
be enforced in a different form. The question is, will the facts
stated sustain an action for deceit?

After attentive consideration, I am inclined to think the plain-
tiffs are not entitled to recover. However reprehensible the con-
duct of the defendant may appear in a moral point of view, we can-
not deny to him the protection of the common law ; which does not
reach cases of imperfect obligation. If this be an attempt on the
part of the plaintiffs, to get rid of the statute of frauds, I can only
say, the occasion justified the experiment, and calls for a patient
and critical examination.

If this case is stripped of the general allegations in the declara-
tion, of fraud and deceit, it appears to me that the gravamen is noth-
ing more than that the defendant encouraged the plaintiffs to sell to
Castro and Henriques ; and, as surety, promised to endorse their
notes. The intention of the party not to fulfil, has not, I believe,
ever been considered amoiig the fraudulent acts, which, in judgment
of law, render a party liable. The maker of a promissory note may
not, at the time, intend to make payment. On this note, the plain-
tiff may declare that the defendant intended to deceive and defraud ;
but it is mere matter of form, sanctioned by precedent in pleading.
The maker may go farther, and on the strength of assurances to
pay punctually, never intended to be performed, induce the lender to
part with his money, and accept the borrower's note. All this is
immoral. Still the remedy is on the contract. The law has not rec-
ognized it as the substantive ground of fraud. That no cases are to
be met with in the books going the length contended for, is good
evidence that the doctrine is novel, and has never been acted upon.

The general ground of liability seems to rest on the affirmation
of a fact as true, which, at the time, is known to be false ; and by
means whereof, credit is obtained. The seller, in most cases, has
not the means of ascertaining the truth at the moment. He must re-
pose on the representation, or refuse the credit. Not so here. There
was no necessity of relying on the defendant's representations, or
his promise. Caution required the plaintiffs to pursue a different
course ; to insist that the note be drawn and endorsed pari passu with
the delivery of the goods. By dispensing with this, they omitted
the prudence and care which the law presumes every man will exer-
cise in conducting his affairs. If the plaintiffs suffer, it is owing to



GALLAGER AND MASON V. BRUNEL. 685

their negligence and misplaced confidence ; for which, the law has
not provided a remedy.

The general principles which govern this species of action, were
ably examined in Paslcy v. Freeman, (3 T. R. 51.) In that case,
the defendant encouraged the plaintiff to sell goods, and fraudu-
lently affirmed that the purchaser was a person safely to be trusted.
The gravamen was the false affirmation of an existing fact ; not
a promise to do a future act, at the time not intended to be per-
formed. Buller, J. observed, "the foundation of the action is fraud
and deceit in the defendant, and damage to the plaintiffs. Every
deceit comprehends a lie ; but a deceit is more than a lie, on account
of the view with which it is practiced, its being coupled with some
dealing, and the injury which it is calculated to occasion to another
person." It is evident what must be the species of fraud, for which
the law gives redress ; falsehood as to an existing fact. If, as Buller,