Foulks Accelerating Air Motor Co. v. Thies

By the Court, Belknap, J.: Action to collect a call upon a subscription to plaintiff’s stock. In his answer defendant, among other things, sets up, as an equitable defense to the action, that during the month of February, 1893, and prior to the 25th day of March, John P. Foulks falsely represented to the defendant and others that he was the inventor and the owner of a certain patent for an improvement in windmills, the letters patent of which had not been issued, but would shortly be issued, and when issued would cover all the mechanical features described in the answer in this case; that defendant, relying upon said representations, subscribed for a certain number of shares of the capital stock of the plaintiff; that defendant first learned upon the dates mentioned in the answer that the letters patent issued to Foulks, and subsequently assigned to plaintiff, did not embrace the mechanical principles claimed for it by Foulks in his representations or in his application for a patent. At the trial the district court found that upon March 9, 1892, Mr. Foulks filed his application for a patent for an improvement in air motors, and appointed Dewey & Co., of San Francisco, Cal., and A. Ii. Evans & Co., of Washington, D. C., his attorneys to prosecute the same, and to alter or amend his specifications, to receive the letters patent when issued, and to transact all business in the patent office connected therewith; that upon December 27, 1892, the attorneys of Mr. Foulks transmitted to him a copy of a notice from the patent office to the effect that his application for a patent had been examined and allowed; that while his application was pending several amendments were made by his attorneys, but no reference thereto was made by the notice, [174] and Mr. Foulks was not informed of the particulars in which his application had been amended until after the patent was granted. It was also found that until subsequent to July 15, 1893, Mr. Foulks believed, and did not have any reason for not believing, that his application for patent had not been allowed by the patent office as originally made and filed; that he believed his representations to the defendant as to the scope of the patent were true, and without any knowledge that they were untrue, and without intent to deceive. It was also found that the contents of the patent materially differed from the representations made concerning it by Mr. Foulks. Upon these facts, the question is whether or not the representations were fraudulent in law. The notification _ to Mr. Foulks that his application had been approved should be considered in connection with his authorization of Dewey & Co., of San Francisco, and A. PI. Evans & Co., of Washington, to alter or amend the specifications. Under the authority given his attorneys, no one could have known, prior to final action by the patent office, the extent to which the specifications had been altered or amended. He knew that amendments had been made. That fact may well have excited his inquiry, and investigation would have readily revealed the fact that the patent office had determined that Mr.’Foulks’ application infringed upon the Kirkwood patent, and that his attorneys had disclaimed all rights conflicting with it. Instead of making the inquiry which the circumstances suggested, he made no effort to inform himself further. Afterwards, when a patent was allowed, instead of ascertaining the extent to which his specifications had been altered or amended by his attorneys under his authority, he represented to defendant and others that a patent, according to the original specifications, had been granted. Manifestly, he did not know whether his statement were true or false, and he, or his successor in interest, is liable if he asserted them to be true not knowing whether they were true or false. In Bennett v. Judson, 21 N. Y. 238, the question was whether representations could be deemed fraudulent unless they were known to be false. It was held that one who, without knowl [175] edge of its truth or falsity, makes a material representation, is guilty of fraud, in legal contemplation, as much as if he knew it to be untrue. The decision in Bennett v. Judson was subsequently qualified by the ease of Wakeman v. Dailey, 51 N. Y. 35, to the extent that the injured party is not compelled to prove that the person making the representations knew them to be false. If he assume or intend to convey the impression that he has actual knowledge of their truth, when conscious that he has not such knowledge, it is enough. (Railroad Co. v. Tyng, 2 Hun, 321; Wakeman v. Dailey, 51 N. Y. 27.) Judge Story states the rule applicable to this class of cases as follows: "Whether a party misrepresenting a material fact knew it to be false, or made the assertion without knowing whether it was true or false, is wholly immaterial; for the affirmation of what one does not know or believe to be true is equally, in morals and law, as unjustifiable as the affirmation of what is known to be positively false, and, even if the party innocently misrepresents a material fact by mistake, it is equally conclusive, for it operates as a surprise and imposition upon the other party.” (Story, Eq. Jur. 193.) "Accordingly,” says Judge Cooley in his work on Torts (page 498), "when either of the two parties to a negotiation for the purchase of property makes material representations of matters which he avers or assumes to be within his own knowledge, with intent that the other party shall act upon them, and these representations are actually relied upon by the other party in completing the negotiation, and they prove to be false, to his injury, a court of equity will treat the case as one of fraud, and give the proper relief, although the party making the representations was not aware at the time of their falsity.” Again, at page 501: "There are numerous cases in which it has been held that if a person makes a material representation in relation to a matter susceptible of knowledge, in such a manner as to import positive knowledge of its truth or falsity, with intent that another should rely upon such representation, this is sufficient to establish against him a legal fraud, if the other does rely upon it and it proves untrue. The fraud here consists in the reckless assertion that that is [176] true of which the party knows nothing, and deceiving the other party thereby; and even the actual belief of the party in the truth of what he asserts is immaterial, unless he had some apparently good reason for his belief, such, for example, as the positive statements of others in whom he confided, and was innocent of any attempt to mislead, or unless his representations related to matters of opinion.” See cases cited on page 501. (8 Am. & Eng. Ency. Law, p. 642.) Judgment reversed, and cause remanded for new trial.