Smith v. . Countryman

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 657 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 658 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 660 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 661 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 662 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 663 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 664 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 666 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 667 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 668 If the new matter set up by the defendant, as constituting a defense, was sham or irrelevant, it was the duty of the plaintiff to have moved on notice to strike it out. (Code, § 152.) If the new matter did not, upon its face, constitute a defense, it was the duty of the plaintiff to have demurred to it. (Code, § 153.) The practice resorted to in this case, to correct the pleadings by motion at the trial is not warranted by the code, and should not be encouraged. The plaintiff, in substance, by his motion to strike out the second ground of defense, admitted the allegations of the answer, and the question was presented to the court in the same form as if he had demurred to the answer. A moment's consideration will show how incongruous and inconvenient it is to reserve questions of law for argument and decision at the circuit. But assuming the question was properly raised there, then it is to be considered whether the new matter, set up in the answer, upon its face constituted a defense to the action. And the question to be decided is in substance the same, whether it is put on the motion to strike out that defense, or upon the motion to strike out the testimony which was given to establish it. In the first place it is to be borne in mind that the plaintiff in this action is seeking to enforce an executory contract, made and entered into by the defendant, as conceded by him, upon false and fraudulent representations *Page 669 made by the plaintiff's assignor, to induce him to make the same, and upon which it was admitted he, the defendant, relied. The statement of the proposition would seem sufficient to suggest the answer which the law should make. In the aspect we are now regarding the case, we are to take the statements of the defendant's answer as true. They are that he was ignorant of the price of hops, and was reluctant to make the agreement with Wood, the plaintiff's assignor; that Wood, to induce the defendant to sell him his hops and enter into the agreement, represented that he had purchased the hops of one Ellwood, a large and experienced hop grower, for the price of twelve and one-half cents per pound; and that, relying upon such representation, and believing the truth thereof, and having confidence in the prudence and judgment of Ellwood, the defendant entered into the agreement. That hops were, at that time, worth more than twelve and one-half cents per pound; that such representations were false and fraudulent, and made with the intent to deceive and defraud the defendant. It is now urged that it was the folly of the defendant that he relied upon these representations of Wood; that it was his duty to have made inquiry of Ellwood, to ascertain the truth of the representations, before he entered into the contract. In other words, the defendant should have assumed that Wood's statements, if not untrue, were at least doubtful, and that he is to suffer for having given them credence, while the party knowingly making the false representations is to reap the fruits of his fraud, because the party dealing with him did not distrust him. It was well observed by the court, in Van Epps v. Harrison (5 Hill, 63), that the credulity of the defendant furnishes but a poor excuse for the falsehood and fraud of the plaintiff, and the latter will have no just ground of complaint if he is held responsible for his misconduct. That was an action upon a bond given upon a sale of land by the plaintiff to the defendant, and as a defense to the action the defendant set up that the plaintiff falsely and *Page 670 fraudulently represented to him that he had just purchased and paid $32,000 for the land, when in truth he had paid but $16,000. And the court was of the opinion that the false affirmation concerning the price paid for the land furnished a good defense to the action. It is true, as contended for by the counsel for the appellant, that the fraud which will vitiate a contract must be material, and that it must relate distinctly and directly to the contract, and must affect its very essence and substance. Parsons, in his work on contracts, (2 Parsons, 267,) observes that there is no positive standard by which to determine whether the fraud be thus material or not, but that no better rule for deciding the question can be given than this: "If the fraud be such that, had it not been practised, the contract would not have been made or the transaction completed, then it is material to it." Applying this rule to the case at bar, in the aspect we are now considering it, and the materiality of the representation is placed beyond all question. The defendant says: that, being ignorant himself of the value of hops, and knowing the prudence and judgment of Ellwood, he, in reliance on the representation that Ellwood had sold his hops to Wood at the price named, entered into the contract to sell his hops to him at the same price. Whatever facts would enable a party to avoid a contract, are equally available to enable him to defeat one sought to be enforced against him. Could this defendant, therefore, have sought the aid of a court of equity, upon the facts stated in his answer, to set aside this contract? The authorities are abundant to show that he could. In Daggett v. Emerson (3 Story's Rep. 733), Mr. Justice STORY states the principles by which courts of equity can be governed in such cases in the following elegant and forcible terms, and these observations have peculiar force and significance as applicable to the present case. He says: "It is equally promotive of sound morals, fair dealing and public justice and policy that every vendor should distinctly comprehend, not only that good faith should *Page 671 reign over all his conduct in relation to the sale, but that there should be the most scrupulous good faith, an exalted honesty, or, as it is often felicitously expressed, uberrimafides, in every representation made by him as an inducement to the sale. He should literally, in his representations, tell the truth, the whole truth, and nothing but the truth. If his representation is false in any one substantial circumstance going to the inducement or essence of the bargain, and the vendee is thereby misled, the sale is voidable, and it is usually immaterial whether the representation be wilfully and designedly false, or ignorantly and negligently untrue. The vendor acts at his peril, and is bound by every syllable he utters or proclaims, or knowingly impresses upon the vendee, as a true or decisive motive for the bargain." In Taylor v. Fleet (1 Barb. 471), the vendee sought the aid of a court of equity to set aside a conveyance and sale of real estate on the ground that the vendor had made a representation, in regard to the land, which was untrue; and the court held that, the vendee having ascertained that the representation was untrue, had the right to rescind the contract. That, whatever may have been the motive of the vendor in making an erroneous representation respecting the land about to be sold to him, it is enough to entitle the purchaser to relief; that there was a misrepresentation of a matter of fact, material to the subject of negotiation, and which constituted the very basis of the contract. The court said: "The representation being untrue and influential, vitiated the transaction, whether such representation was wilfully and designedly false or ignorantly or negligently untrue." (See also opinion of Mr. Justice WOODBURY, 9 Law Rep. 160, Warner v. Daniels; Story's Eq. Juris. §§ 192, 193; Hough v. Richardson, 3 Story's Rep. 659; Bennett v. Judson, 21 N.Y. 238.) In Neville v. Wilkinson (1 Bro. Ch. Rep. 546), Lord Chancellor THURLOW said: "It has been said here is no evidence of actual fraud on R., but only a combination to *Page 672 defraud him. A court of justice would make itself ridiculous if it permitted such a distinction. Misrepresentation of circumstances is admitted, and there is positively a deception;" and he added: "If a man, upon a treaty for any contract, will make a false representation by means of which he puts the party bargaining under a mistake upon the terms of the bargain, it is a fraud. It misleads the party contracting, on the subject of the contract." In harmony with the doctrine of these cases is the principle laid down by this court in the case of Valton v.National Fund Life Insurance Co. (20 N.Y. 32). It was there decided that fraudulent representations made by the assured to the insurer, upon his application for a policy, though not material to the risk, yet material in the judgment of the insurer, and which induced him to take the risk, would avoid the policy. And this court held that a misrepresentation, although it did not affect the nature of the risk, yet was a fraud, because it induced a confidence, without which the party would not have acted. This principle covers the whole ground in controversy in the present action, and if applicable to the present case, is decisive of it. But it is urged, by the appellant's counsel, that the law of contracts of insurance and contracts of sale are different, and rest on different principles. That the parties do not deal, in the former case, on the presumption of equal knowledge and vigilance as to the subject matter of the contract, and that hence a different rule of law prevails. It is true that in contracts of insurance all representations material to the risk, if untrue, avoid the policy, but representations not material rest on the ground of fraud, and therefore vitiate the policy on that ground. This distinction was urged upon the attention of the court in the case of Moens v. Heyworth (10 Mees. Welsby, 147). In that case the question was whether a contract for the sale of coffee, which was represented to be invoiced to the seller, was void, from the fact that such representation was untrue, and it was held that it was. Lord ABINGER, *Page 673 Chief Baron, said: "The fraud which vitiates a contract, and gives the party a right to recover, does not in all cases necessarily imply moral turpitude. There may be a misrepresentation as to the facts stated in the contract, all the circumstances in which the party may believe to be true. In policies of insurance, for instance, if an insurer makes a misrepresentation, it vitiates the contract. Such contracts, it is true, are of a peculiar nature, and have relation as well to the rights of the parties as to the event. In the case of a contract for the sale of a public house, if the seller represent, by mistake, that the house realized more than in fact it did, he would be defrauding the purchaser and deceiving him, but that might arise from his not having kept proper books, or from non-attention to his affairs, yet as soon as the other party discovers it, an action may be maintained for the loss consequent upon such misrepresentation, inasmuch as he was thereby induced to give more than the house was worth;" and he further observed that "the question of fact whether there was fraud or not ought to be decided by the jury from the circumstances of the case." PARKE, Baron, remarked: "The case of a policy of insurance does not appear to me to be analogous to the present; those instruments are made upon an implied contract between the parties that every thing material known to the assured should be disclosed by them. This is the basis on which the contract proceeds, and it is material to see that it is not obtained by means of untrue representation or concealment in any respect." "In this case," he says, "the plaintiffs must prove a representation by words or acts of that as true which was known to the defendants to be untrue, as in the cases of Polhill v.Walter (3 B. Adol. 114), and Foster v. Charles (6 Bing. 696). In the same case Lord TENTERDEN laid down the rule that it is not necessary to prove that the false representation was made from a corrupt motive of gain to the party making it, or a wicked motive of injury to the other party; it was enough if a representation is made, which the party making *Page 674 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 that he may incur damage, and that damage is actually incurred." In Foster v. Charles the same doctrine is reiterated, and PARK, J., quotes, with approbation, the remark of CHAMBRE, J., in Tripp v. Lee (3 Bos. P. 371), that it would be an absurdity in law to hold that if a man draws another into a snare, the party suffering should have no remedy by action. It is perfectly clear, therefore, from principle and authority, that if the plaintiff had demurred to the second ground of defense contained in the defendant's answer, as not sufficient in law, the demurrer would have been overruled, and judgment given for the defendant. The judge therefore properly refused to strike out the second ground of defense as stated in the answer. He also properly refused to strike out the testimony which the defendant had adduced to sustain the answer. Such testimony proved every material fact contained in the answer, except the allegation that hops were at the time the defendant made the contract worth more than twelve and a half cents per pound. Such fact had no materiality in excusing the plaintiff's assignor, from the fraud practised upon the defendant. Non constat, that the defendant would have entered into this contract if he had known that circumstance. The question here is, whether a contract obtained from a person by fraud and falsehood can be enforced against him by the party procuring it. I think clearly it cannot. It is undeniable that if it could have been enforced, if the defendant had fulfilled it, he would sustain thereby great damage; and it is no answer, for the plaintiff to say, that the defendant might on that day have sold his hops either to Wood, or some one else, for the same price, if the fraud had not been practised. The defendant was at liberty to refuse to fulfil the contract on his part, as soon as he ascertained the fraud practised upon him, and the law will not subject him to the damages *Page 675 which the plaintiff or his assignor may have sustained, from their inability to realize the fruits of this fraudulent act. The motion to strike out the defendant's testimony was therefore properly denied. The evidence of the belief of the defendant in the representation made by Wood was perfectly proper. It cannot be permitted to the plaintiff to object that the defendant credited the statement of his assignor. The defendant was not to assume it was untrue, and the law would have assumed that he gave credit to the representation whether he had so testified to it or not. But this objection is wholly immaterial, as the defendant testified, without objection, that he entered into the contract relying on that representation, namely: the representation that he, Wood, had purchased Ellwood's hops. This shows beyond all controversy that he believed the representations to be true, and his statement that he so believed it was of no importance. The judgment appealed from should be affirmed.