Helms v. . Holton

Manning, J. This appeal coming to ns from a judgment granted to the plaintiff upon the pleadings, we must, of course, assume that his Honor held'that the facts set up in the answer did not constitute, in law or' equity, a defense to the notes or a counterclaim or set-off available to the defendant. The motion of the plaintiff for judgment upon the pleadings was, in effect, a demurrer to the answer, and, being such, admitted the truth of the facts alleged in the answer, and denied only their legal sufficiency. Considering the facts alleged in the answer to be true, we think they amount to an actionable fraud, resulting directly in such damages to the defendant as are capable of admeasurement under accepted and established rules. The chief contention relied upon by plaintiff is that there is “no legal causal connection between the alleged false 'representations and the alleged damages.” The defendant alleges that, by reason of the false representations, believed by him and relied upon by him, he was induced to relieve the plaintiff of his liability on notes aggregating several thousand dollars, and himself alone to assume the payment of these notes. The plaintiff and defendant occupied to these notes the relation of co-sureties or coindorsers for.an insolvent corporation, in which' plaintiff and defendant owned equal interests. The plaintiff never paid a dollar of his subscription, while the defendant had performed, in every particular, his obligation. By his misrepresentations the plaintiff has avoided the payment of his stock subscription and the payment of his one-half of the balance on the notes unpaid by the corporation, and has cast upon the defendant the entire burden of liability jointly incurred by the plaintiff and defendant. The advantage which the plaintiff sought is apparent; and the disadvantage and loss to the defendant must be equally clear, for what the plaintiff escaped by his false' representations has fallen upon the defendant. It is alleged that the insolvency of the corporation was well known to the plaintiff; the enterprise jointly undertaken by plaintiff and defendant had failed, and in order to escape a liability then fixed, and which plaintiff would be called upon to meet equally with defendant, the plaintiff, it is alleged, resorted to the device of falsely pleading his own insolvency, and in the presence of the common disaster appealed to the defendant to save himself as best he could. It is no answer to the false statements to say that as defend *591 ant was bound on tbe notes, and, under our statute, bis liability was both joint and several, be might eventually have been forced to pay tbe full amounts; this eventuality did not justify tbe plaintiff in resorting to a falsehood to avoid bis equal responsibility. Wilb ur v. Prior (Vt.), 32 Al. Rep., 474. Were tbe false representations of plaintiff of such character as to constitute actionable fraud? In Richards v. Hunt, 6 Vt., 251, 27 Am. Dec., 545, tbe facts were that plaintiffs, as creditors, bad been induced, by tbe debtor’s false representations of insolvency and poverty, to compromise their claim and to discharge tbe defendant froin their debt, and tbe Court said: “That tbe defendant intended bis representations should be relied upon is evident from tbe cirfeumstances under which, and tbe purpose for which, they were made. That they were relied upon by tbe orators is equally evident, from their conduct in accepting so small a portion in lieu of their whole debt. And that they were injured is equally apparent, from tbe obvious ability of tbe respondent to pay tbe whole debt, which is disclosed by tbe case. There is in this case no ground for supposing tbe respondent ignorant of bis own affairs. He must, therefore, be held to strict truth in bis representations. Were these representations true? Tbe tenor of them is that tbe respondent was poor and destitute, that be bad no resource for tbe maintenance of a numerous family but bis personal labor; that be bad not tbe means of paying tbe debt; and that, if payment was insisted on, be should be driven to take advantage of tbe poor debtor’s oath. Now, the reverse of all this was true. Tbe case falls, then, within tbe ordinary rules for equitable relief in other cases. Is there any reason why these rules should not be applied? If equity requires good faith in all business transactions, why not in this? Can any reason be given why an appeal to the humanity and charitable feelings of a creditor should not be conducted with truth and honesty? Or shall we deny to tbe party defrauded of his property, through tbe medium of bis benevolent and honorable feelings, tbe relief which we should afford to him if overreached in the competitions of avárice?” Reynolds v. French, 8 Vt., 85; 30 Am. Dec., 456; Phettiplace v. Sales, 4 Mason, 312; Irving v. Humphrey, 1 Hopk., 284. In May v. Loomis, 140 N. C., 350, Mr. Justice Hohe, in commenting upon tbe facts presented in that case, said, and we now quote it as applicable to tbe present case: “Accepting tbe testimony favoring defendant’s claim as true, and we are required so to accept it, where a nonsuit is directed against tbe party who offers it, tbe facts disclose a clear case of deliberate fraud *592 in which there appears every element of an actionable wrong— false representations as to material facts, knowingly and willfully made as an inducement to the contract, and by which the same was effected, reasonably relied upon by the other party, and causing pecuniary damage.” It is further contended by the plaintiff that “the parties stood on equal footing, the means of correct information were equally open to both, no artifice to- conceal the true state of facts is alleged.” We may assume as true that both plaintiff and defendant had not only equal means of information, but equal knowledge of the affairs of the corporation in which they were both equally interested, but we cannot asSume that defendant was equally cognizant with plaintiff of his private affairs and his financial condition. The plaintiff must be presumed to know his own financial condition. The defendant alleged that the representations made to him by plaintiff that he was utterly insolvent, that even his life insurance policies were pledged for their full value, were false and knowingly false, and that he discovered their falsity about two years thereafter. How can we assume that of these things defendant had equal information with the plaintiff? In Linnington v. Strong, 107 Ill., 295, the Court said: “While the law requires of all persons 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 there is a certain limit to this rule, and as between the original parties, when it appears that one has been guilty of an intentional and deliberate fraud, by which, to his knowledge, the other has been misled and 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 care and diligence.” In 1 Jaggard on Torts, pp. 595 and 596, the author says: “There is, indeed, a strong inclination on the part of the courts to. hold, without any qualification, that a person guilty of a fraudulent misrepresentation cannot escape the effects of his fault on the ground of the injured party’s negligence. The doctrine is well settled, as a rule, that a party guilty of fraudulent conduct shall not be allowed to cry ‘negligence,’ as against his own deliberate fraud.” Blachnall v. Rowland, 108 N. C., 554; s. c., 116 N. C., 389; May v. Loomis, supra. In determining this appeal, it is not necessary that we should lay down the rule for measuring the damages sustained by the defendant; but it seems proper for us to discuss this to some *593 extent. In Irving v. Humphrey, 1 Hopk., 284, tbe Court beld tbat tbe defendant should be required to make bis representa-# tions good. In Grater v. Binninger, 33 N. J. L., 513, tbe Court beld: “In cases of fraud, tbe true rule of damages is, tbat tbe wrongdoer must answer for those results, injurious to tbe other party, which must be presumed to have been within bis contemplation at tbe time of tbe commission of tbe fraud. Tbe plaintiff having been enticed by tbe deceit of tbe defendant to enter into an oil speculation, the defendant was responsible for tbe. moneys put into tbe scheme by tbe plaintiff in tbe ordinary course of tbe business, and which moneys were lost, and tbat from such moneys must be deducted tbe value of the interest which plaintiff retained in tbe property beld by those associated in tbe speculation.” As defendant, under tbe doctrine laid down in May v. Loomis, supra, and since then approved by this Court, cannot rescind the- contract and cannot restore the status quo existent at the time of tbe false representation, we think tbe proper measure of defendant’s damage is tbe difference between tbe value of tbe assets of tbe corporation with full performance of bis obligations by tbe plaintiff and tbe value at tbe time with plaintiff’s obligations unperformed. All tbat plaintiff could have been required to do was to perform bis obligations; if be escaped these by fraud, and tbe burden of tbe entire responsibility was assumed by defendant — the victim of tbe fraud — tbe plaintiff would have no just ground to complain tbat be should be required to answer in damages for a difference in value directly caused by bis own fraud and deceit. This rule would eliminate tbe contention of plaintiff tbat tbe damages suffered by tbe defendant are damages resulting from a bad business venture. We think, therefore, tbat bis Honor erred in rendering judgment for tbe plaintiff upon tbe pleadings. Tbe judgment so rendered is vacated, and tbe case is remanded tbat tbe matters pleaded as a defense and counterclaim shall be submitted to a jury upon proper issues. Eeversed.