Isman v. Loring

Ingraham, J.: The complaint in this action was demurred to on the ground that it did not state facts sufficient to constitute a cause of action. The complaint alleges that prior to January 26,1906, the parties to this action entered into negotiations for the sale of certain real property by the defendant to the- plaintiff and that such negotiations resulted in the execution and delivery of a contract in writing on January 26, 1906, a copy of which is annexed to the complaint ; that as part of said negotiations the defendant represented to the plaintiff that she had. received a Iona fide, legitimate and fixed bid or offer to purchase said premises from a railroad corporation and that the said corporation was then ready and willing to purchase said premises; that it was then agreed between the parties that the plaintiff would purchase said premises and pay the defendant therefor $5,000 in excess of the bid or offer made to the defendant by the said railroad company; that thereafter the defendant represented to the plaintiff that the said railroad company had made and that there was then in fact pending an actual,, Iona fide, legitimate and fixed offer or bid to purchase said premises for the said company from the defendant for the sum of $10,000, and that the said railroad company was then ready and willing to purchase said- premises at said price; that the plaintiff, relying [847] wholly and solely upon such representations of the defendant, entered into a contract with the’ defendant to purchase the premises for the sum of $75,000; that subsequently the contract was fully performed, the defendant conveyed the premises to the plaintiff, and the plaintiff paid the defendant the said sum of $75,000 ; that the representations made by the defendant were false and untrue in that the bid or offer made by the railroad company was in fact the sum of $55,000, and not the sum of $70,000; that these representations were known by the defendant to be false and untrue and were made for the purpose of cheating and defrauding the plaintiff and inducing him to enter into the said contract; and that by reason of the premises the plaintiff has been damaged in the sum of $15,000, for which sum judgment is demanded. The action is, therefore, to recover damages sustained by the plaintiff caused by the defendant’s fraud. There can be no question but that to sustain such a cause of action the plaintiff must allege the fraud and resulting damage, but when fraud and damage are both alleged there is a cause of action. As was said in Taylor v. Guest (58 N. Y. 262): “ This false representation, made fraudulently and with an intent to deceive, made the defendant liable in an action for deceit if, believing it to be true and relying upon it, the plaintiff parted with the bonds for the price agreed upon, and when, except for the false representation, he would not have sold them, and might have realized a larger price. Fraud without damage or damage without fraud will not sustain the action for deceit * * * ; and a false and fraudulent representation made by one party to induce a contract entered into by the .other is not actionable unless the party to whom it was made believed the representation to be true and acted upon the faith of it to his damage.” The complaint alleges the false representations; that they were made with intent to deceive and that the plaintiff relied thereon, and that by reason of the premises the plaintiff has been damaged in the sum of $15,000. The defendant, however, claims that to maintain the action the plaintiff must allege the special facts from which damage can be inferred, or, in other words, in an action for deceit must allege special damage. It is clearly settled in this State that where there has been fraud in procuring a contract the injured party has at once upon the execution of the contract an [848] action for the fraud and that thát action is barred by the Statute of Limitations six years after the actual execution of the contract or the discovery of the' fraud. Thus in Northrop v. Hill (57 N. Y. 351) it was held that “ when a party to a con tract'is guilty of fraud, he commits a wrong for which he is liable to the defrauded party, to pay, at least, nominal damages. The act of entering into contract relations implies that the parties are to deal in good faith with each other. * * * If he proves no special damage he should, at least, recover nominal damages for the breach of the implied promise to act in good faith.” And the court cites from Allaire v. Whitney (1 Hill, 484), where it- is said: “ But actual damage is not necessary to an action* A violation of right, with a possibility of damage, forms the ground of an action. * * * Once establish, therefore, that in all matters of pecuniary dealings, in all matters of contract, a man has a legal right to demand, that his neighbor shall be honest, and the consequence follows, viz., if he be drawn into a contract by fraud, this is an injury actionable per se. * * * Fraud in a contract can hardly be conceived without being attended with damage in fact.” And it was' held that as the plaintiff had a complete cause of action on the day when the purchase was completed, any damage that subsequently, followed was merely developed from the original wrong then committed and was not a new cause of action. And this same principle was recognized in Pryor v. Foster (130 N. Y. 171). Thus the- fraud gives a cause of action for the damages which necessarily result from the wrong, and these may be recovered without an averment of special damage. Such damages, however, as are the natural, but not. the necessary, result of the injury are special and must be alleged. (Vanderslice v. Newton, 4 N. Y. 130.) In Jutte v. Hughes (67 N. Y. 267), where the action was for a nuisance, the Court of Appeals held that the trial justice was wrong under the allegation of general ’ damage in excluding proof of the rental value for the purpose of showing the damage done, and the further proof that the plaintiff had lost tenants on account of the nuisance. In that case the court said“ It is said, however, that tlie evidence was improper, because special damages - should have been alleged in order to be proved, and that the complaint should, have' stated the names of the tenants, the aq:>artments and specific amounts of rent849 alleged to have been lost, so as to enable the defendant to meet the proof which might establish such an allegation. This doctrine might well apply in actions of slander, and of a kindred class under the common-law' practice, which requires that special damages should be 'specifically alleged. Where, however, the damages necessarily result and naturally flow from the injury complained of, they may be recovered without any special averment.” In Argotsinger v. Vines (82 N. Y. 308), which was an action of trespass, it was held that such damages as would necessarily and naturally result or be incurred from the injury complained of coulc be proved under an allegation of general damage, and that it is not necessary that the damages should be specifically averred in order to authorize a recovery. We thus have it established that an action for damages accrues immediately upon the execution of a contract which has been induced by fraud, and that the Statute of Limitations begins to run as against any recovery for the fraud immediately upon its execution or the discovery of the fraud; that upon such a cause of action a plaintiff is entitled to at least nominal damages, and on a general allegation of damage is, in addition, entitled to recover the damages which naturally and necessarily resulted from the fraud ;■ but that to entitle the plaintiff to recover the damages which naturally, but not necessarily, resulted from the fraud, such damage must be alleged. Applying these principles, it would seem to necessarily follow that a complaint alleging the execution of a contract; that it was induced by fraud, and that in consequence thereof the plaintiff sustained damage, states a cause of action which is good as against a demurrer. It is not necessary to discuss the question as to the damages to which the plaintiff will be entitled upon the trial of this action. The amount of damage would necessarily depend upon the facts as there disclosed. We. have no doubt that the false representation that a railroad company had offered to purchase the property for $10,000, when .in fact the only offer made by the railroad company was $55,000, was actionable. It was not a statement as to the value of property, but was the statement of a fact, namely, the offer made by the railroad company, which was peculiarly within the defendant’s knowledgé. It does not at all follow that inquiry of the railroad company would have disclosed the true fact, as the rail [850] road company was not bound to state to any one inquiring the amount of any offer it had made for the property, or the fact that it desired to purchase "the property. The plaintiff was entitled to rely upon the express representation made by the defendant as to the offer that he had received from the railroad company, and the defendant was responsible for the direct damages sustained by reason of such false and fraudulent representation. The case is thus brought directly within the rule as stated in Schumaker v. Mather (133 N. Y. 590): “That the representations of a vendor as to extrinsic facts affecting the quality or value of the subject of the transaction of sale and which are peculiarly within his knowledge may be relied upon by the purchaser.” (See, also, Mead v. Bunn, 32 N. Y. 275; Fox v. Duffy, 95 App. Div. 202; Hadcock v. Osmer, 153 N. Y. 604.) The judgment appealed from is, therefore, affirmed, with costs, with leave to the defendant to withdraw the demurrer and answer Within twenty days upon payment of costs in this court and in the court below. McLaughlin", Laughlin and Soott, JJ., concurred.