Clark v. Rankin

Marvin, J. Were the plaintiffs entitled to the charge simply as requested ? If so, there must be a new trial; otherwise not. In my opinion the court' erred in refusing the requested instructions. If the facts were as shown by the plaintiffs’ proof, the representations made by the defendant were false, and the plaintiffs were actually deceived and defrauded. (It was admitted that the amount which the plaintiffs were entitled to recover, if they should have a verdict, was $3074.) The case is peculiar. The sale was of a leasehold estate and the lease and sub-leases. One of these leases was for ten years, nearly seven years and five months of the term unexpired, “yielding and paying therefor, yearly and every year, the sum of six hundred dollars, to be paid as follows,, that is — 575 — to say; three thousand dollars cash down, at the execution and delivery thereof, two thousand dollars on the first day of January, which will be in the year of our Lord 1863, and the residue of the said annual rent in equal semi-annual payments thereafter.” This is a peculiar and unusual provision. More than $5000 of the rent had been paid. The annual rent, thereafter, was only $111.11, instead of $600 as represented by the defendant. Now it is true that the lease assigned to the plaintiffs, with the indorsements, showed these facts, and the learned judge brought into the case the position that the purchasers were bound to exercise ordinary care and prudence in availing themselves of the means of knowledge in them possession for ascertaining the terms of the lease, and the payment of rents in pursuance of such terms, and if they failed to exercise such care and prudence then they could not recover. In my opinion the right of the plaintiffs to recover did not depend upon their care and prudence in examining the lease as to the rents reserved and the payments that had been made. They had a right to rely upon the representations made by the defendant, that the rents reserved amounted annually to $4000, and that to make up this sum the annual rent of the railroad lease was $600. In other words, the omission of the plaintiffs to examine the lease and the receipts .upon it was not such negligence as would deprive the plaintiffs of a right of recovery. There was no dispute, upon the evidence, as to the facts touching the examination of the leases by the plaintiffs. They did not make the examination. And the question whether such omission involved such a-want of care and prudence as to defeat the plaintiffs’ right to recover should not, I think, have been submitted to the jury. This question should have been decided by the court. There was was no fact, in this part of the case, for the jury to find. The facts were established by the undisputed evidence, and the question was, whether they defeated the right to recover. This, I think, was a question of law. The learned judge, in his charge, probably had reference — 576 — to the law of caveat emptor. The rules of law deduced from this maxim have reference generally, and more particularly, to the condition of personal property sold by one party to another. The general rule undoubtedly is, that the purchaser is bound to examine and ascertain the defects in the thing sold, and unless there is some misrepresentation or artifice to disguise it, or some warranty as to its qualities, or character, the vendee is bound by the contract, notwithstanding there may be intrinsic defects and vices in it, known to the vendor and unknown to the vendee, materially affecting its value. (Bouv. Law Dic. title Caveat Emptor. 2 Kents Com. 482, et seq. 1 Parsons on Cont. 460, et seq.) Parsons says the decisions under the rule of caveat emptor have fluctuated very much, and there is a noticeable conflict and uncertainty in respect to many points of the law of warranty upon sales, but some exceptions and qualifications to the general rule, are nearly, if not quite, established, both in Fmgland and in this country; and the rule caveat emptor, thus- modified, may perhaps be regarded as, upon the whole, well adapted to protect right, to prevent wrong, and to provide a remedy for wrong when it has occurred. He adds: One important and universal exception is this, the rule never applies to cases of fraud; never proposes to protect a seller against his own fraud, nor to disarm a purchaser from a defense or a remedy against a seller’s fraud. If the article is present and open to the inspection of the parties, and the seller remains silent, neither saying or doing any thing to mislead the purchaser, and there is no secret defect in the article, known to the seller and unknown to the purchaser, the maxim caveat emptor usually applies. If, however, the seller is not silent, but produces the sale by means of false representations, then the rule of caveat emptor does not apply, and the seller is answerable for his fraud. (1 Pars, on Cont. 461.) Kent says, if the defects in the article sold be open equally to the observation of both parties, the law does not require of the vendor to aid and assist the observation of the vendee. — 577 — If, however, the vendor says or does any thing whatever with intention to divert the eye or obscure the observation of the buyer, even in relation to open defects, he would be guilty of an act of fraud. He adds: A deduction of fraud may be made, not only from deceptive assertions and false represen-? tations, but from facts, incidents and circumstances, which may be trivial in themselves, but decisive evidence in the given case, of a fraudulent design. ’ In the absence of active fraud, by the vendor, the vendee should not be wanting of attention to those points, when the attention would have been sufficient to protect him from surprise or imposition. If he is thus inattentive, the maxim of caveat emptor should apply. But as I understand the authorities, the maxim has no application to cases of actual successful fraud practised by the vendor upon the vendee. The question whether the vendee was actúally deceived is always open. If he was not deceived by the representations or acts of the vendor, though they were false, then he has no cause of action. Take the case of the representation that the horse is. perfectly sound, when in fact an eye is missing, and .this is known to the vendor, or is so entirely obvious that had he examined he would have discovered it. In such a case it is understood that the representation of soundness was not intended to apply to the eye, and even a warranty of soundness would not cover such a defect; but, as Kent says, the vendor must not do or say any thing whatever with intent to divert the eye or obscure the observation of the buyer. If he does, he will be guilty of an act of fraud. Apply these principles to the present case. If the facts were as claimed by the plaintiffs, they were deceived by the false representations of the defendant. These representations were made not only orally, but a list of the leases and the annual rents was furnished to the plaintiffs, showing the annual rent by the railroad lease to be. $600, whereas in fact the rent to accrue was only $111.11 annually. Assuming that — 578 — it was the duty of the plaintiffs, ordinarily, to have examined the papers in the office of the attorney, the fraudulent acts and representations of the defendant were such as were well calculated to satisfy the plaintiffs, and to cause them to omit any examination of the papers for the purpose of ascertaining, any special or unusual provisions in them. In Lefever v. Lefever, (30 N. Y. Rep. 27,) the plaintiff, a director of a bank, purchased stock of the cashier upon the representations of the latter as to the condition of the bank. It was held that if the representations were false and the plaintiff was deceived, he was not estopped from setting up his actual ignorance of the condition of the bank. Wright, J. says: “It was simply a sale of stock, by one officer to another; and although the vendee was a director, having the means of knowledge, he was not, in the particular transact tion, chargeable with notice of the condition of the bank. If he was actually ignorant of its condition, the fraudulent vendor would be legally responsible to him for the deceit, as to any stranger to the institution. It was not a case in which the plaintiff was legally bound to know the truth or falsity of the defendant’s affirmation.” In Mead v. Bunn, (32 N. Y. Rep. 275,) it was held that the omission by one of the parties to an agreement, to make inquiries as to the truth of facts stated by the other, can not be imputed to him as negligence; and that every contracting party has a right to rely on the express statement of an ex-> isting fact, the truth of which is known to the opposite party and unknown to him, as the basis of a mutual engagement ■ and he is under no obligation investigate and verify state-: ments to the truth of which the other party to the contract, with full means of knowledge, has deliberately pledged his faith. This was so held in a case of false representations as to the contents of a mortgage on record. The falsity of the representation would have been at once detected upon an examination of the record. (See also Story’s Eq. §§ 191, 192, 193, 195, etseg.; Neville v. Wilkinson. 1 Bro. Ch. R. — 579 — 546,) And see Binnard v. Spring, (42 Barb. 470,) in which I had occasion to examine the cases cited by Story, and some other cases, and to'show that in that case the sci-enter was necessary, and that it was wanting, and that no action for fraud could be sustained. There is no such question in this case; and the cases above cited are germain to the question. (See also Benton v. Pratt, 2 Wend. 385; Livingston v. The Peru Iron Co., 2 Paige, 391.) [Erie General Term, September 3, 1866. The motion for a new trial, upon the exceptions, should be granted. . Daniels and Davis, JJ. concurred, G-rover P. J, dissented. ¡New trial granted. Qrover, Daniels, Marvin and Davis, Justices.] -o