Morse v. Swits

By the court—Gould, Justice. I think the tendency of all the later decisions in this country and in England, is in favor of extending the liability of every one who makes a public representation which he knows to he false, and upon faith in which any one has been led into a business transaction, whereby he suffers .damage. I do not understand that it is at all necessary to the right of action that the representations should have been intended for the party sustaining the loss, or in any way addressed to him. If it be made openly and publicly, so that it might well come to his ears, and if it does come to his ears, and he acts upon it, the party making it shall answer to him for the damages. He shall not be at liberty to sow falsehood broad-cast, without being responsible for the loss it causes. A very late decision of the House of Lords was had in this case: • The chairman of a mining company by falsely representing to the stock exchange that two-thirds of the shares had been taken and paid up, procured the stock to be entered on the official list. A stranger seeing the stock so entered, and knowing the rule that no such stock was entered unless so paid up; and believing the fact to be in accordance with the representations, bought some of the stock on the exchange. It was held (affirming the judgment of the exchequer chamber,) that the purchaser had a right of action against the directors, for the fraudulent representations. (Law Reports July, 1859, XXI, p. 160.) In the case before us, it is averred that the president and cashier of the bank, (leaving out the oath to their statement as mere surplusage,) made and published a statement of the condition of the bank, on a given day, which statement was to their knowledge grossly false, giving the particular item which was untrue. The complaint adds that this statement was made and published “ in pursuance ” of certain statute enactments. If in other respects this averment came up to the prin [287] ciple I have stated, I consider it of no sort of consequence what the provisions of the statute were, or whether or not there were any statute on the subject; all that is required is the falsity of that statement, (known to the makers of it,) provided the statement be so made that it came properly to the plaintiff’s knowledge and he relying upon it sustained damage thereby. That, in fact, it was made to a public officer, and in a way to ensure its publication in a conspicuous and official manner, may well be grounds for holding that it was intended to deceive the public; but I do not see that therefore the defendants are any the less guilty of fraudulent misrepresentations. Nor does it seem to me of any consequence that the statute referred to had for its object something entirely different from protecting the plaintiff or the public against the kind of injury which the plaintiff has sustained. The falsehoods may have been made for one purpose, and published for that; but being published, the public or any individual of the public has a right to believe it. It must have been the intention of the persons publishing it that it should be believed. And if believing it any one of the public acts on that belief, the makers and publishers of this falsehood are to be held liable for the consequences they have caused. It seems to me refining too technically to .say that the defendants made the report to the bank, and the bank to the superintendent, and the superintendent published it. Granting that true, the bank did not tell the falsehood, &c.; the persons who did, knew and intended the use to which this falsehood was to be, and was put. It is but one remove further off in the regular and usual chain by which the completed act was done. At any rate, the complaint charges that the defendants made and published the statement, and the case comes here on demurrer conceding that they did so. [288] The averment of intent in the complaint is “ with intent to deceive and defraud those who might become purchasers and owners of the stock.” This certainly is not so general as that the intent was to deceive and defraud the public. And yet, under the decision I have cited, a mere stranger to the making of the representations could have alleged no other intent than to deceive the public, and himself as one of the public. I should hold under our Code that the intent was sufficiently averred to authorize a recovery. It seems to me that the ruling of the learned judge who gave the special term decision, (whose opinions are always entitled to great respect,) is not according to the present views of our courts, and I shall be in favor of reversing his decision. Hogeboom, J., concurred. Wright, J., being in court of appeals, gave no opinion. Note.—It has been settled in all the courts of England and of this country, that the officers and directors of a company making false statements or representations . which they know to be false, that become public, as to the organization, capital or condition of the corporation, are liable to any stranger coming to a knowledge of such false statements or representations, and suffering loss or damage by purchasing stock or dealing with the corporation on the faith of such statements or representations. (Bedford agt. Bagshaw, 22 Law Rep., 160; cited in the foregoing opinion by Judge Gould; Bagshaw agt. Seymour, 93 Eng. Com. Law R., 873, 45; Johnson agt. Goslett, 3 Com. Bench R., 569-575; National Exchange Co. agt. Drew, 32 Eng. L. and Eq. R., 10; Colt agt. Wollaston, 2 P. Wms., 154; Green agt. Barrett, 2 Simons, 45; Jones agt. Garcia Del Ris, 1 Tur. and Russ., 297; Blair agt. Adair, 1 Simons, 37; 2 id. 289; Gerhard agt. Baley, 20 Eng. Com. L. R., 130; Colman agt. Riches, 29 Eng. L. and Eq. R., 323; The Charitable Corporation agt. Sutton, 2 Atk. R., 40L-1742; Hitchins agt. Congreve, 4 Russ., 512; Walburn agt. Ingilby, 1 Milne and Keene, 61; Foss agt. Harbottle, 2 Hare, 401; Paisley agt. Freeman, 3 Term R., 51; Pontifix agt. Reynolds, 3 Scott’s N. R., 390; Blount agt. Scott, 2 Scott’s N. R., 588; Gallager agt. Brunei, 6 Cow., 346; Allen agt. Addington, 7 Wend., 9; Bailey agt. The Mayor, fyc., 3 Hill, 531; City of Buffalo agt. Holloway, 3 Seld., 493; Culver agt. Avery, 7 Wend., 384; Upton agt. Vail, 6 John., 181; Barney agt. Dewey, 13 John., 224; Williams agt. Wood, 14 Wend., 126, .10 Paige, 330; Dodge agt. Woolsey, 18 How. U. S. R., 33; Robinson agt. Smith, 3 Paige, . 230; Gardner’s Institutes, 320-323; Mead agt. Mali, 15 How. Pr. R., 347; Gross agt. Sackett, 16 How. Pr. R., 62.)—Rep.