Childs v. Merrill

The opinion of the court was delivered by ROSS, Ch. J. The contention is whether the declaration when encountered by a general demurrer, discloses a cause of action. It sets forth that the defendant, being pecuniarily embarrassed and desirous of raising money, procured the plaintiff as a matter of accommodation, to indorse his promissory note for six hundred dollars; and to induce the plaintiff to make the indorsement, the defendant falsely, and fraudulently represented to him, that he owned, unincumbered and in fee, certain lands in California, and certain shares of railroad stock, and two horses ; and to secure him for making such indorsement he would mort — 468 — .gage ¡to him the lands, and give him a lien on the railroad stock ■■and horses; that in reliance upon the truth of the representations he made the indorsements; that the defendant gave him afterwards a mortgage of the California land, but it Avas heavily encumbered, so that his mortgage was of little or no value ; that the defendant did not own the railroad stock nor horses, and did not, and would not give him a lien thereon ; that the defendant well knew the falsity of his representations and made them to deceive the plaintiff ; that the plaintiff thereby Avas deceived and has had to pay the note; and that the defendant Avas and is wholly insolvent, and irresponsible. The representations and indorsement are alleged to have been made on the 26th day of November, 1888, and the mortgage of the California lands to have been given December 12th following. The averment is that they were encumbered on November 26th. The defendant contends that it is not a good averment that these lands were encumbered when the mortgage to the plaintiff Avas given December 12th. But the averment that they were heavily encumbered at the date of the representations declares the falsity of the representations then made, and their condition at that date would be presumed to exist, unless something to the contrary appears, at the time the mortgage Avas given to the plaintiff. The material .averments however are the falsity of the representations when made, and that the plaintiff has been damaged thereby. The damage is declared by the allegation that the lands were heavily encumbered by mortgage, by reason whereof, the mortgage deed thereof to the plaintiff became and Avas of little or no value. To sustain an action of this nature, deceit and damage must concur. In these allegations, we have known misrepresentation^, deceit and damage. These are the only required elements of an action of fraud, if the misrepresentations are of an actionable character. As said by Croke, J., Bulst. Pt. 3, 95, “ fraud without damage, or damage without fraud, gives no cause of. action, but where these two do concur then an action lieth.” Pasley v. Freeman, 3 T. R. — 469 — 51. This form of action does not rest upon the defendant’s nonperformance of his promise to give the plaintiff a lien upon the railroad stock and horses, but upon the deceit consequent upon his misrepresentation that the California lands were free from incumbrance and that he owned the railroad stock and horses, and the damage resulting therefrom. The plaintiff avers that these misrepresentations were made to induce him to indorse the defendant’s six hundred dollar note, and did induce him to indorse it whereby he has had to pay the note, and has no means of enforcing payment from the defendant. He might have had no means of enforcing payment from the defendant if his inducing representations had been true, but he would be more likely to have. While damage must concur to support the action, the gist of the action is the inducing misrepresentations knowingly made by the defendant. That the plaintiff has had to pay the defendant’s note, imports some damage, even if he could enforce payment from the defendant. Hence the allegations in regard to both classes of property are sufficient to sustain the action, if they were of an actionable character. Nor would the plaintiff have to rescind, by tendering back the mortgage he received, of the previously encumbered California land, to entitle himself to maintain this form of action. Mallory v. Leach, 35 Vt. 156; Kelly v. Pember, 35 Vt. 183. On the allegations, that mortgage, subsequently given, was not the inducing consideration for the plaintiff’s indorsement, but the representations that the defendant owned the railroad stock and horses, and owned the land free from incumbrance, and would give the plaintiff security upon all of them. Retention of the slight security, if any, he thereby obtained would not waive the tort. The plaintiff by tendering back the mortgage, upon learning the falsity of the defendant’s representations, could not have relieved himself from his liability as indorser upon the defendant’s note to the bank. Rescission is required, only in cases in which it would place the parties in stat/a quo. — 470 — But it is further contended that the defendant’s false representations were of his own j>ecuniary resources, and that an action for deceit does not lie for such misrepresentations, and he cites in support of this proposition, Fisher v. Brown, 1 Tyler 387; Williams v. Hicks, 2 Vt. 36 ; Dyer v. Tilton, 23 Vt. 313; Snow v. Woodburn, 27 Vt. 415 ; and Best v. Smith, 54 Vt. 617. Fisher v. Brown was heard on demurrer to the declaration. The declaration alleged that the defendant purchased of the plaintiff a horse on credit, and gave his note therefor on time, by falsely representing that he owned a farm in an adjoining town and had a debt due him'.there. The suit was brought before the note fell due. The declaration contained no allegation of special damage. The court held the declaration insufficient on three grounds: 1st. When a man seeks to obtain credit for a chattel, and boasts his ability to pay, the vendor should exercise discretion and vigilance, and make inquiry and not rely solely upon the representations of the purchaser as to his pecuniary responsibility. 2d. That there was no allegation of special damage arising from the misrepresentations. 3d. Where the credit is a part of the contract, it is so material a part of it, that if the action be brought within the time limited for credit, it cannot legally be supported, unless it was not a bona fide purchase at the time by the vendee. Williams v. Hicks was an action upon a promissory note given for a patent right for the manufacture and sale of saddles. The misrepresentations relied upon in defence related to what the vendor claimed to have been offered for the right to manufacture and sell in certain counties, and that he had a uniform price for a license to manufacture saddles in New Hampshire. It did not appear that the note was given for the right to manufacture and sell in the counties named. It was held that these representations, if false, did not show a defence to the note; that they did not show that the defendant suffered any damage, nor did he say that they induced the purchase. It is intimated that they did not extend beyond the right of a vendor to — 471 — recommend liis property, and should not be relied upon by the purchaser. In Dyer v. Tilton, the defendant obtained credit of the plaintiff by falsely representing that he possessed two bank bills, one for $100 and the other for $20 and that a certain person owed him. Before bringing his action for fraud the plaintiff had recovered on the contract but failed to collect his judgment. The court held that the action was of novel impression : that the testimony showed nothing more than the ordinary evasions, to which men always do, and may be expected to resort, when reluctant to disclose the state of their property; and that the plaintiff had elected to treat the. matter as one of contract. This case is criticised in Poor v. Woodburn, 25 Vt. 234. It is there said that the case of Dyer v. Tilton, was effectually concluded as one of contract, by the judgment. Judge Isaac F. Redfield speaking for the court, says, “ In regard' to fraud, the question must be determined a good deal upon the cases. There is doubtless a considerable difference between fraudulent representations in regard to the extent of one’s property in the general, and in the detail. In one case you have the means of forming your own opinion, and in the other, you trust altogether to the estitmate of one’s own resources, which is proverbially a very poor reliance. But how far a man is justified in asserting clear falsehoods even upon matters resting in opinion may be questionable. One may as surely perpetrate fraud in the one as in the other mode of misrepresentation.” Snow v. Woodburn, is an action for fraud predicated upon a representation by a person asking for credit, that he is safe to be trusted and given credit to. It was held that such representation should be regarded as merely a matter of opinion, and should not be relied upon as matter of fact. But Judge Bennett is careful to say, “ Farr (the purchaser) did not make any false representation as to any item of property which he possessed, but simply that he was safe to be trusted and given credit to.” In Best v. Smith, the defendant obtained credit of — 472 — the plaintiff on liis promises to reimburse them from the avails of tbe road which lie was under a contract to furnish to the railroad company, and on his promise to assign the pay coming from his future performance of the contract to the plaintiffs. It is held that the duties and obligations of the defendant rested altogether in promise; that there was no representation of the defendant that he had property in possession ; but that he had a contract which if performed, would be of value. From this review of the authorities cited by the defendant it will be seen that only in Fisher v. Brown, and Dyer v. Tilton, were there any false representations of property in possession. The latter is criticised subsequently and made to rest upon being concluded by the judgment as resting in contract. The first had other sufficient grounds upon which to rest. So far as they hold that false representations of property in possession causing damage, made by a purchaser to obtain. credit, are not actionable, they must be considered, not only in the light of the criticism of one, by Judge Isaac F. Nedfield already alluded to, but in the light of other cases bearing upon the same subject. In Hodgeden v. Hubbard, 18 Vt. 504, the plaintiff purchased a stove on credit, falsely representing that he owned a farm in Cabot and considerable stock upon it ; that he owned the team he had with him and carried on a large business manufacturing butter firkins, and gave his note for it on six months’ time. The purchase was at Montpelier, from a clerk. The clerk learning that the plaintiff was pecuniarily irresponsible, and that his representations of property in possession were false, pursued him, and forcibly retook the stove. The action was trespass for assault and for taking and carrying away the stove. The representations having been found knowingly to be false and to have induced the purchase and credit, it was held that no property in the stove vested in the plaintiff and that the defendant might lawfully forcibly retake it. To much the same legal effect, are Fitzsimmons v. Joslin, 21 Vt. 129, and Chamberlin v. Fuller, 59 — 473 — Vt. 247. These cases hold that when a person asking for credit obtains it, by making false representations in regard to property in his possession and ownership, which are relied upon and induce the credit, he does not, because of the fraud, obtain title to the property purchased on credit. In other words, they in effect hold that by such representations the purchaser commits an actionable fraud. The vendor may elect to waive the fraud, and hold the purchaser on his contract, and generally does so if he dops not rescind the contract as soon as he is made aware of the falsity of the representations, or of the fraud. We think the cases last cited, must be held to have so far modified and overruled the apparent holdings in Fisher v. Brown and Dyer v. Tilton, that a person purchasing upon credit does not commit an actionable fraud, when he induces the purchase by false representations in regard to his property in possession. Such representations are not expressions of opinion or estimates of one’s ability to pay, but statements of facts in regard to his property in detail, on which the vendor has the right to rely, and form his own opinion or estimate of the purchaser’s right to credit. All these cases apparently rest upon the leading case of Pasley v. Freeman, 3 T. R. 57 decided in 1789. In that case the defendant knowingly, falsely represented that the proposed purchaser on credit, was a man of good credit. Such representations relied upon were vigorously contended not to be fraudulent, that the maker gained nothing by making them. Buller, J., relying to this contention, says : “ But let us see what is contended for: it is nothing less than that a man may assert that which he knows to be false, and thereby do an everlasting injury to his neighbor, and yet not be answerable for it. This is as repugnant to law, as it is to morality.” And Lord Kenyon, Ch. J., says : “ All laws stand on the best and broadest basis which go to enforce moral and social duties.” The repugnancy to law and morality is not any the less when the proposed purchaser knowingly resorts to false representations of facts in regard to himself to — 474 — acquire property upon credit. Tlie proposed purchaser on credit may recommend himself as a man of credit, may over-estimate the value of his property in possession without legal liability. These statements rest largely in opinion, and are so understood between the parties. His credit often depends as much upon his habits of frugality, and industry, upon his good health, and unwaivering integrity, as upon his possession- of property. He is expected to place a high estimate upon the value of his property. The vendor of a horse may over-value it. The proposed purchaser expects he will. This is a matter of judgment, and the purchaser relies upon his own. On representations of matters of judgment and opinion, each party forms and relies upon his own. But when the vendor or purchaser calls upon the other for a statement of facts, he is entitled to have them given as the party honestly believes them to exist, and if he knowingly makes a false statement of facts to secure a sale or purchase, and thereby secures it to the damage of the other party to the transaction, he not only disregards his moral and social duties, but commits an actionable fraud, which the law will redress. The judgment is affirmed and cause remanded.