Farmers' Savings Bank v. Jameson

Salinger, J. [679] 1' cor^ruSTon: anty1? rute^)£ar reason. [678] I. Defendant wrote plaintiff a letter, in [679] effect, that its bearer was a desirable bank customer, would probably need to use considerable money, was thoroughly reliable, and was “good for any arrangement”,it might make with plaintiff. .Plaintiff was a bank, which was forbidden b"y Section 1870 of the Code Supplement,. 1913, to loan, more than $2,000 to any one borrower; but,-from time to time after receiving this letter, it loaned the p'arty so presented. more than $60,000, and the borrower is wholly unable to pay. The bank contends that it would not have loaned at all had it not been for said letter, and was induced thereby to loan said large sum. It had a verdict against defendant for its said loss. The trial judge charged that the statement as to being good, etc., is “the material part of this letter,” and, if the damage suffered by plaintiff by the said loaning was “the immediate consequence” of relying thereon, defendant will not be relieved from liability, though the loan “was in violation of law and in sums beyond the authority of the bank to make.” Appellant urges that this charge is erroneous, in that it permits a recovery for the total of the loans; because, in no view, was defendant, liable for more than the $2,000 which might lawfully have been loaned; that any loan above $2,000 could not be any “consequence” of the letter and, therefore, no “immediate consequence” of the same. This attack presents whether the law has put any limitations. on what should be understood from-;the phrase “good for any arrangement” a proposing borrower might make. If, for illustration, said letter is to be treated as a general guaranty, unlimited both as .to time and amount, then, though its maker undertook “to become responsible for any amount of credit you may give him,” he would still not be bound for “an unreasonable amount of credit.” Lehigh Coal & Iron Co. v. Scallen (Minn.), 63 N. W. 245. If we may treat this letter as being no more than such guaranty, we would readily hold that the loaning-of more than $60,000 to a stranger, a country [680] dealer in gravestones, made by a bank having a capital of $10,000, and limited by statute to $2,000 per borrower, was so unreasonable a credit as that the guarantor could not be charged with it, because he neither intended nor anticipated it. It is manifest, then, that, if we may not thus hold, it is because the finding of the jury settles that the letter was a fraudulent false pretense, and that, therefore, the writing of it was not a guaranty, but a tort. 2. fraud : fraudulent represenabi^construc-" guage.lan" One difference between a letter of guaranty and a letter which is a tort is that one who so commits a tort may not defend that his writing had unexpected consequences. Doyle v. Chicago, St. P. & K. C. R. Co., 77 Iowa, at 610: Texas & P. R. Co. v. Carlin, 111 Fed., at Fottler v. Moseley (Mass.), 70 N. E. 1040; Hill v. Winsor, 118 Mass. 251; Jones v. Boyce, 1 Star. N. P. 493. And the essence of appellee’s theory is that, because of this rule of damages in tort, defendant may not urge that he could not anticipate that $60,000 would be loaned on the strength of the fraudulent pretense with which he is charged. It is perfectly true that he may not do this if the pretense was broad enough. But does the fact that it will not avail one who does make a false pretense to say that he could not reasonably anticipate the consequences that did follow, make him liable for a pretense which he did not make ? That one who utters a false pretense may not escape the consequences of it, no matter what they are, certainly has no bearing on the question of what his false pretense was, nor bar the defense that the loss sustained is not a consequence of his writing at all. The existence of said rule of damages merely enlarges what may be recovered for a wrong which has been committed. The least reflection should demonstrate that the rule does no more than settle that, in cases where a charged representation is established, the defense that its consequences, were unforeseen, or could not have been foreseen, is eliminated. But, surely, such rule does [681] not interfere with showing that no. false pretense was made, or that what was suffered by complainant was not caused by such false pretense as was made. That a stated act’s being done precludes inquiry into whether its consequences could be anticipated neither proves that such act was committed, that it had any consequences, nor what were its consequences. Once show that this defendant did fraudulently write a falsehood which may in reason have been understood to represent that the Granite Company was financially responsible for any amount whatsoever, and he may not say that he should not have been believed, nor that he could not foresee that so large a loan as was, would be, made. But, if he made a representation which could not thus be understood, then, no matter how fraudulent was his letter, its representations would still be no more than they were. A fraudulent representation that one is good for $2,000 would not make him liable for all loaned if $60,000 be loaned. While the representor may not say that, though he falsely represented that a borrower was good for $2,000, he did not anticipate that such sum would be loaned, he may defend against being held liable for a $60,000 loan, not because the larger loan could not have been anticipated, but because he never represented the borrower to be good for the larger loan. The falsity of the pretense that the borrower is good for the smaller sum, coupled with the fact that the larger sum was loaned, cannot enlarge the pretense that was in fact made. The excess of the loan above $2,000 is not an unexpected consequence of the pretense which was made, but it is not its consequence at all. If we must hold that the representation made was limited to a loan of $2,000, then, as to the loan in excess thereof, there is no question of faet as to whether the larger loan was proximately due to such representation. Our question is not whether defendant made a false representation not limited to a loan of $2,000, and whether he may evade it by claiming that he could not foresee that $60,000 would be loaned. It is whether a loss suf [682] ferecl by plaintiff was caused by justified reliance upon the representation which was made. No matter how vicious the fraud perpetrated, plaintiff may not recover more than such fraud induced him to lose; and Instruction 12 so rules. It follows, the vital inquiry is, what is the representation that was made, — more concretely, how should plaintiff have, as a matter of law, understood what was written to him? However the damages permissible may differ in tort and on guaranty, what language used means, is settled by the same rules in either case. While one may not commit a tort by writing and have read into it a limitation as to what damages resulting he is to be responsible for, he may insist that what he has written is not the tort which plaintiff claims it to be. There is no rule of construction peculiar to determining the meaning .of written words which constitute a tort. The same words are dealt with in the same way, whether found in a statute, an alleged libel, or a contract. We have applied the ordinary rules of construction in tort, or, rather, in determining how a statute forbidding a tort should be construed. State v. Gardner, 174 Iowa 748, involves how the words “any person” should be construed when found in a statute which makes it a felony to resort to a house of ill fame, for stated purposes. It goes without saying that the felony of so resorting to such house is as much a tort as the writing of a fraudulent false pretense. We held, in Gardner’s case, that the phrase “any person,” found in such statutes, though broad enough to include all human beings, is limited by the rule of reason; and that, in determining how the use of words was understood, there should be taken into consideration what was the general understanding of the law as it existed before such statute, was made, in order to arrive at what meaning such words in such statute would, convey; and that it should not .be held that the legislature contemplated absurd literal interpretation ..of said general words. If the approved usage of the language, or the . meaning in law of a technical phrase or: pre [683] existing law, may be read into a statute wbicb creates a felony, and if the words therein found may be interpreted and limited by considering these, it must follow that, whenever it becomes a question whether a written false pretense induced a loss, the rule of damages in tort affords no reason for blocking an inquiry on what the words used in the pretense mean, in law. Dealing with ‘ ‘ any person, ” when defining to whom a criminal statute applies, and “any consequence,” used in a false pretense, calls not for different rules of construction. Though the ■ consequence of what was written must be met, whether anticipated or no, no rule of law prevents reading into a written false pretense either the approved usage of the language, the meaning in law that a technical phrase may have attained, or ■the law of the land. The point, then, narrows to how, apply- . ing the ordinary rules of construction, plaintiff must have understood defendant’s letter. 2. 3. Banks and BANKING; loans: false representation as to solvency: implied limitation on language. If, to the statement that the proposed customer “was good for any arrangement he might make,” there had been added, “but not exceeding the borrowing of $2,000,” it will be agreed that, though the rating as worthy a credit of $2,000 were a deliberate fraud, defendant would not be liable for $60,000 loaned in addition to $2,000. If, for any reason, plaintiff must have understood the unlimited statement to be limited to a credit ,of $2,000, then ■ the case stands as though the supposed limitation had been • written into the letter. If, for any reason, plaintiff must have ■ understood that, when defendant wrote that the company was good for “any” arrangement it might make, he meant to convey that “any” such arrangement meant' one that was not repugnant to sound and safe banking, then the letter to plaintiff is to be treated as though.it stated such proviso. If, by [684] general banking usage, known to both the banker who wrote and the banker who received the letter, the phrase, “good for any arrangement to borrow” meant an arrangement sanctioned by good banking, then, no matter how fraudulent, the representation made to plaintiff was still not one that the company was good for “any” loan it might be willing to take, but good for one not in excess of the limit set by sound and safe banking. If the broad words used had become thus limited by ‘ ‘ context and the approved usage of the language, ” or because they constitute a technical phrase which was thus limited by having acquired “a peculiar meaning in law,” then the broadly worded representation carried on its face a restriction to whatever was sound and safe banking. We have already pointed out that the word “any” does often have a meaning narrower than the literal; that it is never to be taken literally at the expense of reason. Should it here be given its broadest meaning? The parties sustained no fiduciary relations, — indeed, no relations. Yet the letter was signed by a bank president, and we must assume for plaintiff that it believed his letter to be an honest one. Still, it was, after all, the letter of a stranger. The record discloses no knowledge of or about him beyond that the recipient recognized him as the one who presided at a bankers ’ meeting at Yinton. Every mental step which overcame that fact, by giving weight to the standing of one who was such bank officer, involved thinking that such an one writing to a brother banker in honesty would not request what it would be unreasonable, in fact, for a stranger to do, and unreasonable for him to think or believe a stranger would do — involved the thought that he would not ask the making of loans that one of his standing would not make. Whatever led plaintiff to act out of deference to the writer threw light on the meaning of his letter. Its recipient could not conclude that it was safe to loan because an eminent, honorable, financial authority represented it to be proper, and believe, .too, that such authority was requesting it to;loan [685] all its funds, and more than six times its capital, to a nonresident country monument dealer, of whose affairs it knew nothing, without bankable and adequate security. Applying the elementary canons of construction to such situation and conditions, constrains us to hold that the representations made, honest or no, could not, in reason, have been understood to be that the company was, literally, good for any sum whatsoever, and must have been understood to speak to nothing above any loan which a bank of the class to which plaintiff belonged, would, in reason, be likely to make to such a borrower, or any borrower, in the circumstances — a loan that was proper banking. 3. i. banks and BANKING: loans: guarantoSseoivencyofS nSt'ofTtatute. Now, ordinarily, what was such a loan would be a jury question. But is that so if the law defines what is such banking — if it be settled, as matter of law, that loaning more than $2,000 is unsafe, discredited, and, therefore, prohibited banking; if, in a word, statute law may be read into the letter ? All who do business in-the state are conclusively held to know its law. It is not strained to assume that both parties, bankers, actually knew the statute law on banking. In our view, such law does declare that a loan, here, of more than $2,000 was unsafe and discredited banking, and forbids it. 5.criminal misdemeanor: prohibited act wiüiout penalty. Section 1870 of the Code Supplement, 1913, prohibits this plaintiff bank to permit one borrower to become liable to it beyond $2,000. Section 1877, Code, 1897, makes it the duty of, or at least empowers, certain officers to wind up the affairs ot a bank which violates _ „„„ . . . Section 1870, with a receivership. It is a question whether a violation of 1870 is not within Section 4905, Code, 1897, which provides that, when [686] the performance of any act is prohibited by any statute, and no penalty is imposed, the doing of such act is a misdemeanor. 6. Fraud : fraudulent representations : justifiable reliance: state bank loans. Whether it is, needs, for reasons presently to be stated, not to be decided; and we may assume, for the purposes of this decision, that no punishment is provided for those who disobey Section 1870. It is true, too, but' we think not material, that the one who borrows more than such statutes permit may not resist judgment by pleading the violation of such statute. 5 Cyc., page 580, Note 95; Portland Bank v. Scott (Ore.), 26 Pac. 276; Wyman v. Citizens’ Nat. Bank, 29 Fed. 734; O’Hare v. National Bank, 77 Penn. St., at 102; Gold-Mining Co. v. National Bank, 96 U. S., at 641; Mills County Nat. Bank v. Perry, 72 Iowa, at 16; Weber v. Spokane Nat. Bank, 64 Fed., at 211; Savings Bank v. Boddicker, 105 Iowa, at 558. These but declare that the statute rule is for the safety of the bank and its stockholders and creditors; that to prevent recovery of the borrower would, therefore, injure those whose protection is the object of the statute; and that ■ one who keeps what he got by having the statute violated should not be heard to object to payment because what he received was got in spite of the statute prohibition. And the Bod-dicker case, supra, so holds as to the surety of the borrower. As put in Gold-Mining Co. v. National Bank, supra, “after obtaining and holding to its own use the money,” the company cannot be allowed to interpose the plea that the bank had no right to loan the money. And see Portland Bank cáse, supra. It is true, as well, though again immaterial, that recovery is allowed because it is for the government and not the borrower to punish for the disobedience of such statutes.. O’Hare v. Bank, 77 Penn. St., at 102; 5 Cyc., page 580, Note 95; Wyman v. Bank, 29 Fed. 734. How does all this matter ? True, the borrower here could not defeat judgment; true, it is not permitted to punish the lender. But the controversy is not over whether one who got [687] and retains the proceeds of a prohibited loan is estopped to urge the violation of the law committed in loaning to him, nor over whether the lender may be punished, and, if so, how and by whom, but over whether a recommendation should have been understood to be limited to loans that did not constitute bad and prohibited banking, as defined by statute. 7‘ construction: terms of writing. It is possibly to be gathered that there is suggested that, since the borrower may not avoid the contract, a stranger may not. It misses the point. This defendant is a stranger to the borrowing and lending. He is not liable as a borrower at all, not even up to $2,000. He has no need to and could not urge that part or all • of the loan is uncollectible because of said statute prohibition or rule. But all this does not establish that he may not say that his letter did not advise a disregard of said statute, limited the plaintiff to loans not within its condemnation, and suggested the limitations of this statute. That the borrower is estopped, and that the lender may not be punished, in no way meets .the statement of Fowler v. Scully, 72 Pa. 456, noted in O’Hare’s case, supra,, that the statute is a regulation “to prevent these associations from splitting on the rock which has ruined so many banks, to wit, that of lending too much of their capital to one person or firm, the intention being to protect the association and its stockholders and creditors from unwise banking, we cannot suppose it was meant to injure them by forbidding recovery of the injudicious loans.” It in no way establishes that plaintiff was justified in understanding the letter to advise the making of a prohibited loan which, as a matter of law, was unwise banking. It is not to be assumed that the recipient of the letter said to himself that, though to loan these parties six times the capital and substantially all the money of the depositors is unsound banking and is prohibited by law, this letter advises doing this, and should be followed, because so loaning, while it may close the bank and ruin its owners [688] and creditors, will not send the lender to jail, and because the stranger borrower will not be able to prevent the getting judgment against him. General language should not be construed to authorize any and all acts upon which the criminal law has not laid its ban, and for consequences of which the courts will afford some remedy. We have gone so far as to hold that a statute which is void may still fix public policy. Mr. Justice Deemer, speaking for the court, said, in Dorn v. Cooper, 139 Iowa, at 750: “The legislature, in declaring the public policy of the state, had spoken in an authoritative, way, and, although the statutes may have been void, because not uniform in their operation, or because of the varying degrees of punishment, the acts with which plaintiffs were charged were none the less contrary to public policy of the state, as declared by proper legislative authority.” If one receive a letter requesting that the recipient do “anything” in his power for a third person, it should not be construed to include lying for him, or inducing the widowed sister of recipient to embark every dollar she has in some utterly reckless speculation proposed by the other. And this is. so though lying is ordinarily not punishable by fine or imprisonment, though such advice be not punishable, and though the widow is saved the right to get a worthless judgment as a substitute for all her means of livelihood. It reverts to the undeniable proposition that words are not to be strained into a request to do improper, unsafe things condemned by law, or to commit a breach of trust against depositors, merely because what is done is not a criminal offense, and because, for reasons of public policy, the courts will entertain attempts to remedy such misdoing. The result is that, even in tort, defendant can be put in no different position than he would occupy had his representation been in terms limited to a credit not exceeding $2,000. It follows that he is not liable for the loss of plaintiff by loan [689] ing more than that. It remains hut to determine whether he is, in any view, bound to repay up to $2,000. 8' uÉnt represenagesfpay?™" catfon • suretyship II. Without determining what it was, in fact, that induced the plaintiff to part with any money, the utmost that may he claimed for plaintiff on this record is that a false representation concerning the solvency of a borrower induced it to loan $2,000, to its loss in that amount. It appears that the borrower repaid more than that sum. If, after parting with $2,000 because of a wrong done by defendant, plaintiff had compelled the borrower to repay that sum, it would be clear that, no matter what the wrong of defendant, he would be absolved from liability, for the simple reason that his wrong had ceased to be injurious. Now how is this changed because a borrower who had fraudulently obtained $2,000 by the help of defendant, and, say, $18,000 more through an act of plaintiff, not induced by defendant, pays back, say, $10,000 ? In a sense, defendant is a surety for $2,000. It is in the sense that, of a larger aggregate of loans lost, he is holden to save the lender harmless for but $2,000, and may urge that the applying of $10,000 received on what he is not liable for at all is to give undue preference to the plaintiff whose act caused the loss above $2,000 as much as defendant’s caused the loss up to $2,000. We think that, in these circumstances, defendant may insist that, when the fraudulent borrower restores more than $2,000 in reduction of a loss greater than $2,000, the sum received should be applied as far as necessary to extinguish defendant’s liability for. the loss of the smaller sum, and should not be devoted by plaintiff to the payment of the loss above $2,000, which, so far as defendant is concerned, would never have happened but for the act of plaintiff. Some such thought as this rules Savings Bank v. Seidensticker, 128 Iowa 54, 55, as to the surety of an embezzler; and Crane Co. v. Heat & Power Co. (Wash.), 78 Pac. 460, lends considerable support to this position. [690] 2. 9‘ uient representations: eviciency" *nsu®" If there he doubt as to this, there is another reason why defendant should not be held responsible in any sum. We have examined this record with the care due the gravity of the issues, and are satisfied by such investigation that there is no sufficient,’ if indeed . any> evidence that any representation made by defendant was fraudulently made. And our passing upon this point is, notwithstanding the disposition of the case, no mere dictum. The lack of proof is duly presented. A finding of no fraud is at least an alternative finding. It furnishes a reason why the decision is right, even if the arguments that no representation was made and that liability has been extinguished be not tenable. If, in passing on the alleged fraud, we may be said in any sense to depart from the rule of “needless decision,” we think there is a peculiar situation which justifies, if, indeed, it does not demand, a seeming departure from that rule. There is in the record a verdict and a judgment which find the defendant guilty of an intent to defraud. A reversal on the ground that no representations were made concerning the right to credit above $2,000, and of repayment by the borrower, does not exclude that defendant fraudulently represented the Granite Company to be good for as much as $2,000. Finding that the evidence does not disclose any fraud, we think we should so declare, because our ultimate conclusion obviates a retrial, and thereby all opportunity for defendant to set aside the now existing finding of fraud below, on a retrial. III. Various other contentions are fully argued. Among them are: (1) Whether, under the pleadings, it was error to permit a recovery if it be found defendant had asserted positively, and of his own knowledge, that something was true, though he did not know whether it was true or false; (2) whether the letter should not have been understood to refer to the buying of commercial paper rather than to the loaning [691] of money; (3) whether the statement as to financial standing was more than a naked opinion; (4) whether a recovery may rest upon failure to advise plaintiff if defendant learned, after writing, that the company was or had become insolvent; (.5) whether plaintiff in fact relied upon the letter, and, if so, whether the case be not within the ancient rule which denied recovery as for fraud to one who was not “an innocent;” (6) whether insolvency may be shown by opinion testimony; (7) whether insolvency may be established by showing that one is generally reputed to be insolvent, and, if so, whether such general repute in his community is any evidence that one who lived there and asserts him to be solvent is responsible as for asserting that which he knew to be false. Having concluded that defendant never made a representation that the.Granite Company was good for more than $2,000, and that any loss sustained up to that sum has been repaid, and, if this be not so, yet no fraud induced any loss sustained, it becomes apparent we Should not pass upon the various other error points made. The case must be, and is — Reversed. Evans, C. J., Ladd, Weaver and Gaynor, JJ., concur.