46 N.J.L. 380 | N.J. | 1884
The opinion of the court was delivered by
This action is an action on the case for deceit. There is a distinction between relief, either affirmative or defensive, in courts of equity, on the ground of fraud, and the remedy for fraud in a court of law. Courts of equity grant affirmative relief by way of reformation or cancellation of instruments, and even defensive relief in proceedings to enforce an obligation or liability, on the ground of constructive fraud, such as would afford no relief in law, especially by action for deceit. 2 Pom. Eq., § 872; Arkright v. Newbold, L. R., 17 Ch. Div. 302, 317, 330; Redgrave v. Hurd, 20 Id. 1, 12. Reese River Silver Mining Co. v. Smith, L. R., 4 H. of L. Cas. 64, in which Lord Cairns held that)“ if persons make assertions of facts of which they are ignorant, whether such asser - tions are true or untrue, they become, in a civil point of view, as responsible as if they had asserted that which they knew to be untrue,’^is an instance of equitable relief by way of rescission. The bill was filed by a subscriber for stock to be relieved from a subscription induced by false representations as to the property of the corporation. ]In that case,, as appears in the report in L. R., 2 Ch. App. 604, the directors issued the
The action of deceit, to -recover damages for a false anal fraudulent representation, differs in principle from the cases! that have been referred to. In such an action a false representation, without a fraudulent design, is insufficient. There must be moral fraud in the misrepresentation to support the action. Pasley v. Freeman, 3 T. R. 51, and Haycraft v. Creasy, 2 East 92, are the leading cases on this subject. Both of these cases were decided by a divided court. In Paisley v. Freeman the question arose on a motion in arrest of judgment. The count in the declaration which gave rise to the motion averred that the defendant, “intending to deceiveand defraud
The Court of Queen’s Bench departed from the doctrine of Haycraft v. Creasy in two cases, and held that an action at law might be maintained for false representations, though there was neither fraud nor negligence. Fuller v. Wilson, 3 Q. B. 57; Evans v. Collins, 5 Id. 804. But Wilson v. Fuller was reversed on error, (3 Q. B. 68,1009,) and the question was finally set at rest in the English courts in Taylor v. Ashton, 11 M. & W. 401, and Ormrod v. Huth, 14 Id. 651. In Taylor v. Ashton the suit was against the directors of a banking company for publishing a false report of the condition of the bank. The report had been prepared by the officers of the company, and adopted at a meeting of the directors. The judge charged the jury that they must be satisfied that a fraud.—that is, a moral fraud—had been committed by the defendants. The jury, under this instruction, found for the defendants, stating, at the same time, that the defendants had been guilty of gross and unpardonable negligence in publish
prolific of decisions, are not altogether harmonious. Mr. Pomeroy, speaking of the cases I have cited from the Queen’s Bench as holding that a representation, false in fact, if acted upon, would support an action, and that the defendant’s liability was independent of his knowledge or ignorance of its actual falsity, says, “ This theory admitted the possibility of fraud at law where there was no moral delinquency. It denied that moral wrong was an essential element in the legal conception of fraud. The same view was for a time accepted and adopted by a considerable number of decisions in different American states. These cases have, however, been overruled, and the theory itself abandoned in England, and generally, if not universally, throughout the states of our own country. Itl is now a settled doctrine of the law that there can be no fraud,! misrepresentation or concealment without some moral delin-J quency. There is no actual legal fraud which is not also a moral fraud.” 2 Pom. Eq., § 884. The English and American cases are fully cited in the notes to Paisley v. Freeman, 2 Sm. Lead. Cas. 176-186. They have placed the law on this subject where it was put by Paisley v. Freeman and Haycraft v. Creasy, and have, I think, upon principle as well as by the great weight of authority, established the law on the rational basis that in the action for deceit, moral fraud is essential to furnish a ground of action. The American case , ohfc be expected of a subject so
The principle on which the action for deceit is founded being ascertained, the next consideration is with respect to the
The simplest form in which the question of the sufficiency of proof arises is where the proof is that the representation was false to the defendant’s knowledge. The scienter as well as the falsehood being proved, proof of the fraudulent intent is regarded as conclusive. Evidence that the defendant intended no fraud will not be received, and the jury will be instructed to find for the plaintiff, though they should -be of opinion that the defendant was not instigated by a corrupt motive of gain for himself, or by a malicious motive of injury to the plaintiff. Foster v. Charles, 6 Bing. 396; S. C., 7 Id. 105; Polhill v. Walter, 3 B. & Ad. 114; and Mylne v. Marwood, 15 C. B. 778, are cases of this kind. In each of these cases the proof was that the representation was false to the knowledge of the defendant. The jury added to its finding an expression of opinion that there was no fraudulent intent, but the court nevertheless entered judgment for the plaintiff on the ground that a wilful falsehood was a fraud. The language of Lord Campbell in Wilde v. Gibson, 1 H. of L. Cas. 605, 633, was directed to cases of this aspect; and Jessel, M. R., in a case where it was proved that the representation was untrue to the defendant’s knowledge, refused to receive evidence that he in fact believed it to be true. Hine v. Campion, L. R., 7 Ch. Div. 344.
In other cases of actionable frauds, the probative force and effect of the evidence to establish the fraudulent intent will depend upon the circumstances of the particular case. This question is presented in a complex form where the defendant has added to a representation—which turns out to be untrue,
The Massachusetts cases cited to support the instruction certified to the court admit the distinction I have referred to. In Tryon v. Whitmarsh, 1 Metc. 1, which was an action for false and fraudulent representations as to the credit of third persons, whereby the plaintiffs were induced to give them, credit, a verdict for the plaintiffs was set aside for the reason that the judge should have instructed the jury that the defendant would not be liable if they were of opinion, from the evidence, that he gave an honest opinion, and believed that the persons recommended were trustworthy. In Hazard v. Irwin, 18 Pick. 96, the false representation was by a vendor,, on the sale of an engine, with respect to its condition. He made the representation as of his own knowledge. The condition of the engine was a fact the vendor could easily have ascertained. The court, (Shaw, C. J.,) cited Haycraft v. Creasy, and distinguished it from the case in hand in that the subject matter of the representation was “ one of fact in respect to which a person can have precise and accurate knowledge, and in respect to which, if he speaks of his own knowledge, and has no such knowledge, his affirmation is essentially false.” In Page v. Bent, 2 Metc. 371, the false representation was in relation to the nature and amount of the assets assigned by the defendants. The condition and amount of the-assets were peculiarly within the knowledge of the defendants. The court, (Shaw,-C. J.,) said, “The principle is well settled that if a person make a representation of a fact as of his own knowledge, in relation to a subject matter susceptible of knowledge, and such representation is untrue, * * * it is a fraud and deceit for which the party making it is responsible. * * * But in a matter of opinion, judgment or estimate, if he states a thing of his own knowledge, if he in fact believes it, and it is not intended to deceive, it is not a fraud, although the matter misstated is not true. The reason is that it is apparent from the subject matter that what is thus stated as knowledge must be considered and understood by the party ta
The principle adjudged in Haycraft v. Creasy is applicable to actions against directors for false and fraudulent representations concerning the financial condition of the institutions in their charge. It was so applied in Taylor v. Ashton, which has become a leading case in the English law. The affairs of such an institution must necessarily be entrusted to executive officers and subordinate agents, and the directors generally cannot know, and have not the requisite ability to learn, by their own efforts, the exact condition of the affairs of the company, and it has been found that no vigilance on their part has been adequate to protect these institutions from frauds and peculations covered up and concealed by false entries and false reports. A representation by a director that the institution is in a sound and solvent condition within his own knowledge
The facts on which this case was founded were these: the plaintiff was a depositor in the bank. About the 1st of August, 1878, there was a rumor in circulation affecting the condition of the bank. The defendant was one of the directors of the bank, and a member of the finance committee. The plaintiff, having heard the rumor, went to the defendant and told him of the rumor in circulation, and that he was a depositor and did not want to lose his money, and proposed to take it out. The defendant said, “ It can’t be so, unknown to me and Mr. Monks. We are on the finance committee. There can be nothing wrong with that bank unknown to me and Mr. Monks. Don’t believe any of these false reports; believe me; take my word for it. The bank is good, paying six per cent.—the best in the state. If all that is in Jersey tells you the bank is bad, don’t believe it till I tell you.” He also said “ there was a surplus of over $6000 after the dividends were paid.” The bank continued to pay all demands down to November 1st, 1878, when it went into the hands of a receiver. It was insolvent on the 1st of August, 1878, when these representations were alleged to have been, made.
The defendant was a director of the bank from June 8th, 1869, until its suspension in November, 1878, and a member of the finance committee from November 19th, 1877. The duties of the finance committee were to attend to all applications for' loans, and to look after the investing of the company’s funds. The general charge and government of the bank devolved upon the executive committee, of which the defendant was not a member. There was no evidence that the defendant had actual knowledge of the condition of the bank. On the contrary, the proof was that at a regular meeting of the directors, on the 31st of May, 1877, the president read his statements, showing a surplus of $6000, and a motion
On these facts the defendant was not entitled to the non-suit he asked for; but he was entitled to a different; instruction to the jury. The case cannot be distinguished from Hay-craft v. Creasy and Taylor v. Ashton, and it should have been left to the jury to say whether, upon the evidence, the defendant made the representations with a fraudulent purpose to deceive, or Whether he made them in good faith and in the honest belief that they were true.
There will be a certificate accordingly.