Lovelace v. Suter

93 Mo. App. 429 | Mo. Ct. App. | 1902

GOODE, J.

Several legal propositions were very ably argued by the counsel in this case in discussing the propriety of the direction given by the circuit court in defendant’s favor; but we shall confine our remarks to the inquiry whether the letters written to the appellant by the cashier of the bank con-tamed any rejoresentation which will support, an action like the one before us; an action in the nature of the common-law remedy of deceit, not for breach of warranty or rescission of the contract of sale.

While the respondents earnestly insist that the contention of actual fraud on the part of Russell was waived or withdrawn, we find no withdrawal in the record, but the appellant is certainly urging that contention on this appeal instead of relying on merely legal fraud; hence, we shall treat the case as still involving the issue of intentional fraud. In fact, the theory that the action of deceit will lie for constructive fraud, without the element of moral obliquijgs, is one we are unwilling to accept; for it has been combated as unsound by the most eminent expositors of the law. Peek v. Derry, 31 Ch. Div. 541; Dunn v. White, 63 Mo. 181; Kountz v. Kennedy, 141 N. Y. 124; Hindman v. Bank, 112 Eed. Rep. 931. It is true that since the decision of the Supreme Court in Hamlin v. Abell, 120 Mo. 188, it can not be doubted that the law in this State is that a party may be held liable in an action for deceit practiced in the sale of property, if he induces 'the sale by false representations as to a matei’ial fact, recklessly made as of his knowledge when he had no knowledge, even though he believed the fact was as stated. This, however, does not depart from the rule that fraud is necessary, as we shall endeavor to make plain; though the distinctions drawn in the reported cases on the subject are often fine and sometimes impalpable.

If one makes a representation as a matter of information —as something that has been represented or imparted to him just as he imparts it to another — no foundation for a case of deceit arises; but if he asserts something as a fact within his own knowledge as an inducement to another person to act, when he possesses no knowledge thereof nor any good reason to think he does, this is presenting the inducement in a false light and enhancing its influence by whatever value the hearer may attach to the speaker’s words. Such a statement is essentially false in the sense of being corruptly untrue and not merely different from the actual fact, and the party making it does so at his peril. The scienter sufficiently appears from the claim of knowledge when there was only ignorance.

In the Hamlin case, which, like the one in hand was based on a sale of commercial paper through alleged false representations, the defendant assigned for error that the lower court had ignored the gist of the action, to-wit, a fraudulent intent on the appellant’s part when he made the representation. In dealing with that assignment, the opinion quotes approvingly the following excerpts; the first from Dulaney v. Rodgers, 64 Mo. 201:

“It seems to be established that an action based upon the deceit or fraudulent representations of another, can not be maintained in the absence of proof that the party making them believed, or had good reason to believe at the time he made them, that they were false, or that he assumed or intended to. convey the impression that he had actual knowledge of their truth, though conscious that he had no such knowledge. When the above facts are proved, the scienter necessary to maintain an action for deceit, founded on fraudulent representations, is established.”

The second from Dunn v. White, 63 Mo. 181: “It is not, however, always absolutely necessary that an actual falser hood should be uttered to render a party liable in an action for deceit; if he states material facts as of his own knowledge, and not as a mere matter of opinion or general assertion, about a matter of which he has no knowledge whatever, this distinct, willful statement in ignorance of the truth, is the same as the statement of a known falsehood, and will constitute a scienter.”

Further along the opinion reads: “While it is true that in all cases it is held that the petition must allege the representations were, fraudulent, in all of them it is held that a statement of material facts by one as of Ms own knowledge, not merely as an opinion or general assertion about a matter of which he knew nothing whatever, a willful statement in ignorance of the truth, is the same as a statement of a known falsehood and will constitute a scienter.”

Do the above remarks of the Supreme Court change, or indicate a disposition to change, the long-established doctrine that proof of a guilty scienter is indispensable to the maintenance of an action for deceit? No such conclusion can be logically drawn from them; for the purpose of the court was not to dispense with the scienter, but¿o point out what may sometimes be sufficient proof of it, namely; an affirmation as of one’s own knowledge and not merely his information, opinion or belief, that something material to the business in hand is true, when he has no good reason to believe it is true, and it is in fact false. The consciously false assertion of knowledge which is likely and intended to induce the person addressed to part with his money or property on the belief that the speaker knows the truth whereof he speaks, establishes the scienter as thoroughly as the false assertion that some fact exists which is known not to exist. Deception is practiced in both cases, the intention being to persuade the hearer into making an investment, or taking some other business step, by misleading his judgment.

The real embarrassment in such disputes arises when the basis of the action is a statement or representation made by the defendant as true of his own knowledge, which he not only believed to be true, but believed with good reason he knew to be true; in other words an honest mistake not due to gross negligence. In our judgment, a representation of that kind though it may often make a good case to rescind a sale or ex contraciu on a warranty, can not make out a case of deceit for lack of a scienter. Collins v. Evans, 5 Q. B. 804, 13 L. J. Q. B. 180. Infallible knowledge of facts is never attainable, and it is, or ought to be, enough that one has carefully endeavored to learn the truth from appropriate sources and believes he has learned it. Such conduct is very different morally and we think legally, from recklessly asserting something to be true from a vague belief of its truth which the speaker.has taken no pains to verify; for gross negligence is closely akin to fraud. Western Bank of Scotland v. Addic, L. R. 1 H. L. 145.

Testing the representation made by Eussell to appellant when he proposed the sale of the bond in question by the criterion above indicated, we find no fraud was committed to constitute a ground for this action. A glance shows how widely Eussell’s representation differs from that made by the defendant in Hamlin v. Abell, which was that the defendant knew the negotiable paper sold was secured by collateral.- Here, the sale of the security was entirely by correspondence, and the only statement of-Eussell to induce the sale was the one contained in the second letter above quoted; that the Paris Gas & Electric Light Company’s bond was just as good as the Nevada Gas Company’s bond. Considered in connection with all the facts in evidence, that representation falls short of constituting a cause of action for deceit, since it was not a statement of fact as of Eussell’s own knowledge.

In the first place, it was not a statement of a material fact as that expression is used and understood in opinions in controversies of this kind. It is sometimes a close question whether a representation is to be taken as an expression of opinion or as an assertion of an actual fact. But if we read Eussell’s letter with reference to the previous letter, which appellant introduced and relied on as part of the fraudulent means employed to sell her the bond, it is plain that he only aimed to give her the benefit of his judgment. In the first letter he said of the Nevada bonds: “We are satisfied they are A No. 1.” On the face of it, that statement was undoubtedly nothing more than his opinion. The other letter said the Paris bond was just as good as those of the Nevada company. It would be unreasonable to interpret that statement to mean that be was giving his own actual knowledge from an investigation of the condition of tire Paris company and the property on which the bond was secured, instead of his-opinion from the company’s standing and the market reputation of its securities.

Nor if we consider the matter from the appellant’s standpoint and the way in which she understood Eussell’s letter, is her case at all helped. She took the letter to give merely his judgment, on which she was willing to risk her money. Mrs. Lovelace testified: “I got his note or letter. When I got the letter I think I wrote him and said if he thought it safe, to invest in it for me/’ And, again: “I had the utmost confidence in Mr. Eussell and his judgment, and I relied on him altogether.” . . . “At the time I bought the bond I supposed Mr. Eussell had skill in dealing with bonds; I had confidence in him and supposed he knew all about bonds.” No pretended facts in regard to the franchises, contracts, assets, liabilities, business or officers of the Paris Gas Light Company, or in regard to how the bond was secured, or as to the value of the property behind it, were laid before the appellant which could have influenced her judgment in any way, and it is clear she did not rely on her own judgment at all when she made the investment, but entirely on Eussells’.

Now, right here the distinction to be noted in all deceit cases between statements of facts and. of opinion may be treated in another light. It is vital to ascertain whether the plaintiff. in such a ease acted on his own judgment or on that of the defendant. If on his own, which was led to an erroneous conclusion because of false but plausible representations about material facts made by the defendant, either with knowledge of their falsity or without knowledge on the subject, there is a good cause of action. But if the plaintiff left the matter to be decided by the defendant, or based his own decision on a statement of the defendant’s opinion, there is no cause unless ■ the defendant decided corruptly or gave an opinion which he did not entertain. In the present case, the appellant herself acknowledged she left it to Eussell to decide the matter for her and trusted entirely to his judgment, and the only question is, therefore, was there evidence from which the jury might have inferred that he gave a dishonest opinion? None whatever. The bank invested money in seven of that issue of bonds paying ninety-five cents on the dollar therefor; most of them it afterwards sold at a profit of five per cent; some to its own officers and some to outsiders, while some it retained. There is not the least room for doubt that Eussell believed those bonds to be a safe investment and that he was doing appellant a favor to sell her one of them; for they bore good interest.

The only circumstances which are questionable were the exchange of the first bond for one of the second issue and the payment of interest by the bank on her bond for four years after the company had defaulted. Eussell gave a reasonable explanation of those circumstances; but whether that explanation was true or false, it is manifest they have nothing to do with the main issue of whether the sale was induced by fraudulent representations in the first place. Nor are they relied on for such a purpose; but were pleaded and proven by the ■ appellant to avoid the plea of the statute of limitations by showing that the fraud alleged to have been committed in 1889 was concealed from the plaintiff for ten years by the respondents in the manner stated.

The action for deceit sounds in tort, and there is nothing to show7 a legal wrong was committed by Eussell or any of the defendants in this matter prior to the conversion of the first bond, which is only incidentally related to the cause of action declared on in the petition.

It follows from the foregoing considerations that the circuit court properly granted the peremptory instruction in favor of the respondents and the judgment of that court is affirmed.

Bland, P. J., and Barclay, J., concur.