Mallory v. Leach

35 Vt. 156 | Vt. | 1862

Aldis, J.

I. As to the alleged variance, it may be observed that it consists in averring the injury occasioned by the plaintiff’s fraud to be greater than it was proved to be. But in the averment of damages it is not necessary to be exact; and the proof need not sustain the allegations in this respect.

II. The parol evidence was admissible as tending to show the fraud — not as qualifying the written contract. It tended to show a special confidence and relation between the parties, in regard to this business, and, if proved, to the satisfaction of the jury, to have existed in the outset, and to have continued to the time of the re-purchase by the defendant, must materially have given character to both the defendant’s words and silence, as intended to induce the plaintiff to act under a delusion.. This leads us to the main point, viz.: the testimony on the part of the plaintiff, and the charge of the court in regard to it.

The testimony of the plaintiff tended to show, that the defendant, in advising her to buy the fifty shares of mining stock, professed to act as her friend, from a desire to invest her money so as to make her indepehdent, and in a mode that was to be kept secret from all but her father and mother, and with his own guarantee that she should get back her money and at least twenty per cent, interest. He told her that as he was interested in the stock he would keep her informed as to its situation and value, and that he should go to the mines in June, 1859. This declaration of the defendant is to be considered in connection with 'the fact that by the written contract she was to decide on the 1st July, 1859, to keep or to sell her stock. That such language would strongly tend to beget confidence and trust in the defendant, and lead the plaintiff to rely upon his advice, and to be guided by it on bis expected return from the mines in June, 1859,. is obvious. This must have been the purpose for which he thus advised her; and we think he must have been aware of the effect that it produced on her mind at that time. Now if this relation of trust and confidence continued from December, 1857, when she bought the stock, to July, 1859, when she sold it to the defendant, and he at the time of his purchase knew that she thus trusted in and relied upon his friendship and advice in this matter, it was clearly his duty to tell her of its real value, and it was a fraud to take advantage of her ignorance and buy it at about a qu arter of its market price. But if during this period of time this relation of confidence ceased to exist, and alienation and distrust had taken its place, then it is obvious fhat he could not have supposed she was relying upon his friendship and advice in this business, and was not under obligation to give her information in regard to the value of her stock.

There was testimony on the part of the defendant tending to establish this state of facts. The fraud of the defendant (if any) consisted in taking advantage of the confidence which he knew the plaintiff put in him, and which he had sought to win ; but if she had lost her confidence in him, he could no longer take advantage of it.

The court distinctly stated to the jury that no obligation rested upon the defendant by virtue of the contract to inform her of the real value of the stock. To have required that would . have been to add a new clause to the contract. The court then proceeded to refer to those circumstances which gave rise to a relation of trust and confidence between the parties in this matter, and made it the duty of the defendant to inform her of what he knew as to the value of the stock, and then said to the jury, “ because he had placed himself in such a relation it would be a fraud in him to receive back the stock without giving her the knowledge he possessed.” This put the case clearly on the ground of fraud in taking advantage of a confidence he had sought, and which he knew was placed in him.

The doubt we have felt, in regard to the correctness of the charge in this respect, is whether the court sufficiently called the attention of the jury to the fact that this relation of confidence must exist between the parties at the time of the re-purchase by the defendant, and to those circumstances shown on the part of the defendant tending to prove that the relation had ceased to exist. We have carefully examined the exceptions on this point, and can not but regret that the statement in this respect is not more satisfactory. It does not appear that the defendant in his requests to the court called their attention to this part of the defence,' or made any request in regard to it. The defendant’s evideucc was admitted. The court treated the promise of the defendant to inform her of the situation and value of the stock from time to time as a continuing promise, and seem to carry the idea that the plaintiff must have continued to rely on it. As there is no direct request to charge in regard to this part of the defence, and as no exception was taken on the ground of an omission in this respect; and as it would have been the duty of the defendant to have called the attention of the court to this point, if not sufficiently referred to in the charge, and as the general tenor of the charge seems to require that the confidence •should have existed at the time of the re-Ale, wo thiuk we should not be justified in opening the case on this ground.

The defendant further claims that the charge of the court in regard to the representation made by the defendant, that there was about to bo a large assessment made upon the stock, was incorrect. The substance of the charge is, — if the defendant said this with a view to mislead the plaintiff as to the value of the stock — if the fact was calculated to depreciate its value and to induce her to sell at a price less than the value, and she was thereby deceived and induced to sell, he would be liable unless he disclosed his knowledge of facts tending to enhance its value.

1. This does not assume as matter of law, that the fact would depreciate its value and induce her to sell. That question is left to the jury. It is obvious that ordinarily an assessment of 25 per cent, upon stock, unexplained, would lead the holder to suspect something might be wrong ; especially if it was not expected by stockholders that such an additional payment was to be made. So if the holder of the stock was a poor person, and unable wiLhout trouble and inconvenience to raise the sum assessed, it would tend to induce such person to sell the stock. We think the evidence admissible as tending to show that the defendant made declarations which he must have been aware would embarrass the plaintiff and lead her to wish to part with her stock.

It was telling the truth, but not the whole truth. It was telling it in a manner to produce the effect of a falsehood. The defendant must have felt that what he said would depress the plaintiff’s estimate of her stock — jvould lead her to think its value much less than it was ; and he knew she was ignorant of its true value. Now he might be silent — might say nothing; but he had no right to produce a delusion by his language, and knowingly take advantage of it for his own benefit. This was not fair dealing, and was very properly characterized in the charge of the court.

III. It is further claimed that the receipt by the plaintiff of the amount of the note given for the stock, after she knew of the fraud, was a ratification of the contract, so that she can not now sue for the deceit.

Let us consider what the rights of the parties were when the defendant had by fraud procured a transfer of the stock to himself.

1. As to the defendant it is obvious that he could not take advantage of his own wrong — he could not rescind the contract, but was bound by it to pay the note.

2. As to the plaintiff, as fraud avoided the contract, she had the right, if she saw fit, upon discovery of the fraud, to treat the contract as wholly at an end — to return to the defendant his note and demand a re-conveyance of the stock. This would have been to rescind or disaffirm the contract. If she thought that the stock would continue to advance in value and remain a highly profitable investment, she might have deemed it for her interest to have back the stock; and, in order to accomplish this, she should have given notice immediately to the defendant that she disaffirmed the contract and demanded back her stock. But she was not bound to do this. She might claim what was due her by contract, and also rely upon her right to recover her damages for the amount of which she had- been defrauded— which would be the difference between what the defendant had agreed to pay her for the stock and its true value. In such case she would have ratified the contract, hut would not have thereby waived her claim to damages.

The fallacy of the defendant’s claim is this: that it supposes a ratification of the contract to be a waiver of the right to recover damages. Not at all. The plaintiff has the right to hold the defendant to his contract, and, also, to recover of him compensation for the injury occasioned by his fraud. How can the defendant complain of this ? It is but making the plaintiff good. It can not injure the defendant, or deprive him of any defence, or impair any right.

If the plaintiff had seen fit to rescind the contract, but had waited an unreasonable time before giving notice, — pondering upon the fluctuations and chances of the market before-making a decision — the defendant might perhaps say with justice that such delay tended to deprive him of his reasonable opportunity to sell, and that he might well suppose she had concluded to ratify the sale and ask not for her stock, but only for damages. Her right to her damages was perfect when the fraud was committed. It is a right not legally to be extinguished but by compensation or by voluntary release. To infer a release of the damage from her receiving payment of the note would be putting an unreasonable construction on the act. She thereby takes what the defendant agreed to pay, and neither claims nor relinquishes her rights growing out of the fraud.

The case cited by the defendant from 9 B. & C. 57 only shows that though the vendor of goods sold through fraud and upon a credit mi'ght sue in trover for the goods before the credit expires, yet if he proceed upon the contract of sale he can not sue till the credit has expired. The principle of that case does not conflict with the plaintiff’s right to recover his damages after receiving payment of the note. When he sues upon the contract he must be bound by it, but when damage results from the fraud beyond what he can recover by contract, he can also recover in an action on the case for the deceit.

In 2 Pars, on Contracts 278, in a note, it is said, “ If a party defrauded brings an action on the contract to enforce it, he thereby waives the frauds and affirms the contract.” The authorities cited to sustain this arc 5 M. & W. 83, and 24 Wendell 74.

In Selway v. Fogg, 5 M. & W. 83, the action was assumpsit for work in carting away rubbish. The plaintiff, induced by the fraudulent representations of the defendant as to the depth of the rubbish, agreed to do the work for £15, which had been paid him. lie sought by this action to recover for the value of his work above the £15. It appeared that the plaintiff had knowledge of the circumstances indicative of the fraud before the work was finished. Upon the trial, Abinger, C. B., was of the opinion, that the question of fraud was not open to the plaintiff in the present action, although it might be the subject of complaint in another. Upon hearing in the Exchequer, Abinger, C. B., said “ a party can not be bound by an implied contract when he has made a specific contract which is avoided by fraud. If he repudiate the contract on the ground of fraud, as he may do, he has a remedy by an action for deceit.” So far the opinion stands upon solid ground, and was required for the decision of the case. But when the Chief Baron proceeds to say “ secondly, the plaintiff had full knowledge oí all that constituted the fraud, during the work, and as soon as he knew it he should have discontinued the work and repudiated the contract, or he must be bound by its terms,” if he means, that the plaintiff could not in such case recover for the damage he suffered from the fraud in an action for the deceit, he says what was not required for the decision, and what wo deem untenable as a rule of law. Consider in what a position the plaintiff is put by the application of such a rule. He proceeds with his work till it is in part done, and then discovers “ circumstances indicative of fraud.” He may be fully convinced that he has been defrauded, and yet feel great doubt that he can prove it. He says to himself, “ If I proceed and finish the work I shall be entitled in any event to the contract price. If I stop and fail to prove fraud, I can not recover for the work I have done. If I pi'oceed and finish the work and still shall be able to prove fraud, why should I not be entitled to recover the full value of all my work ; why should I be bound to a contract price to which my consent was procured through fraud ? How does my going on with the work injure the defendant., or purge his fraud ? If he has been guilty of fraud he knows it, and needs no notice from me to put him on restitution.” If, however, the going on with the contract injures-the defendant’s rights, or puts him in a worse condition than he would be by rescission, then the plaintiff ought not to go’ on, but to stop and give notice. But the defendant can not justly claim it as his right, not to have the work done at all unless he can have the advantage of his fraud, and get it done for less than its fair value. When he agreed to have the whole work done, and decided to try to get it done for less than its value through fraud, he should have considered that the plaintiff might not discover the fraud till the whole work was done ; or might, if he did discover it, doubt his ability to prove it, and so reasonably go ou and finish the ivork ; and yet, in either case, it would be flagrant fraud in him to pay only the contract price.

The S. & S. R. R. Co. v. Row, 24 Wend. 73, was where the defendant, before commencing the work, knew of the alleged fraud, and had all the knowledge as to the fact said to be misrepresented that the plaintiff had, and could not have relied on-such representation. The court say, “ if the truth bad not been-discovered till after the performance of the contract had been commenced, a different question would have been presented.

In Kimball v. Cunningham, 4 Mass. 502, the question was whether the defrauded party, who had affirmed the contract, could retain in his possession personal property, a part of the-consideration, which by the contract was to pass to the other, Held that the contract, if affirmed, was affirmed as a whole, and that the defendant was liable in trover for the property so withheld. It also appeared in the case that the defendant had sued for his damages from the fraud in an action on the case. The court say, by this action it is clear he has made his election to-consider the contract as subsisting, and to recover damages for the breach of it.

If so, the fraud was not waived in the sense of waiving the right to recover damages for it.

In Campbell v. Fleming, 1 Ad. & El. 40, the plaintiff sought in an action of assumpsit to recover the price he had paid for shares in a mining company which he had been induced to buy by fraudulent representations. After knowledge of the fraud he consolidated the shares with other property in a new company, and had sold shares in the new company. Held, that such sales of the new shares, after knowledge of the fraud, was an affirmance of the contract, so that he could not sue for and recover back his purchase money. The decision does not touch the point that he could not recover, in an action for the deceit, the damages he suffered by it.

The whole subject is well considered in Whitney v. Allaire, 4 Denio 554; and the court say: “ There is no principle or authority showing that where a person has been defrauded by another in making an executory contract, a subsequent performance of it on his part, even with knowledge of the fraud, acquired subsequent to the making and previous to the performance, bars him of any remedy for his damages for the fraud. The party defrauded, by performing his part of the contract with knowledge of the fraud, is deemed to have ratified it, and is precluded thereby from subsequently disaffirming it. That is the extent of the rule. His right of action for the fraud remains unaffected by such performance. But having gone on after discovering the fraud, he can not afterwards disaffirm the bargain, or sue for the consideration.” The principle and its reason apply to this case. Upon this subject see Long on Sales, 219, 240 ; 2 Kent’s Com. 480 ; 3 Fost. 520 ; 10 Ind. 430 ; the remarks of Sherman, J., in 14 Conn. 424-5 ; 5 McLean 170 ; 9 Cush. 266.

Judgment affirmed.