Paddock v. Strobridge

| Vt. | May 15, 1857

The opinion of the court was delivered by

Redfield, Ch. J.

The question in this case is whether, in the \ sale of a horse having an internal and secret malady, of a fatal I character, and no external indications calculated to excite suspicion / of its existence, but known to the seller, and not to the purchaser and which the seller knows or believes the purchaser would not buy if he did know of its existence, and still sells at such a price as the article seems to be worth, without disclosing the defect, he is guilty of such fraud and deceit as will be actionable.

There is no doubt that there is a class of positive misrepresentations affecting, more or less, the marketable price of commodities sold, for which the vendor is not legally liable. Such are those we every day encounter in the way of traffic, and which it is understood are nothing more than a species of badinage, or allowable chaffer. So, too, representations in regard to the state of the market, and other extraneous incidents, not affecting the state and quality of the article sold, and the suppression of facts of this character by the party profited thereby, although morally wrong, do not constitute an actionable fraud. The somewhat celebrated case of Laidlaw v. Organ, 2 Wheat. 178" court="SCOTUS" date_filed="1817-03-15" href="https://app.midpage.ai/document/laidlaw-v-organ-85188?utm_source=webapp" opinion_id="85188">2 Wheaton 178, where the purchaser of a quantity of tobacco obtained it much under its present value by not disclosing the news of peace, which was known to him, but not to the seller, is a very fair illustration of the rule of law upon this subject. In this case the seller inquired if there was any news calculated to enhance the price or value of the article, and the buyer made no assertion or suggestion calculated to impose upon the seller in regard to the news. The circuit court charged the jury that this did not amount to such fraud as will avoid the sale; Marshall, Ch. J., in giving judgment says, “The court is of opinion the buyer is not bound to communicate intelligence of external circumstances which might influence the price of the commodity, and which was exclusively within the knowledge of the vendee. But at the samé time each party must take care not to say or do any thing tending to impose upon the other. The court thinks the absolute instruction of the judge was erroneous, and that the question whether any imposition was practiced by the vendee upon the vendor ought to have been submitted to the jury.” The disposition made of this case in the supreme court would seem to indicate that it was there considered that the testimony in this case did tend to show such imposition as would avoid the sale, or expose the party to an action at law. But I should not be prepared to believe that the rule of law, as at present recognized in the courts of law, or equity, will fully justify that view. It is more generally considered, perhaps, that the party is fully justified in taking advantage of any superior knowledge he may have of any extraneous circumstances not affecting the essential quality of the article sold, and where both parties have equal means of knowledge, and there is no positive misrepresentation.

But in regard to those incidents which do materially affect the quality and value of the article sold, the rule is different. It is certain no positive misrepresentation will be allowed here, and there is a degree of negative deceit which the more recent cases certainly do not justify. But negative deceit, like any other, must be practiced in such a manner, and upon such a subject, as to be calculated to mislead and impose upon a person of ordinary sagacity. And the vendor must know, at the time, that the vendee is .misled, and must intend he shall be, and must do this for the purpose of gaining an unjust advantage, which he could not otherwise expect to do.

This negative deceit has more commonly been reached in the English courts by engrafting successive exceptions to the general rule of warranty, by way of implied warrantees. As in regard to provisions, bought for consumption, that they are wholesome. So, too, in regard to manufactured articles purchased for a particular use, known at the time of sale to the vendor, it is said there is an implied warranty, although nothing is said that the articles are reasonably fit for the use for which they are purchased. So, too, of articles contracted to be delivered in future for any specified use, and some others, perhaps, where the law implies a warranty that the articles are of a merchantable quality in the absence of all stipulation upon the subject.

These cases, it is obvious, are nothing more than exceptions founded upon certain flagrant indications of fraud and deceit which do not exist in ordinary cases.

And following out this, as the , leading idea, it seems now to be the settled rule of law in Westminster Hall, that there is an implied warranty on the part of the seller that the article sold is what it appears to be, so far as the vendor knows. In other words, that a defect in the article, which changes its essential character and renders it wholly unfit for the purpose for which it is purchased, will justify the vendee in rescinding the sale, or bringing suit for damages at bis election. It seems to be there considered that secret defects in the article sold, which materially affect its value, and which the vendor supposes the vendee would regard as an impassable barrier to the contract, must be disclosed or the contract is not binding. To have this effect the defect must be known to the vendor and wholly unknown to the vendee, and there must be no external or sensible indication calculated to excite suspicion in ordinary observers. It must be of such a character as clearly to have formed an impassable barrier to the contract, and so understood by the vendor at the time. In such case, the defect being known to one party and unknown to the other, is not strictly what the law understands by latent defects. And it is impossible to make any sensible distinction between such a case and one' where the party uses some device to mislead the other party in regard to a defect which he might' otherwise have discovered, or where he makes positive representations of soundness, knowing them to be false, which is done ordinarily to put the other party off his guard. It is putting the parties upon unequal footing, and without advertising the vendee that such is the vendor’s purpose. For if the vendee is made fully to understand that he must take the article with all faults, or that he must not rely upon the vendor, this is equivalent to putting him upon his guard, and it is upon this ground that the case of Mellish v. Matteaux, Peake’s cases 115, was doubted in Baglehole v. Walters, 3 Camp. 154, and in Pickering v. Dawson, 4 Taunt. 779. But the principle of that decision, in other respects, in the language of Chancellor Kent, 2 Comm. 482 and note, “ remains unmoved.” This case was the sale of a ship, which had a latent defect, known to the seller, and which could not have been discovered by the buyer. Says Chancellor Kent, “ the seller was held to be bound to disclose it, and the concealment was justly considered to be a breach of honesty and good faith on general principles.”

To this extent this same decision has been several times since recognized in the English courts. The principal of these decisions was thus stated by me, upon a former occasion, and which a pretty thorough reexamination of the cases, on the present occasion, has served to confirm.

So, too, it is not always necessary that there should be an express representation, one will often be inferred from circumstances which are in fact equivalent to such positive representation, as in Bruce v. Reeder, 17 Eng. C. L. 290, where the defendant induced the plaintiff to accept an insolvent tenant in his stead without making known such insolvency. The defendant made no positive representation whatever as to the person he offered as tenant. The court held the mere fact of his offering him as such to take his own place was equivalent to a representation of his solvency, and as he knew the contrary he was guilty of a fraud. Bayley, J., says, “ I thought at the trial the keeping back that fact was, legally speaking, a fraud which rendered the defendant liable.” Lord Terterden says, “ I think so now.” Bayley, J., “It is very desirable, if possible, to make people honest.” Holroyd, J., “ I think it was clearly a fraud.” So, too, in Hill v. Gray, 2 Eng. C. Law 459, it was held, that suffering one to buy goods under a wrong impression as to their quality in an essential particular, is a fraud, although the seller did nothing to induce the misapprehension, and that jthe purchaser is not bound by the contract. The only misapprehension in this case was in regard to the picture, which was the subject of the contract, having belonged to the cabinet of Sir Felix Agar. It was sold and bought as one of Claude’s, and was confessedly genuine; but the sale was held void because the purchaser was allowed to buy it, supposing it had belonged to that particular cabinet, which, in his estimation, greatly enhanced the value, and which the seller knew to be false. Lord ElleNborough said: “ Although it was the finest picture Claude ever painted, it must not be sold under a deception.

This last case came under consideration in the C. P. so late as 1851, and Jervis, Ch. J., said, quoting from the opinion that the purchaser had fallen into the delusion of believing the picture to have belonged to Sir Felix Agar’s cabinet: “ Not removing that delusion might be taken as equivalent to an express misrepresentation.” These two last eases have never been questioned.

They seem to rest upon the principle that under some circumstances a suppressio veri is equivalent to a sugyestio falsi. And of this, we think, there can be no manner of doubt. The difficulty will arise in the application of the principle in practice. Many plain and flagrant cases may be supposed where no manner of doubt whatever will arise in the mind of any- one. The case supposed in argument of selling a vicious horse for horse-back or carriage use, which will be sure to kill the purchaser or his family, if put to use, and not guarded, or possibly in spite of all circumspection, the seller would no doubt be liable beyond the price of the purchase, by way of special damage, if he did not declare the fact.

And we may suppose cases of the sale of spurious articles, as of nutmegs made of wood, or white lead of whiting or ground stone, which is really of no value, or none for the purpose of the purchase. There can be no doubt if the seller is aware of the deception and the buyer is ignorant; such deceit will form the basis of an action at law, although no representation is made. But if both parties are equally innocent, the contract is probably binding, certainly unless there is such a misapprehension in regard to the subject matter of the contract that the minds of the parties cannot be said to have met, which requires a strong case to excuse the purchaser at law, certainly. Courts of equity sometimes interfere in such cases, upon grounds which would not always excuse the party at law.

And in cases of this character, where the price, or other circumstances, indicate that both parties are aware of the spurious quality of the article, and they are bought to sell, no action lies, for there is no deception. But where fraud and damage concur, an action ordinarily lies. And a representation sufficient to constitute fraud often exists without the use of articulate language. And in a case like the present, where the hidden malady is known or believed to be of a fatal character, and to render the commodity valueless, and it appears to be valuable, and is sold as such, and this malady is known to the vendor and unknown to the'vendee, and is known to form an impassable barrier to the sale, if disclosed, and the malady proves speedily fatal, we are not_, prepared to say that the action for deceit or false warranty will not lie. We think it will as much as if the party had sold a horse which was not present, knowing it to be dead at the time, but without making any false representation in terms ; or as if he had sold the mere image of a horse at such a distance as to impose itself upon the senses for a living animal or a horse after having given it a slow but fatal poison, or where it had, to the knowledge of the vendor, received a fatal wound in a part not visible. There is no end to these illustrations. And they in no sense come up to the civil law rule that a sound price creates an implied warranty that the thing sold is sound; for that will make the vendor liable for defects wholly unknown to both parties, and possibly for defects which were known to both parties.

And we should not probably be prepared to say that a sound price, of itself, implies a warranty, in all cases, against secret defects known to the vendor and not known to the vendee. But we think even the latitude of the English common law, which upon j»Kis subject is proverbially lax, does not justify the vendor in palming off upon the vendee a valueless article which is apparently valuable, for a price corresponding to its appearance, under the delusion, in the mind of the vendee, that the thing is really what it appears to be, but which the vendor, at the time, knows to be a mere delusion. This amounts to nothing more than an implied warranty against selling a shadow for substance, an image for the reality. And in every such case the very sale is equivalent to a representation that the thing is, as far as the vendor knows, what it appears to be, and does impose upon the vendor the duty of correcting any such delusion into which he has led the vendee by offering to sell him for a valuable price, what he knows or believes to be, and which is really valueless, or of essentially different and less value than it appears to be and is taken to be by the vendee, and without which belief he would not have made the purchase, and this well known to the vendor.

The present case may be of this character. There was, no doubt, strong testimony tending to prove this, and even tending to prove the use of artifice by the vendor to mislead the vendee. But, in the charge of the court upon this point, many of the elements of the fraud seem not to have been specifically enumerated, and the jury might have inferred that the vendor was bound to disclose all the secret defects of the article, and which tended to lessen its value, whether they changed the essential character of the article or not, and whether they formed, in the belief of the vendor, an impassable barrier with the vendee to entering into the contract or not. We think, therefore, the case will have to go to another trial, unless we are prepared to say that every sale of an article for a sound price does imply a warranty against secret defects materially affecting the value, and which are known to the vendor and unknown to the vendee. This is indeed the sensible rule upon the subject, and is very distinctly pointed at by some of the late English cases. But it is perhaps questionable whether any such rule is yet fully established. But it has been often held that, in the sale of a promissory note, there is an implied warranty that it is genuine and not a forgery; and especially, if the vendor knew it to be a forgery, should it be regarded as such a fraud as will avoid the sale. So, too, are we prepared to say, is there an implied warranty in the sale of live animals for a sound price or a valuable price, which are in apparent health, that they are not already affected by any secret but fatal malady, to the knowledge of the vendor. And in such cases belief must be regarded as knowledge, if it prove to be well founded. The case of payments made in counterfeit coin or bills, without any question being made at the time, is also a good illustration of the subject. The offer of the money as genuine is equivalent to a representation of its genuineness. The three English cases referred to of Mellesh v. Matteaux, Bruce v. Ruler, and Hill v. Gray, certainly justify tlie view we have here taken. And none of these cases have ever been doubted, except the first, and that only upon the ground that it was a sale with all faults. Chancellor Kent also regards the law as going the full length of all these cases. And for one, I confess I should scarcely know how to defend a doctrine, coming short of the rule we here adopt.

The opinion in 9 Foster, by Ch. J. Wood, 343, 359, Hanson v. Edgerly, contains a thorough and critical revision of the leading cases upon the subject, and the conclusion of the learned judge is certainly very sound : “ It is going far enough to hold that an omission to disclose them (secret defects known to the vendor and unknown to the vendee) with a design of deceiving the party oí-an intentional concealment by which he is deceived and injured, will render the party responsible. It would be going quite too far to say that a simple unintentional concealment or omission to disclose them, would render the party liable for the damage sustained.”

This seems to be placing the subject on a sound basis. That Í there is no positive duty on the vendor to 'disclose secret defects, in I the article, but if he conceal them even by silence, when he knows I the other party has fallen into a delusion in regard to them, and is j making a purchase which he otherwise would not make, or at a price materially beyond what he otherwise would, in consequence of such delusion, this is equivalent to a false representation or the use of art to disguise the defects of the article.

We think this case contained testimony tending to show both that the sale was knowingly and intentionally made under such a delusion on the part of the vendee, which did materially increase the value of the article in his mind, and without thi| he would not have entered into the contract; and this well known to the vendor, and acted upon by Him with the purpose_o£-defra.uding the vendee; and also that the vendor used artifice, more or less, to keep up this delusion, both of which will render him liable for the damage thereby sustained. But as the .case was not put distinctly to the jury upon either of these grounds, and as we are not fully prepared to say that the vendor of personal property is, in all cases, bound to disclose all known defects in tÉe article, which are unknown to the other party, and not discoverable by the exercise of ordinary care upon the subject, we reverse the judgment below, and remand the case for a new trial.