56 A. 687 | R.I. | 1903
This is an action for deceit. The declaration *457 sets out that the defendant was the president of the Platt Albertype Company, a corporation, and as such caused to be issued negotiable bonds signed with the name of said company, by him as president, of the par value of $100 each, headed "Ten year gold bonds." They were to be registered at the Knickerbocker Trust Company, of New York, where both bonds and interest were to be payable.
In each bond was this recital: "This bond is one of an issue of Fifty Thousand Dollars ($50,000) of like tenor, and is secured by all the property and assets of this company." Bonds numbered from 1 to 20, inclusive, were issued by said defendant, as president, to himself, and assigned by him, by an indorsement in blank on the back of the bonds. The plaintiff, trusting and relying upon the representation contained in said bonds, that they were secured by all the property and assets of the company, and being thereby induced to believe that he was getting special security, loaned to said company the sum of five hundred dollars, for which it gave its promissory note and also ten of said bonds as security therefor.
The plaintiff avers that said bonds were not secured by all the property and assets of the company, nor by any of them, which defendant knew when he caused and permitted said bonds to be issued, and of which the plaintiff was ignorant; that said company became insolvent, and made an assignment for the benefit of its creditors, and said bonds taken as security became worthless, having been protested.
To this declaration the defendant demurs, upon the grounds, (1) that the representations were made by the company and not by the defendant; (2) it does not show that the defendant was personally cognizant of the obtaining of the money from the plaintiff on said bonds or connected therewith; (3) that it does not show that he had actual knowledge of the falsity of the words in the bond; (4) that the words relied on import no special security; (5) that the words were such as to put the plaintiff upon his inquiry; (6) that it does not show the nature of the security the plaintiff was led to rely on; (7) that it does not show that the plaintiff has suffered damage, as the very security has been assigned for the benefit *458 of creditors, nor that the property could have been reached by the plaintiff, nor that it would have been sufficient to indemnify him to a greater degree than in the general distribution of the estate.
Upon the first question, assuming on demurrer the facts as alleged, we think the defendant is liable as for personal representations. It appears that the defendant was not only an officer of the company, but the negotiator of the bonds, as they were issued to him. His relation to them, therefore, was something more than that of an officer of the company. He indorsed them, not as president, but as an individual. But even as an officer he may be liable for acts done in the name of the corporation. In the nature of things this must be so. While a corporation is an entity, which can hold property and be sued, yet it can only act and speak through its officers. If it publishes a falsehood, it is done through them. Directors have frequently been held liable for publishing false reports, although they purport to be the statements of the company. As said in Bank v. Byers, 139 Mo. 627-659: "No one should be permitted to escape personal liability for fraud practiced by himself, or in connection with others, upon another in his or their official character of president, director, or secretary of a private corporation, upon the ground that they were acting for the corporation. To claim exemption on the ground of official responsibility, or that the fraud was committed for the benefit of the corporation, is equivalent to claiming that the corporation is liable for the fraud of its officers, and the officers themselves not liable." The same doctrine was stated inHempfling v. Burr,
There can be no difference in principle between a false report and a false statement on a corporate bond which is issued to the public. Accordingly, we find that officers have been held liable in both classes of cases. Clark v. Edgar, 84 Mo. 106;Ward v. Trimble, 44 S.W. Rep. (Ky. 1898) 450; Houston v.Thornton, 29 S.E. Rep. (N.C. 1898) 827; Seale v. Baker,
The case chiefly relied on by the defendant is Van Weel v.Winston,
Mr. Justice Miller said: "It is obvious from the nature of these circulars that the branch road had not then been located, and that Mr. Winston, as an individual, could give no pledge on that subject which would bind the company, nor could he do so as president of the company. The road had yet to be located, and this could only be done by the board of directors of whom Mr. Winston was but one of eight or ten." He further stated that it was impossible to read the description of the line of road conveyed as security for the bonds without *460 seeing clearly that the line was not yet located — that its future location was to be governed by two considerations: 1. That it should be the most practicable route; and 2, that it should not exceed 50 miles."
The difference between a representation like this and a positive statement that bonds were secured is obvious.
The only other case cited by the defendant on this point isSalem v. Adams, 23 Pick. 256, which was an action for deceit by vendor in the sale of goods. The jury found for the defendant, upon the ground, apparently, that the plaintiffs had full opportunity for inspection. The court said, obiter, that where there was an express warranty in the contract of sale an action would lie. The point made by the defendant is that this means an action against the sellers; hence, in this case, the company, and not Atwood, the president.
We do not see that this is implied.
We are of the opinion that an officer may be held liable for representations in which he has participated, even though the company is nominally the contracting party.
The second ground of demurrer is that there is nothing to show that the defendant knew of the sale of the bonds to the plaintiff, or that he had any connection therewith.
It is not necessary that the defendant should be personally connected with the particular transaction, if he is the active agent of the fraud which results in the transaction. Thus, directors have been held liable, in cases already cited, for false statements published, by means of which others have been misled, though not directly, by those officers. So in Leonard
v. Springer,
Nash v. Minnesota,
It affirms the rule that one may be liable, though he does not deal directly with the purchaser.
The third ground is not mentioned in the defendant's brief, probably for the reason that the declaration does state that the representation relied on in this case was known to be false by the defendant.
The fourth ground is that the statement that the bond was `secured by all the property and assets of the company" imports no special security.
The argument is that "security" is a general word, including liens by mortgage or pledge, notes, bonds, surety, or anything that guards or protects. This is entirely true in the general application of the word. It is a term used to cover all kinds of evidences of assets. The securities held by a bank, for example, include its bonds and notes. It may, however, have a limited meaning, as, in Easton v. Ormsby,
The natural, common, and necessary implication of the words "secured by all the property and assets of the company" clearly imports a special security. Whiting v. Price,
The next ground of demurrer is that the words on the bond were such as to put the plaintiff upon inquiry as to the nature of the security.
The defendant claims that as the words do not specify any particular form of security they are indefinite, and hence demand inquiry. Again he cites Van Weel v. Winston, supra, where Mr. Justice Miller said: "Every prudent man, knowing that this mortgage was his main security, would examine it, or his agent would, before investing his money." In that case a mortgage had in fact been given. One buying under it would, of course, be held to inquiry as to its terms and scope. There was no false representation in regard to it. The bondholders were expressly referred to it. If, in the present case, the bonds had specified a mortgage, and there was one, the bondholders would, of course, have to examine it for its terms. That is a very different matter from an assertion of security when none existed. Most of the other authorities relied on by the defendant were like the one just cited, where the fact stated was true and the extent of its application was held to be matter of inquiry. So, in this case, if there had been any security on the property of the company, the plaintiff would have been put upon his inquiry to ascertain what it was, because the information would have been true as far as it went. Not so with a false statement.
The distinction as to false statements is well stated inRobertson v. Parks,
It then goes on to say: "A representation which merely amounts to a statement of opinion, judgment, probability, or expectation, or is vague and indefinite in its nature and terms, or is merely a loose, conjectural, or exaggerated statement, goes for naught, though it may not be true; for a party is not justified in placing reliance on such statements or representations. Such an indefinite or speculative representation should put the person to whom it is made upon inquiry; and if he chooses to put his faith in such a statement and abstains from inquiry he can have no ground of complaint." It is evident that the court had in mind a representation very different from the one before us.
The defendant claims that the representation here is within the statement of the learned court, because it is vague and indefinite in not stating the form of security. It is a positive statement, in a solemn instrument under seal, asserting the fact that the bonds were "secured on all the property and assets of the company." It is neither vague nor indefinite, except as to the form of the security. If the plaintiff had reason to believe from the assertion, as he might, that all the property of the company was secured to the payment of these bonds, he might naturally give little heed to the form, whether it was by mortgage, trust, pledge, or other equitable title or lien.
In Leonard v. Springer,
In view of the positive statement on the face of the bonds, evidently intended as one to be relied on by purchasers, the plaintiff was not bound to make further inquiry.
The sixth ground of demurrer, that the declaration does not state the nature of the security the plaintiff was led to rely on, is of no consequence when the fact appears that he was led to believe that there was some kind of security, when there was none at all.
The last ground is that the declaration does not show that the plaintiff has suffered damage.
It states that the company has become insolvent, has made an assignment, and that the money advanced has been wholly lost. While the declaration would have been more complete by stating that the company had property, we think that the allegations are sufficient for the purposes of pleading.
Demurrer overruled.