Tillis v. Smith Sons Lumber Co.

65 So. 1015 | Ala. | 1914

SAYRE, J.

Smith Sons Lumber Company, a corporation, sued Tillis in an action of deceit. The cause being submitted to a jury on counts 5, 7, 8, and 9, plaintiff recovered judgment. The facts averred in the com-plaint show a tripartite negotiation for the sale of a sawmill property. Two McGowins and one Boyette, acting together, and to be hereafter for brevity referred to-as the McGowins, proposed to purchase the mill property from plaintiff, and to pay the price in money and in large part by the delivery of certain bonds and preferred stocks of the Norfolk & Southern Railway Company, a Virginia corporation, which money, bonds, and stocks they were to get from defendant. To enable the McGowins to effect the purchase, defendant was to advance the money, bonds, and stocks, taking from them a mortgage to secure repayment of the money, and as well the price at which plaintiff was to take the stocks and bonds. The negotiation resulted in a sale on the considerations stated, and, in view of the further facts to appear, the transaction involved the same legal consequences, and may be properly and most conveniently treated for all the purposes of this case, as though Tillis had sold the bonds and stocks to the Smith Company. The further facts alleged and to be considered are, in brief, that plaintiff, stating its ignorance to defendant, inquired of him as to the true value of the bonds and stocks, whereupon defendant, with intent to deceive plaintiff and induce it to accept them at a price greatly in excess of their true value, falsely and fraudulently represented to plaintiff that (counts 5 and 7) “the said bonds and preferred stock were as good as gold,” or that (counts 8 and 9) “said bonds and preferred stock were perfectly good,” and in addition that (all the counts) “said bonds were secured by a first mortgage on all the property of the said railroad company.” Count 5 differs from counts 7, 8, and 9 in this, not to mention other variations of no particular importance : It avers that defendant falsely and fraudulently represented, etc.; whereas, in the other counts, the additional averment is that he knew his representations were false.

By motions to strike certain phrases from the several counts, by demurrer, and by special instructions requested, defendant brought forward his contention that the complaint in its averment of the representation counted upon stated only a case of “trader’s talk,” or at most a mere opinion, upon which plaintiff had no right to rely.

The alleged false representations as a whole consti tuted the gist of the cause of action asserted in the sev■eral counts, and the question was upon the legal sufficiency of its statement. Those segregated parts against which the motions were directed were not frivolous, scandalous, or unduly prolix, nor were they impertinent, irrelevent, or immaterial to the cause of action as conceived and alleged by the plaintiff. They were proper, if not essential, elements of the case stated, and the court correctly refused to mutilate that statement of the case. The proper method of getting defendant’s contention in respect to the sufficiency of the counts before the court was by demurrer.—4 Mayf. Dig. p. 496, § 1196 et seq.

The question raised by the demurrer is whether the court can say that the representations alleged, though falsely and fraudulently made, fail to state an actionable wrong. Where statements are made as of fact, especially where they concern matters which may be assumed to be within the knowledge of the party making them and where there is nothing to arouse suspicion, the party to whom they are made has a right to rely' upon them without instituting an independent investigation, and, if they be false, it is immaterial that they may have been made without fraudulent intent. They are fraudulent by construction of law.—Shahan v. Brown, 167 Ala. 534, 52 South. 737; Einstein v. Marshall, 58 Ala. 153, 29 Am. Rep. 729. The difference between the counts, stated above, imports no lack of necessary averment in count 5. The greater generality of .that count simply opens to the plaintiff a wider field of inquiry, for, besides covering the case alleged in the other counts, it reaches and adequately states a case, involving identical legal consequences, as for the false statement of material fact made to entrap plaintiff, ignorantly it may be, hut with reckless disregard of its truth or falsity.—Brown v. Freeman, 79 Ala. 406.

We think it cannot be determined as a conclusion of law on the language used whether the alleged statement of the defendant was the representation of a fact, which he intended should be understood as true of his own knowledge, or the expression of an opinion. That depends upon the surroundings, which in this case, Ave think, were a proper subject for interpretation by the jury.—Moses v. Katzenberger, 84 Ala. 95, 4 South. 237; Tabor v. Peters, 74 Ala. 90, 49 Am. Rep. 804; Andrews v. Jackson, 168 Mass. 266, 47 N. E. 412, 37 L. R. A. 402. 60 Am. St. Rep. 390.

For mere “trader’s talk” aie vendee will not be held to respond either in contract or tort. In Deming v. Darling, 148 Mass. 504, 20 N. E. 107, 2 L. R. A. 743, cited by appellant, it is said to be settled: “That the law does not exact good faith from a seller in those vague commendations of his wares which manifestly are open to' difference of opinion, which do not imply untrue assertions concerning matters of direct observation, * * * ánd as to which ‘it always has been understood, the world over, that such statements are to be distrusted.’ ”

And. the court'added: “The rule of law is hardly to be regretted, when it is considered how easily and insensibly words of hope or expectation are converted by an interested memory into statements of quality and value, when the expectation has been disappointed.”

But the modern tendency is to restrict this license of vendors.

Cases do arise in which the court will say, as matter of law, that the representation made is mere “trader’s talk,” and an opinion, though implying some knowledge of facts, may be stated under such cimcumstances that the court will say that the vendee should not have relied upon it. Appellant has cited some such cases. Expressions of opinion as to the future undeveloped uses or value of property, amounting to mere speculation, belong to this class.—Ansley v. Bank of Piedmont, 113 Ala. 467, 21 South. 59, 59 Am. St. Rep. 122. And where the parties deal at arm’s length, and the vendee is not fraudulently induced to forbear inquires which it may be presumed every competent person would otherwise make for his own protection, expressions of opinion as to matters which lie in opinion merely — opinions as to current market values furnishing the most common example — will not constitute ground for an action of deceit, for the reason that the vendee, knowing the nature of such expressions, has no right to rely upon them. He should inquire and examine for himself.—Camp v. Camp, 2 Ala. 632, 36 Am. Dec. 423.

“A man who relied on such affirmations, made by a person -whose interest might so readily prompt him to invest his property with exaggerated value, does so at his peril, and must take the consequences of his imprudence.” — Kerr on Fraud and Mistake, 84.

But while the value of property is generally a matter of opinion, yet if the purchaser states his ignorance and invites the opinion of the vendor, as alleged in the complaint under consideration, thus in effect giving the vendor to understand that he relies upon that opinion, and putting upon him the onus of confidence imposed and the responsibility of making a definite statement, the vendor is not bound to assume the burden or to- answer ; but if he does, and his answer exceeds the license of those vague commendations which do not imply untrue assertions concerning matters of direct observation, his answer must speak the truth. Under such circumstances the affirmation of a definite opinion as to value becomes an affirmation of fact, that is, of the fact of a bona fide opinion; and if it is falsely and fraudulently made “to mislead or cheat another, to abuse his confidence, or to blind his judgment, it is in law and morals as reprehensible as if any other fact were affirmed-for the like purpose.”—Stebbins v. Eddy, 4 Mason, 423, Fed. Cas. No. 13, 342; Kerr on Fraud and Mistake, 87 Montgomery So. Ry. v. Matthews, 77 Ala. 357, 54 Am. Rep. 60; Wilcox v. Henderson, 64 Ala. 535; Camp v. Camp, supra; Simar v. Canaday, 53 N. Y. 298, 13 Am. Rep. 523. The demurrers to the counts mentioned above were properly overruled.

Whether a representation in the form of an opinion implying some knowledge of facts shall be held for an opinion merely, or was intended for acceptance as a statement of fact, is in general a question to be determined by the jury on consideration of all the surroundings.—Moses v. Katzenberger, supra; Tabor v. Peters, supra. So, likewise, whether an opinion has been elicited under such circumstances of confidence as to induce the vendee to forbear independent inquiry is a question for the jury.

Clearly plea 3 stated a good defense, for it contained, among other things, a categorical denial that defendant made to plaintiff any representation of any kind concerning the value of the bonds and stocks. That denial was equivalent to the general issue, which was also pleaded in due form. The error of sustaining the demurrer was harmless.

Pleas á and 5 were bad for reasons which ■ may be found in the principles of law stated above in connection with the rulings on the sufficiency of the several counts upon which the case was tried.

Charges 9 and 12, requested by the defendant, sought to limit the inquiry as to fraudulent representations to one certain occasion during the negotiation which led up to the sale. But there was evidence of similar rep: resentations made on the occasion when the sale was consummated. Appellant contends that these last alleged representations were made, if at all, after the sale, and his testimony went to support this contention; but the evidence for appellee tended to- show that, though the terms of the sale had been agreed upon, yet the agreement was tentative only, that there had been no delivery and acceptance of the bonds and stocks, without which there was nothing to suggest that the parties intended the title to pass, that, in short, until the actual delivery the contract of sale rested in negotiation, so that either party was yet at liberty to withdraw entirely or to seek new inducements, and that, while the negotiations were at this stage, plaintiff’s agent, acting in the premises for plaintiff, again demanded of defendant further assurance as to the value of the bonds and stock. Defend1-ant’s final response, made under those circumstances, in line with the representations charged in the c'Ont-plaint, and similar to those which the testimony tended to show had been made on previous occasions, was relevant and proper for consideration by the jury. These charges were properly refused.

The proposition of charge 10 failed to take account of one certain aspect of the evidence, and was too broadly stated in favor of the defendant. In Pomeroy’s Equity-Jurisprudence, § 892, the law is stated to be that: If,, after a representation of fact, however positive, the-party to whom it was made institutes an inquiry for-himself, has recourse to the proper means of obtaining information, and actually learns the real facts, he cannot claim to have relied upon the misrepresentation, and to have been misled by it. Such claim would simply be untrue.”

But it would seem to be clear that if the vendee, after inquiry which proves unavailing or unsatisfactory, goes • to the vendor demanding assurance, the question whether he relied on an assurance so obtained must be one for the jury. It appeared that at an early stage of the negotiation plaintiff communicated with its bankers in Mobile, asking them to make inquiry in New York as to the value of the bonds and stocks of the Norfolk & Southern Railway. But it seems that in the memorandum, which plaintiff’s agent made at defendant’s dictation for the purpose of investigation, a mistake occurred in describing the bonds of the railway company, of which there were several issues — though how this mistake occurred, and whether it made any real difference' in the value of the bonds, was left in doubt — and that the answer, relating to bonds only, and omitting any reference to stock, indicated a more or less doubtful value, approximating, however, the price demanded and received by defendant. Subsequently plaintiff, according to the tendencies of its evidence, required defendant to make statements as to the value of the stocks and bonds. Defendant denied the alleged representations in tofo. Whether plaintiff was justified in relying upon statements elicited under these circumstances as representations of fact or of bona fide opinion, if any were made., and whether plaintiff did in fact rely in material part upon them, or wholly upon information gained from other sources, were questions for the jury. But the charge in question, construed in connection with the evidence, might have misled the jury to conclude the case against plaintiff on the bare fact that it had made the inquiry of its bankers above mentioned. It was well refused.

There is a degree of obscurity in charge 13 requested by defendant arising out of the use of the phrase “as to the value of its property.” If, however, the charge be read as asserting the proposition that the defendant was entitled to a verdict if the plaintiff did not rely at-all upon defendant’s representation as to the valué of his bonds and stock, and so appellants reads it, it was sufficiently covered by other charges given for defendant, and there was no error in refusing it.

Thus far, in discussing the principles of law deemed to underly plaintiff’s asserted cause of action, we have, for mere convenience of statement, treated the transaction -at issue as though it were a sale of bonds and stocks by defendant to plaintiff at an agreed price. For the purpose of the statements already made, this method was not improper or misleading. — Urn stem v. Marshall, supra. Coming now to the question of the measure of damages and some rulings on the evidence which have been assigned for error, it is necessary in the consideration of the position taken by appellant to have regard for the transaction more precisely as it was. In this connection it is noted that plaintiff and defendant entered into no contractual relations. They each contracted with the McGowins. but not with each other. Defendant, therefore, could be held to respond in damages to plaintiff in an action of tort only, and this on the theory that by the fraud he had induced plaintiff to enter into the trade with the McGowins. In large part the transaction as between the plaintiff and the Mc-Gowins was a barter or exchange of properties, and amounted in effect to' this, that plaintiff gave its sawmill property in exchange for the McGowins’ bonds and stocks, plus a sum of money paid and to be paid. The bonds were taken in the trade at 95, the stock at 80, per centum of their face value. Defendant offered to prove the value of the mill property, and we may assume that his witnesses would have testified that it was worth less than the agreed estimate of its value, viz.: $200,000. He excepted to the court’s adverse rulings. The court, instructing the jury along the same line, laid down the measure of damages as the difference between the represented value of the stocks and bonds and their actual value at the time of the sale, with interest. These rulings are assigned for error.

Appellant’s insistence in respect to the proper measure of damages, in an action of deceit by vendee against vendor, is that to make the vendee whole it is only necessary, and therefore just, that the vendee have the difference between that which he had before and that which he had after the purchase; that is, he should have the difference between the value of the thing purchased and the price paid, or, in case of an exchange, the difference between the value of Avhat he was fraudulently induced to part with and the value of Avhat he got. This may be the rule of the federal courts, of some of the state courts, and seems to be the rule in England.—Sutherland on Damages, § 1172; 20 Cyc. 135. But the rule sustained by the great weight of authority in this country is that the vendor must make good his representation as though he had given a warranty to that effect, that damages must be measured by the difference between the actual value of the property at the time of the sale or exchange and is represented value.—Sutherland, 1171; 20 Cyc. 132. We think our own cases lend support to this statement of the proper rule.—Foster v. Kennedy, 38 Ala. 359, 81 Am. Dec. 56; Thompson v. Bell, 37 Ala. 438; Kelly v. Allen, 34 Ala. 663; Gibson v. Marquis, 29 Ala. 668; Stow v. Bozeman, 29 Ala. 397. This rule, evidently, derived from the law of contract, gives the purchaser “the benefit of his bargain,” and is based upon the consideration that in good morals he is entitled to that benefit. Appellant, adverting to the fact that he was not a party to any contract with appellee, urges that as a special reason why the rule of the federal courts should be adopted in this case. But if we are to observe the rule which has become firmly established in the great majority of the courts in this country — and it seems to us to be a very just rule — we can find no- sufficient reason for taking this case without its operation. As pointed out in Potter v. Necedah Lumber Co., 105 Wis. 25, 80 N. W. 88, 81 N. W. 118: “The foundation principle upon which all rules for determining damages in a case of actionable fraud rests is that tbe wronged party is to be compensated for tbe loss be sustained by tbe fraud to tbe extent of tbe natural and proximate consequences of tbe wrong.”

And tbe difference in tbe two rules above stated arises out of different conceptions of proximate consequence. Tbe most general conception is that tbe vendee is entitled to “tbe benefit of bis bargain,” and a loss of that benefit is a consequence of tbe fraud. This transaction was in part a barter of properties; but tbe rule in sucb cases is tbe same as where there is a sale. Defendant was not a party to tbe contract; but be was in a most material way a party to tbe negotiation from which it resulted. Even if be bad been without interest in tbe outcome, be would have been responsible for tbe consequences of a representation known to- be false and made-to induce tbe sale. This doctrine is stated in strong language by Stone, J., in Einstein v. Marshall, supra. But tbe facts of this case, assuming that tbe jury cor'rectly interpreted tbe evidence in accordance with thisappellee’s contention, take it far beyond the requirements of that doctrine. It is entirely plain that there-would have been no contract but for defendant’s intervention, and it may be assumed that bis course was in part at least controlled by anticipation of advantage to himself. He was making a large investment of cash capital besides tbe value of bis bonds and stocks. He investigated tbe value of tbe mill property on bis own account. Tbe McGowins were dependent upon him. He was thus in a position to dictate, and did in fact dictate,, substantially tbe entire contract; that is, in tbe situation of tbe parties, this particular contract could not have been made without bis approval. It seems clear that on tbe general doctrine of tbe cases, to- which tbe facts in evidence lend moral weight, plaintiff was entitled to tlie benefit of the bargain which defendant, according to one tendency of the testimony, has fraudulently helped to impose upon it, and that the trial court, in its rulings on the evidence, and in its instruction to the jury on the measure of damages, committed no error. Our conclusion is that the case was properly submitted to the jury for decision, and that the judgment be affirmed.

Affirmed.

Anderson, C. J., and McClellan and Somerville, JJ., concur.