Adams v. Barber

139 S.W. 489, 157 Mo. App. 370, 1911 Mo. App. LEXIS 402

• Court: Missouri Court of Appeals
• Decided: May 8, 1911
• Status: Published

Opinion

opinion;

NIXON, P. J.

— I. Appellant assigns as error that the allegations of the petition are insufficient to sustain a judgment for deceit and that his demurrer to the petition on that account should have been sustained. The petition, after alleging the specific false representations, enumerates them in detail at great length and then proceeds to charge what is commonly called the scienter, in these words:

“Plaintiff further says that said representations so made by defendant were made to the plaintiff fraudulently and intentionally for the purpose of inducing plaintiff to enter into said contract and to make said exchange of his stock of merchandise and fixtures to defendant for said land.”

The objections appellant makes to this petition are, that plaintiff must allege and prove that the representations upon which his action is based were false; that they were known to be false by the defendant at the time they were made; or that the representations were made by defendant as of his own knowledge when in part he had neither any knowledge on the subject nor any reasonable grounds to believe the representations to be true; and that the plaintiff’s petition does not come up to these requirements.

It will be seen that the specific statements of the petition are “that the defendant fraudulently and intentionally for the purpose of inducing plaintiff to enter into said contract” made said representations. It must be remembered in the discussion of the sufficiency of these allegations to sustain an action for deceit, that this is not an action in equity to rescind a contract procured by fraudulent representations, but an action at law for damages caused by deceit and that under the law a scienter is an essential element of actionable fraud. It will be seen by a perusal of the petition that it first sets out the representations made by the defendant and follows this with the allegation that the plaintiff entered into the contract relying upon the representations of the defendant, and then sets out the inducements and statements made by the defendant to induce the plaintiff not to go to Arkansas and examine the land before making the trade. The words used are that plaintiff “fraudulently and intentionally for the purpose of inducing plaintiff to enter into said contract” made said representations. The word “fraudulent” is defined by Webster as follows: “Using fraud; trickery; deceit. Dishonest. Synonym: Deceitful, fraudful, guileful, crafty; treacherous; dishonest, etc” and while the authorities hold with great uniformity that in action of this kind it is necessary to charge the scienter, no express form of words is required to be used for that purpose, nor is it always necessary that the knowledge of the falsity of the representations be expressly stated In so many words. And it has been held that the allegation that the representations were fraudulently or deceitful avers words. And it has been held that the allegation that the representations were fraudulently or deceitfully made sufficiently avers the scienter as the word “fraudulently” or the word “deceitfully” excludes the idea of mistake and .imports that the representations were made with knowledge of their falsity. The allegation of an intention to deceive is not always to be made in direct terms. And while the plaintiff must, in substance, aver that the representations were made with knowledge of their falsity, this requirement is complied with if from the averments of the petition it can be fairly gathered that the defendant falsely and fraudulently deceived the plaintiff. Especially is this considered sufficient after verdict. [Barber v. Morgan, 51 Barb. (N. Y.) 116; Zabriskie v. Smith, 13 N. Y. 322; Bayard v. Malcolm. 2 Johns. (N. Y.) 550.] In the case of Nauman v. Oberle, 90 Mo. 666, the charge was held sufficient that “the defendant falsely, fraudulently and deceitfully represented' and guaranteed. [See also, Hoffman v. Gill, 102 Mo. App. 320, 324, 77 S. W. 146; Fenwick v. Bowling, 50 Mo. App. l. c. 521; Carr v. Spangler, (N. Y.) 138 App. Div. 32.] Under the authorities cited, the charge of the scienter in this petition was undoubtedly sufficient as the allegations charge that the representations were fraudulently, made, which implies that they were knowingly made by the defendant in bad faith with knowledge of their falsity.

Nor does this conclusion conflict with the statement of the law by our Supreme Court in the case of Remmers v. Remmers, 217 Mo. l. c. 557, 117 S. W. 1117, that in order to state a cause of action for deceit it is essential to aver that such representations were false and so known to be by the defendant, and that such representatations were made with the intention of deceiving plaintiff, and that plaintiff was deceived thereby, and relying upon such promises and representations he was induced to act to his injury. This opinion could not be reasonably construed to mean that the necessary allegations can not be substantially stated without the use of formal statement, nor that any particular set phrase or formal words are necessary in order to substantially make the charge. The opinion in that case turned on the elements necessary to be stated rather than the sufficiency of their statement. We conclude that the petition is sufficient to withstand the assault after issues joined and especially after verdict.

II. The sufficiency of the petition is further assailed by appellant in that it does not state what the value of the real estate would have been if it had been as represented. The petition alleges that the defendant traded the plaintiff 480 acres of land for the price of $8 an acre in payment of his stock of goods and that the defendant was to pay the plaintiff the cash difference, and that the stock of goods invoiced about $5000, and that the land was conveyed in pursuance to the contract to the' plaintiff and that the stock of goods were transferred to the defendant and the difference was paid in cash, and that by reason of the false representations the plaintiff was damaged in the sum of $4000. We think this contention is not sustained and that the allegations of the petition were sufficiently specific to show the nature of the damages claimed, — especially in consideration of the plaintiff’s evidence which shows the 480 acres in controversy to have been actually worthless.

III. The further contention is made that the plaintiff cannot both rescind and maintain an action of deceit, and that if he elects to rescind he may recover what he has parted with under the contract but not recover any damages for fraud. The law is that the plaintiff in cases of fraud has a choice of remedies. And while his affirmance may preclude him from rescinding the contract, he may rescind and yet maintain an action for deceit. [Warren v. Cole, 15 Mich. 265; 20 Cyc. 87.]

IV. Appellant also objected to the introduction of certain evidence of the witness, Fishbum, who was the intermediary between plaintiff and defendant in making this trade. It appears that after the parties met at Sarcoxie at the store of the. plaintiff at a certain stage of the negotiations and after they had been partially concluded — the 'defendant’s, evidence tended to show —there was an agreement between plaintiff and defendant that at the request of the defendant the plaintiff would go to Arkansas and examine the land before, con-eluding the agreement, and if the examination proved satisfactory the trade was to be then concluded. Upon this arrangement being made between the parties, the testimony of Fishburn and defendant tended to show that the defendant left the storeroom as though the trade was off for the present and that Fishburn and plaintiff retired to the back of the storeroom and had a private conversation in which the plaintiff’s intention to go to Arkansas to examine the land was changed and the contract was immediately after this conversation concluded. Fishburn was allowed to testify in this connection as follows:

“We were preparing to come back home, leaving Mr. Adams to go and see the land before he rendered final decision, but I talked to Mr. Adams and I told him that he had Mr. Barber’s written statement of the land, that I had known Mr. Barber, knew of his dealings here, and that I considered him fair and honest, and that he would find the land as represented. I told him in my opinion that if it was not that way he could come back at Mr. Barber. That is in general' the substance. . . . Then I called Mr. Barber in. I don’t remember whether he was just outside the door or out in front. Mr. Barber came back and then we all three talked it over and they agreed to trade without plaintiff going to see the land, and drew up the contract they traded on.”

The particular objection that appellant makes to the competency of this evidence is that the defendant and plaintiff had come to an agreement that the plaintiff should go and examine the land in person and the defendant had left the store and was not present at the time the conversation took place between Fishburn and plaintiff, and that the agency, if any existed, between Fishburn and defendant, was at an end. This objection seems to overlook a portion of the plaintiff’s evidence in this case in which he testified: “Q. What was said at that time, if anything, about going to see the land? A. I said I would go and see the land. Mr.- Fishburn said there was no use to go see it. Q. Was Mr. Barber present? A. Yes, sir; he says, ‘No use to go see it, I have a written description and Mr. Barber is worth the money. If it is not like he says it is, he is worth the money.’ He says, ‘It’s all right, let me see it.’ I handed it to him. He read it and he says, ‘Yes, it’s all right, I will stand by it, whatever I say I stand by.’”

But aside from all this, there was evidence for the consideration of the jury as to whether the part performed by Fishburn at the time the trade was consummated and his representations to Adams in which he induced Adams not to go to Arkansas, was a part of the original design arranged between Fishburn and the defendant before they went to Sarcoxie to make the deal, in which Fishburn stated: “I knew of Mr. Barber having the land. I saw Mr. Barber, talked to him and framed up a deal which Mr. Barber would agree to make if the goods were satisfactory.” If . the program that was pursued at Sarcoxie at the time the deal was perfected in the store was in pursuance of an arrangement between Barber and Fishburn and a part of the “framing up” of the deal referred to by Fishburn, or if at the time of the conversation, which is objected to by appellant, Fishburn was acting as the agent of the defendant and made these representations to the plaintiff for the purpose of fraudulently inducing hint not to examine the land or make a personal investigation as to the representations that had been made to him, then the evidence was competent for the consideration of the jury. On the question of the intent of the parties, and whether plaintiff relied upon defendant’s representations, the evidence was properly admitted; and also as being a part of the res gestae.

V. Error is also assigned in the giving of plaintiff’s instructions numbered one and four which are as follows :

“1. . . . and if you further find that said representations so made by defendant were false and that defendant either knew that they were false or that defendant made such representations without knowing whether true or false, for the purpose of inducing plaintiff to trade with him, then your verdict will be for the plaintiff. . . .”

“4. The court instructs the jury that, even though they may believe that the defendant never had seen this land, yet if the jury further believes from the evidence that the defendant made the representations as set out in the written statement offered in evidence, knowing that said representations were false, or made them without knowing whether they were true or false, then the defendant is bound thereby, and if they were false and the plaintiff made the trade with defendant relying on said representations, then your verdict should be for the plaintiff.

The propriety of the giving of these instructions in this case can only be satisfactorily determined by an examination of the nature of appellant’s defense and the evidence he offered as to his knowledge of the condition, the soil, etc., of the 480 acres of land. In this connection we give the following portions of the evidence material to this inquiry:

“I told Mr. Adams I had 2720 acres at this particular price that I had never seen except one corner of it. Q, State what you said to him? A. I told him the mountain land was good fruit land; it would grow any crop Missouri would; that I had raised alfalfa on part of my '2720; that I had- never seen this 480 except the corner, but that it had been represented to me to be the same kind of land by Mr. Oalhoun, from whom I bought it, and by Mr. Calhoun’s agent. And we agreed that Mr. Adams should go down and see the land. Q. What did you tell him about his going? A. I told him I was satisfied if he would go down he would trade; I wanted him to go down and he said he would. ... I told Mr. Adams also that it was represented to me that all of the oak timber on all of this 2720 was intact, had never been cut, but that the pine on all the 2720 acres, including the pine on this 480 acres, had been cut. I have found since that I did misrepresent that — that it has not been cut. . . . Mr. Fishburn went back and talked with. Mr. Adams in the rear of the store, I don’t know whether-Mr. Adams called him back or not. I believe I stayed up-in front of the store and he came up and said, ‘We won’t, take this train; we will go out and get supper and come back and sign a. contract.’ ” -

This evidence, considered together, constitutes appellant’s defense and the evidence was evidently offered to show that the misrepresentations by appellant as to-the land were not made in the form of unqualified personal knowledge, but upon information and belief in which the speaker gave the sources of his knowledge,, and tended to show that though not true they were made-with defendant’s belief in their truth.

Whether actual bad faith must be shown in a common-law action for deceit, to justify a recovery, has been the subject of much controversy. The question was, however, settled in England by the decision of the House of Lords in Derry v. Peek, L. R. 14 App. Cas. 837, wherein it was finally held that there can be no recovery in such an action where the defendant made the statement complained of in the honest belief of its truth, however unreasonable such belief. The United States Supreme Court in Lord v. Goddard, 13 How. 198, 14 L. Ed. 111, seems to have taken the same view, and substantially the same holding Avas announced in Kimber v. Young, 137 Fed. 744, and in Pieratt v. Young (Ky.) 49 S. W. 964, that in an action for deceit, either knowledge on the part of the defendant of the falsity of his alleged representation or what in law is equivalent thereto must be proven or the action fails. Our own Supreme Court in Dunn v. White, Adm’r, 63 Mo. 181, said: “The now generally recognized doctrine is that in order to support a personal action for fraudulent representations, it is not sufficient to show that the party made statements which he didn’t know to be true and which were-in fact false.” If spoken honestly, and the speaker believes his representation to be trne, he is not liable in an action for deceit for honest mistake or error in judgment. [Koontz v. Kaufman, 31 Mo. App. 397; Snyder v. Stemmons, 151 Mo. App. 156, 131 S. W. 724, 727.]

In the case of Paretti v. Rebenack, 81 Mo. App. 494, the instruction given and condemned was essentially identical with the one given in the case under consideraron. The court held that to recover damages caused by fraudulent misrepresentations in an action at law, it is -necessary, to allege and prove, first, that the representations were untrue; second, that defendant knew them •to be false when made, or that he made them as of his own knowledge when in fact he had no knowledge whatever on the subject; third, that the plaintiff had a right to and did rely upon the truth of such representations and suffered damage or loss by reason of their falsity. .And the court held that the plaintiff’s instruction having omitted, ‘0!r that he made the representations as of his own knowledge when in fact he had no knowledge ■ whatever on the subject,’ such omission rendered the instruction given by the court at the instance of the plaintiff vitally defective. And the court there said: “Hence in the case at bar when the triers of the fact were directed to find against the defendant (on the second -alternative upon which the law predicates an intent to -deceive) if he did not know ‘that they (representations) were true’ the jury might well have rested their adverse finding on the assumption that whatever reasonable grounds defendant had for believing his statements to be true, still he did not in fact know them to be true. This instruction was a clear misstatement of the law applicable to the facts as developed on the trial of this case, and necessitates a reversal of the judgment and a remanding of the case to be tried in conformity with this opinion.” [See also, Walsh v. Morse, 80 Mo. 568; Hamlin v. Abell, 120 Mo. 188, 25 S. W. 516.] On a retrial of this case, the instruction should be so framed as to pTesent the question to the jury whether the false representations made by the defendant, if any, were made as of his own knowledge and not as a mere matter of opinion or general assertion about a matter of which he had no knowledge whatever.

VI. Appellant contends that the court erred in giving instruction numbered two as follows:

“2. The court instructs the jury that if they believe from the evidence that the witness, Fishburn, was. the agent of defendant alone in making the trade between plaintiff and defendant, or was the agent of both plaintiff and defendant, then the representations and statements made by Fishburn to plaintiff while acting on behalf of the defendant were binding on the defendant. And if the jury believe from the evidence that the acts and statements of Fishburn to plaintiff, if any, to. induce him not to go to Arkansas to examine the land were made for and on behalf of defendant, then the defendant would be bound thereby.”

This instruction told the jury that if they found that Fishburn was the agent of defendant alone in making the trade, or was the agent of both plainiff and defendant, then the representations and statements made, by Fishburn to plaintiff while acting on behalf of the defendant were binding on the defendant. We think the court committed no error in giving this instruction as the statements of the agent, if acting within the scope of his authority, would be proper evidence for the consideration of the jury in arriving at a conclusion as to whether the plaintiff relied upon the false representations of the defendant as to the condition and quality of the land.

VII. The court’s instruction as to the measure of damages is contained in plaintiff’s instruction No. 1 and is as follows:

“If your verdict is for the plaintiff, you will assess plaintiff’s damages at the difference in the value of the land as it actually is, and what the value of the land would be if said land had been as defendant represented, not to exceed $3840.”

The majority of jurisdictions apply the rule that the defrauded vendee is entitled to the difference between the value of the property that he received and its value had the representations made been true. [Shinnabarger v. Shelton & Lane, 41 Mo. App. l. c. 158; Caldwell v. Henry, 76 Mo. 257; Hicks v. Deemer (Ill.) 58 N. E, 252; McCready v. Phillips (Neb.) 76 N. W. 885.]

VIII. As this case is subject to retrial, attention is called to the fact that under the evidence in this record the doctrine of caveat emptor does not apply. The rule often announced by the courts of law is that where the vendor and purchaser are dealing at arm’s length and where the subject-matter of the sale is at hand and both parties have equal opportunities to examine, the purchaser must protect himself and cannot rely upon representations made by the vendor. In this case, however, there were not equal opportunities for examination and the plaintiff was not required to make investigation. The. 480 acres of land which was conveyed by the defendant to the plaintiff was in another state, one hundred or more miles away, and under those circumstances it would be unreasonable to apply the rule that the plaintiff was required to examine the land before making the purchase. To go and examine the land would involve expense and inconvenience, and the plaintiff had a right to trust to the representations made by the defendant as to the character, situation and surroundings of the land at such distant place when he could not, as we have stated, make a personal examination; and if the plaintiff had no knowledge or information of his own, he had a right to rely upon the statements made by the defendant if he made them as of his own knowledge. There is no rule of law which requires men in their business transactions to act upon the presumption that all men are knaves and liars and which dedares them guilty of negligence and refuses them redress whenever, they fail to act upon that presumption. The fraudulent vendor cannot escape from liability by asking the law to applaud his fraud and condemn his victim for his credulity. Strand v. Griffith, 97 Fed: 854. The unmistakable drift of authority is towards the doctrine that the wrongdoer cannot shield himself from liability by asking the law to condemn the credulity of his victim. [Noyes v. Belding (S. D.) 59 N. W. 1069; Watson v. Molden (Idaho) 79 Pac. 503.] The party perpetrating a deliberate fraud will not be allowed to take advantage of his rascality by setting up the negligence of the defrauded vendee and saying to him, in effect, “I admit that I designedly defrauded you, but you need not have been duped by me had you not trusted me and negligently relied upon my intentionally false words.” [Judd v. Walker, 215 Mo. 312, 114 S. W. 979.] By the overwhelming weight of authority ordinary prudence and diligence does not require a person to test the truth of representations made to him by another as of his own knowledge, and with the intention that they shall be acted upon, if the facts are peculiarly within the other party’s knowledge or means of knowledge, though they are not exclusively so, and though the party to whom the representations were made may have an opportunity of ascertaining the truth for himself. [14 Am. and Eng. Ency. Law, 120, 121; McMullen v. Rousseau (Wash.) 82 Pac. 883.]

IX. In the giving of the instructions in this case, both plaintiff and defendant ignored the fact that the action could be maintained without the plaintiff having made an examination of the land, and as the record nowj stands, neither party has any cause of complaint on account of error committed in that behalf, the court having instructed by their consent on that theory. But as the case is to be retried, attention is called to the fact that the doctrine of caveat emptor does not apply in this case.

X. The testimony as to the agreement between plaintiff and defendant to the effect that the plaintiff' was to go to Arkansas and examine the land for himself, and also as to the inducements held out. by Fishburn to the plaintiff not to make an examination was proper for the consideration of the jury in arriving at their conclusion as to the ultimate facts as to whether defendant fraudulently and intentionally made false representations to the plaintiff for the purpose of inducing him to enter into the contract, or whether he made such representations as of his own knowledge when in fact he had no knowledge whatever on the subject, and that the plaintiff relied upon the truth of such representations and suffered damage by reason of their, falsity. Hence the defendant’s instructions numbered 8, 9 and 10 as originally asked and as modified and given by the court should have been refused, and also plaintiff’s instruction numbered 3.

The primary issues involved in this case are few and easily apprehended and in the retrial the jury’s attention should not be diverted from these issues nor their deliberations impaired and confused by instructions on collateral issues.

The judgment is reversed and the cause remanded.

All concur.