Barndt v. Frederick

11 L.R.A. 199, 47 N.W. 6, 78 Wis. 1, 1890 Wisc. LEXIS 269

• Court: Wisconsin Supreme Court
• Decided: November 5, 1890
• Status: Published

Opinion

Lvox, J. I.

On the trial of the cause, counsel for defendant claimed that the action, as characterized by the complaint, is to recover the consideration paid for the mining stock, on a rescission of the contract of purchase because of the alleged false representations made by the defendant which the plaintiff believed to be true and on the faith of which he made the purchase. Such also is his contention in the argument here. On the other hand, counsel for plaintiff maintained on the trial, as he does in this court, that the action is to recover damages for the alleged fraud and deceit of the defendant in the sale of the stock. If the first position is correct the action is based upon the implied promise of the defendant to refund the consideration paid for the stock by the plaintiff, in case such representations should prove to be false and the plaintiff should elect to rescind the contract and return, or offer to return, the stock. In such case, it is an action ex eon&raetu. If the other position is the correct one, it is an action ex delicto. Before the plaintiff can recover on the implied assumpsit he must show that the defendant made representations of fact materially-affecting the value of the stock; that the plaintiff relied upon such representations and purchased the stock on the faith of them, believing them to be true; that they were false; and that, within a reasonable time after discovering they were false, the plaintiff rescinded the contract of purchase by returning or offering to return the stock to the defendant. It need not be averred or proved that the defendant knew his representations were false. His legal liability remains although he believed and had good reason to believe his representations true. It must also appear either that the defendant was the owner of the stock, or, if he was not the owner but was acting as agent of the owner in making the sale, that he failed to disclose such agency to the plaintiff, but dealt with him as though he (the defendant) was the owner. If such agency existed and the principal was disclosed to plaintiff at the time of the sale, the action ex conl/ractu must be brought against the principal, and the agent is not liable, especially after he has (as in this case) paid over the proceeds of the sale to his principal.

If the action is to recover damages for the alleged fraud and deceit, the plaintiff must, as in the other form of action, show the representations, them materiality, his reliance upon the truth of them in making the purchase, and that they were false; but he must also aver and prove that the defendant knew they were false, or had no good reason to believe they were true, when he made them. Ho offer to return the stock need be averred or proved, and the facts that the defendant acted as agent for others in selling the stock, and disclosed his principals to the plaintiff at the time of the sale, will not relieve the defendant from liability for his fraud. Neither will any delay in bringing such action ex deUeto necessarily defeat it, unless some - statute of limitation has run against the cause of action. The rules above stated are quite elementary, and neither of the learned counsel question or controvert them.

The defendant proved on the trial that he sold the stock in question as the agent of the mining company, and the proofs are quite satisfactory that the plaintiff had knowledge of that fact when he made the purchase. If he had such notice (and we do not doubt he had) the plaintiff cannot recover against the defendant on the implied asswnvpsit; hence, if this is an action ex conbraefot,, it cannot be maintained and the judgment for the plaintiff must necessarily be reversed.

On the other hand, the testimony given on the trial tends to prove that the defendant made the representations charged in the complaint; that the plaintiff believed them true, relied upon them, and purchased the stock on the faith of them; that they were false in material particulars; and that the stock, when plaintiff purchased it, was of little or no intrinsic value. It is not denied that the Peerless Mining Company never excavated ore of any considerable value from its mine, and it is not claimed that defendant had any reason to believe, or that he was ever informed, it had $1,500,000 of ore on the “ dump,” as it is called, or any other considerable quantity. If he made the representation to the plaintiff in that behalf as charged, it was certainly fraudulent. Although the defendant denies that he made any such representation in regard to the Peerless mine, yet there is sufficient testimony tending to show that he did to support a verdict for the plaintiff. There is also testimony which would justify findings that the defendant had no good reason to believe that other material representations so made by him, were true, and that they were not true. The testimony therefore tends to prove every fact essential to a recovery in the action, if the cause of action is the fraud and deceit of the defendant.

The f oregoing observations show that the question whether the action is upon contract or for tort is important if not controlling on this appeal. It will now be considered. The same question has frequently arisen in this court in cases founded upon transactions which were at the same time a breach of duty and a breach of contract. Lane v. Cameron, 38 Wis. 603; Smith v. C., M. & St. P. R. Co. 49 Wis. 443; Graham v. C., M. & St. P. R. Co. 49 Wis. 532; S. C. 53 Wis. 473; Fifield v. Sweeney, 62 Wis. 204; Western Ass. Co. v. Towle, 65 Wis. 247; Potter v. Van Norman, 73 Wis. 339; Whereatt v. Ellis, 58 Wis. 625. In some of these cases the actions were held to be on the contract, although the complaint in each contained averments peculiar to an action in tort for the breach of duty; while in others the actions were held to be for the tort, although the complaint in each contained averments peculiar to an action for the breach of contract. The general rule to be deduced from these cases is thus stated by Mr. Justice Tatloe in Western Ass. Co. v. Towle: “ Each complaint must be judged of upon the exact facts stated in it, in order to determine whether it be an action in tort or on contract, and in determining that question the evident intention of the party in stating his facts must have effect in determining the question, when the facts alleged might sustain a cause of action either in tort or on contract.” 65 Wis. 254. It must be conceded that none of these cases are decisive of the question as it arises in the present case. We must determine it, therefore, mainly upon the special circumstances of the case, having due regard to the rule thus laid down.

The complaint contains all averments essential to a cause of action for the tort and also to a cause of action on the implied assumpsit to recover back the consideration paid for the stock, unless it is essential to the latter cause of action to aver a demand of the consideration. This is not averred. But we are inclined to think that such demand is implied in the offer to return the stock, and it is not a necessary averment in either form of action. The point, however, is not here decided.

Eegarding the complaint as stating a good canse of action for the alleged fraud and deceit and also to recover back the consideration paid for the stock, the defendant might have moved the court, before the trial, to compel the plaintiff to elect upon which cause of action he would rely, and to strike out the allegations peculiar to the other cause of action, and the motion should have been granted. Or he might have moved that the complaint be made more definite and certain, and the court would have required the plaintiff to make the same election and amendment. Perhaps, also, the defendant might have demurred for improper joinder of causes of action in the complaint. It may be that he could not demur until he had obtained an order of the court compelling the plaintiff to separate his two causes of action which were blended together in one count. Had a motion for such an order been submitted, the court should have granted it and required the plaintiff to strike from the complaint the averments peculiar to one of the causes of action. Or, had the two causes of action been separated, a demurrer for misjoinder of causes of action would have been sustained, which would have led to the same result. The defendant failed to resort to either procedure indicated, but fully answered both causes of action and went to trial on the issues thus made by the pleadings.

Early in the trial, however, and before any testimony was introduced, counsel for defendant requested the court to determine whether the action was to recover damages for the alleged deceit or to recover the consideration paid for the stock on the rescission of the contract for the sale thereof. The court thereupon determined that the action was for the deceit, and in the subsequent rulings in the case so treated it. Plaintiff was content with such determination, and, conducted the trial upon the same theory. This was equivalent to an election by plaintiff to rely upon tbe cause of action in tort stated in tbe complaint, and to abandon tbe other cause of action therein stated. Thus was accomplished on tbe trial what would have been, bad one of tbe proceedings above suggested been resorted to before trial. We discover no error in this. We conclude tbe action was properly tried as an action to recover damages for tbe deceit, and that tbe complaint may be treated as amended by striking out tbe allegations peculiar to tbe other form of action, or tbe same may be rejected as sur-plusage.

II. Tbe testimony is voluminous and on some material propositions of fact is in conflict. It has been carefully examined, as has also tbe very acute and searching analysis of it submitted by counsel for defendant. Were we sitting as jurors in tbe case we might, in tbe light of tbe analysis and argument, hesitate to find tbe facts as tbe jury found them. But we can only determine whether there is testimony in tbe case which, assuming it to be true, is sufficient to support the verdict. We have' already determined this question in the affirmative.

Tbe action being for the fraud, and there being sufficient evidence to support the verdict, the judgment entered pursuant thereto should not be disturbed unless material error intervened on tbe trial. Before considering in detail tbe errors assigned for a reversal of tbe judgment, it may be observed that some of them are based on tbe hypothesis that the action is ex contwaelM, and cease to be material since it is held to be an action ex delicto. Of this class is the exception to tbe refusal of tbe court to grant a nonsuit on tbe ground of plaintiff’s silence after he ascertained the character of the mine, and his failure for so long a time to take any steps in the matter, which it is claimed is fatal to his right to impeach the contract under which he purchased the stock for fraud. He is not seeking to impeach the contract, as tbe parties aggrieved were in Grannis v. Hooker, 31 Wis. 474, and Woodford v. Marshall, 72 Wis. 132, cited by counsel. Of tbe same character also are tbe exceptions to tbe remarks made by tbe judge to tbe jury, to tbe effect that it was not denied tbe defendant sold tbe stock to tbe plaintiff and received payment tberefor; and that it made no difference whether tbe alleged false representations were made by tbe defendant as agent or owner. No further mention need be made of exceptions and alleged errors of tbe same class.

We are now to consider tbe material rulings of tbe court upon which errors are assigned, and .which are relied upon as grounds for a reversal of tbe judgment.

1. One of tbe grounds urged for a nonsuit was that tbe alleged false representations, especially tbe representation that tbe Peerless Mining Company bad $1,500,000 worth of ore on tbe dump or surface, ready for crushing, was too absurd and incredible for any sane man to believe, and hence tbe plaintiff could not have relied upon its truth when be purchased tbe stock. It is difficult to draw a line beyond which human credubty cannot go, especially in speculations in mining stocks. If tbe representations were so extravagant that sensible, cautious people would not have believed them, that is a proper consideration for tbe jury in determining whether tbe plaintiff believed and rebed upon them; but it does not preclude a finding that plaintiff did so, nor relieve tbe defendant from liability for bis fraud if be committed fraud. It is as much an actionable fraud wilfully to deceive a credulous person with an improbable falsehood as it is to deceive a cautious, sagacious person with a plausible one. Tbe law draws no fine between tbe two falsehoods. It only asks, in either case, Was tbe be spoken with intent to deceive and defraud, and was tbe false statement bebeved and money paid on tbe faith that it was true? These questions 'are for tbe jury. Tbe false representations in this case were not so extravagant as to justify tbe court in bold-ing, as matter of law, that tbe plaintiff could not bave believed and relied upon them as true. Tbe motion for a nonsuit called upon tbe court so to rule. Tbe refusal to do so was not error.

2. Tbe plaintiff testified in bis own bebalf that tbe stock was then worthless. Tbis was not objected to. Later, bis counsel put tbis question to bim: “ Wben did you first learn tbe truth in regard to tbis mine?” An objection to tbe question was overruled, and be answered: “About two years ago — I think it was in October ■ — • I found it was not worth a cent.” It is now contended that tbe question was objectionable in that it assumed tbe truth of tbe plaintiff’s previous testimony. Suppose it does. After tbe plaintiff bad testified positively to a fact, we see no valid reason why bis counsel may not formulate other questions on tbe theory that bis testimony is true, and put them to bim. But tbe question in tbe form it was put really assumed nothing. It merely called upon tbe plaintiff to tell wben be first learned of a fact to which be bad already testified.

8. It is assigned for error that testimony of conversations between tbe parties after tbe sale of tbe stock was erroneously admitted. We are unable to find in tbe bill of exceptions any objection to its admission, or any ruling by tbe court upon tbe question of its admissibility. We suppose, however, that in so far as tbe conversations bore upon tbe issues in tbe case tbe testimony was admissible.

4. Tbe defendant asked an instruction as to tbe duty of tbe jury closely to scan testimony of conversations repeated after tbe lapse of years. Tbe court gave tbe substance of the proposed instruction as follows: “ I bave been requested also to charge you in regard to conversations made after the, lapse of years; to charge you that human memory is so imperfect and frail that testimony of that kind should be scrutinized with some or more care. Tbis is tbe rule of tbe law.” To this, however, the court added: “It applies, however, more particularly to a casual conversation, and loses much of its force when applied to an important vital conversation in regard to a transaction.” It is claimed that such additional remark is erroneous. The fair construction of the charge is that if a witness testifies to a conversation which was casual as to him — that is to say, in which he had no interest, and perhaps took no part — his testimony should be carefully scrutinized, especially if considerable time has intervened between the conversation and the time he gives testimony of it. But if the conversation was vital and important to some transaction in which the witness was engaged (as, for example, the making of an important contract), the rule loses much of its force. Had the learned judge given a reason for the distinction, it doubtless would have been that in the latter case the witness would naturally remember the conversation with much greater accuracy because the result of it was important to him, perhaps imposing upon him new or increased obligations to others, than would the mere casual talker or listener who had no interest whatever in the subject matter of the conversation. In our opinion, this reason for the distinction is a sound one, for it accords with what we all know of the human memory and the essential conditions of accuracy in its exercise. The court supplemented this instruction in another part of the charge by saying to the jury: “You are the judges of the credibility of these witnesses. They contradict one another in several important particulars. You must determine which of them have told the truth in regard to these disputed questions, and, to aid you in that, you see them upon the stand. You can judge of their manner in which they testify, whether they appear to be candid and truthful or not, whether the story they tell is reasonable and natural or not, whether they have any interest in the result of this case. You are also, then, to apply your own knowledge of men and things, your own observations and experience in the affairs of life; apply them to the testimony of these witnesses, and determine upon which side the truth of the matter is.” In this portion of the charge the court supplied any defect or omission in the portion objected to, by giving the jury a better and safer and more comprehensive rule by which they might sift the truth out of a mass of conflicting testimony. Even were the challenged instruction somewhat objectionable, we should be inclined to hold that it could not, when considered with the rest of the charge, possibly have misled the Wy.

5. The defendant further asked the court to instruct the jury that fraud is never to be presumed, but must be proved by a preponderance of the evidence as in the case of any other fact. The court gave the instruction substantially as asked, and then added the following remarks: “ It is not presumed; but it may be, however, inferred from all the circumstances and surroundings of the case as developed by the evidence. ... In this case, while you are not to presume it, you may infer, if you find the evidence will warrant you in that presumption, the fraudulent character of this transaction.” These quoted portions of the charge are claimed to be erroneous in that they contradict the instruction given at the request of defendant, which is but the statement of an axiom in the law. The argument is that, after having charged that fraud is never to be presumed, the court proceeded to charge that fraud may be mf erred. But such is not a fair statement of either branch of the instruction. The court charged, in substance, that fraud is not to be presumed without proof of it, but it may be inferred from circumstances proved on the trial if those circumstances are sufficient to warrant the inference. In other words, the court charged that the fact of fraud may fie proved by circumstantial evidence, if sufficiently strong, just as any other fact may be proved in a court of justice. This is doubtless good law.

6. The Peerless Mining Company issued a circular to its stockholders in April, 1884, which the plaintiff received soon after it was issued, and carefully read. It purports to give a statement of the operations of the company to that time, its plans, prospects, etc. Counsel for defendant claims that this circular negatives the truth of many of the representations which it is alleged the defendant made to the plaintiff to induce him to purchase the stock, and hence that the plaintiff knew such representations were false long before he brought this action or asserted the deceit; so counsel proposed an instruction specially submitting to the jury the question whether, in view of those facts, if the fraudulent statements the plaintiff claims were made to him were in fact made, he would have so remained quiet, putting forth no claim of alleged wrong done him in the particulars now alleged, with an instruction that if present statements of plaintiff are unreasonable and not consistent with his conduct the jury should give little weight to such statements.' The court refused to give the instruction. The trial court has some discretion as to how far it will give special instructions based on isolated portions of the testimony. Here a single item of evidence is selected, the inference from which is claimed to be that the plaintiff is asserting a claim in this action inconsistent with his former conduct. The counsel maintains that it should have been specially submitted to the jury whether the inference claimed is the correct one, and, if correct, that the jury should have been instructed that plaintiff’s testimony is entitled to but little weight. In view of the full and accurate instructions given to enable the jury to judge correctly the weight of the testimony, we do not think the court erred in refusing to give this particular instruction, even though it did not encroach upon the prerogative of the jury to determine the weight of testimony. We have, however, looked into the circular, and we do not think it contains any clear statements showing that the more material of the alleged representations were false.

In conclusion, it only remains to be said that in his charge to the jury the learned circuit judge gave due heed to the very salutary caution of Lord Justice Tubker, that in its anxiety to correct fraud the court should be careful that “ it does not enable persons who have joined with others in speculation to convert their speculations into certainties at the expense of those with whom they have joined.” Jennings v. Broughton, 5 De Gex, M. & G. 140. Upon the whole case, we conclude that no error has intervened for which the judgment should be disturbed.

By the Oowrt.— Judgment affirmed.