Erie City Iron Works v. Barber & Co.

106 Pa. 125, 1884 Pa. LEXIS 166

• Court: Supreme Court of Pennsylvania
• Decided: October 6, 1884
• Docket: No. 188
• Status: Published

Opinion

Mr. Justice Trunkey

delivered the opinion of the court

In case of finding for the plaintiffs the jury were instructed to assess the damages in two parts: 1. All damage exclusive of the rental value of the mill during the necessary time for making repairs, and 2. The rental value for such time; the court reserving the point whether the plaintiffs were entitled to recover rental value for the time required to repair the injury. Had the mill been entirely destroyed its value would have been compensation. If worth repairing, how can compensation be made without allowance for the time it was necessarily idle ? In determining the difference between the market value of the mill just before and just after the injury, it would be as proper to consider the time required to make the repairs as the other things in the expense of making them. The witness who testified respecting the rent may not have been well qualified to estimate its value, but he had some knowledge of the subject, and the testimony was sufficient for submission. The first and second assignments of error, treated as good in form under the rules, cannot be sustained.

Nor are the last six assignments well taken. The judgment is on the verdict, not for the defendant notwithstanding the verdict. Hence, if the jury were rightly instructed relative to the damages it is immaterial whether the points of law were properly reserved. None of the instructions respecting damages is assigned as erroneous. It is clear that the jury found damages, exclusive of rent, $7,038, and for rent, $1,000, in all $8,038. If not strictly correct in form, the Act of March 14, 1872, P. L., 25, provides that a verdict shall not be set aside for “defectiveness or indefiniteness in form.” Following the instruction, the jury found one item of the damages separately, and the result is the same as if they had merely found the total sum for which judgment was rendered. The court charged that as only $500 was paid by the plaintiffs on the purchase money of the boiler that damage for the boiler must be limited to that sum ; and reserved the point of law whether the sum paid on the boiler should be included in the damages. There was no direction to find separately as to this, and the instruction was right. Had the court struck off $500 from the verdict.the plaintiffs could raise the question whether the point was well reserved.

The president of the company testified that Shearman was their sales agent, under a verbal arrangement, except what might have been embraced in correspondence ; that with their knowledge he held himself out as their agent; that he received the goods at a fixed price and made what he could above that for his remuneration, and that the goods belonged to the company until sold. This is the pith of the abundant testimony of Shearman’s agency, and if there was some evidence tending to'show that the contract was actually between Shearman, acting for himself, and the plaintiffs, it is by no means so strong as to warrant the court to rule that the jury ought not to have found that Shearman acted as the defendant’s agent when the plaintiffs contracted for the boiler. Nor should the third assignment be sustained. The offer was files ,,of letters, each book a monthly file, from November, 1873, to April, 1874, to show that the whole correspondence between Shear-man and the defendant was inconsistent with' the idea of principal and agent, and not a letter or part thereof, which was rejected, has been printed or shown so that it may be determined whether it was pertinent.

Whatever may have been the precise terms of the original contract, the parties agree that the boiler was not made according to the order, and that the plaintiffs had declined to accept it until after certain representations by the president of the compare defendant. One of the plaintiffs testifies that the president said the boiler was equal in every respect to such an one as ordered and superior in many respects, and also guaranteed the boiler to be good and in every respect equal to the one which had been ordered. The president denies that he made a guaranty. There is scarcely dispute respecting the fact that the boiler was ordered and manufactured for a particular purpose, and that its acceptance upon the representations of the manufacturer was for that purpose. Expert witnesses on the part of the plaintiffs testify that the boiler was unsafe, poorly manufactured, made of very bad iron which was not thick enough if good, and that a boiler properly made, as the plaintiffs ordered, would have been sufficient and safe ; also some of them say that the man who made the boiler must have known the inferior quality of the iron. Like witnesses on part of the defendant say the iron was good, as good or better than flange iron, was thick enough, and if there was defect in quality it could not have been discovered by the workman, nor by any person by inspection. For present purposes the verdict settles that the boiler was defective, and that the representations respecting its quality were untrue.

The defendant was engaged m the business of manufacturing boilers, and bad built more than any other company or person in the country for a number of years. Selden, the president and general manager of the works, had had large experience in superintending the manufacture of boilers. He testifies that ninety per centum of the boilers of that kind made by the defendant, was made of the same kind of iron as the one sold to the plaintiffs, and that the plaintiffs’ is the only one he ever knew to blow up. He states the care that was taken in procuring the iron for this boiler and in doing the work — also that lie believed the iron was of high quality, and that he believed the representations that he made to the plaintiffs.

A corporation engaged in the manufacture of machinery ought to be responsible to purchasers the same as natural persons under similar circumstances. As it can only speak or act by agent, there is stronger reason for holding it answerable for the acts and representations of the agent done within the ostensible scope of his authority and while transacting the business of the principal, than where the principal is a natural person. However, the same rule applies alike to natural and artificial persons. “ The purchaser can maintain an action of deceit against the innocent principal, when the fraud of the agent has been committed within the scope of his authority, and where the principal has benefited by it. In this respect it makes no difference whether the principal be a corporation or an individual:” Benjamin on Sales, vol. 2, § 708, (3 Eng. 4 Am. Ed.) “ The principal is liable in a civil suit, to third persons, for the frauds, deceits, concealments, misrepresentations, torts, negligences and other malfeasances and misfeasances of his agent in the course of his employment, although the principal did not authorize, justify or participate in, or indeed know of such misconduct, or even if he forbade the acts or disapproved of them. This rule of liability is not based upon any presumed authority in the agent to do the acts, but on the ground of public policy, and that it is more reasonable when one of two innocent persons must suffer from the wrongful act of a third person, that the principal who has placed the agent in the position of trust and confidence should suffer, than a stranger:” Lee v. The Village of Sandy Hill, 40 N. Y., 442; see Angel and Ames on Corp., §§ 305, 309, 310. If a corporation be incapable of committing deceit, the safety of third persons with whom it deals by agent, requires that it be held liable in the proper action for the deceit of its agent perpetrated in such dealing. The learned judge of the Common Pleas did not err in submitting the case as if the deceit of the defendants’ president and general manager was the deceit of the defendant.

The jury were instructed that there could be no recovery on the alleged express warranty, nor on an implied warranty of the manufacturer and seller; but if they found that the iron was bad, or the boiler defectively made, and that the contract was with the defendant, and that Mr. Selden knew that the boiler was defective in workmanship and material, or either, and represented it as good and equal to such boiler as was ordered, the plaintiffs could recover damages consequent on the deceit. There is no error in this instruction as respects the point submitted. The case was put upon the single point — warranty and negligence were excluded as grounds uponAvhich there could be recovery, and only considered as bearing on the alleged fraud. It had already been decided that the declaration must charge the defendant with having knowingly committed the deceit: Erie City Iron Works v. Barber & Co., 6 Out., 156. And the amendment was accordingly made. There is no occasion to consider the question of misjoinder of counts. That Avas not raised at the trial. But is the scienter, a matter so essential that it must be averred in the declaration in an action for deceit, presumed from the fact that the representation was untrue ?

The court did not leave the point as first submitted, but added: “If Mr. Selden did not knoAV that the boiler Avas bad, either in bad workmanship or in the quality of the iron, but without knowing absolutely asserted that the iron was good and the workmanship perfect, or without any further words that it was a good boiler, suitable for the purpose for which it was intended, then he would be liable, the company would be liable upon his false assertion of matters respecting which he did not know, if you find as a fact that the iron was bad and the workmanship defective, in other words, if he did not know he ought not to have said anything respectifig it. If he did know then he was guilty of direct deceit and fraud. But if he undertook to assert that the boiler was a good one, when he did not know whether it was good or bad, then the company would also be liable by reason of this false representation made by him, if in fact the boiler was a bad one.” This may be regarded as the full instruction frequently epitomized in tlio answers to numerous points. Thus, in answer to the 17th : “ There is no direct evidence that Mr. Selden personally knew at the time he made this representation that this was a bad boiler, the evidence is that he ordered the iron of a good company, and that the iron had a good reputation. But if he represented, as I have before said, that it was a good boiler when he did not know whether it was a good boiler, then the company would be liable.”

Under that instruction if Selden had skill and experience and ample reason to believe the boiler was good, and did so believe, he was as guilty of deceit as if lie knew it was bad. He may have made it with his own hand, or directly superintended the making, and believed the workmanship and materia] to be the best, yet if at the time of sale he told the buyer it was good, upon such ruling, he committed actual fraud in case there was a latent and unknown defect. If there was such a defect, it was impossible that he could know it was good. If it was defective it was not good. And the pith of the instruction is that if Selden represented the boiler to be good, and in fact it was bad, the defendant is liable for deceit. In order to make a person liable for a fraudulent representation, be must have been guilty of some moral wrong; legal fraud, unaccompanied by moral fraud, will fail to support' the action. But though it is necessary that the defendant in making the false statement should have committed some moral turpitude, it is not necessary to show that he knew as a fact what he stated was false. If he made the representation not knowing it to be true, or without reasonable and probable grounds on which to suppose it to be true, lie acted fraudulentljn When a man having no knowledge whatever upon a subject takes it upon himself to represent a certain state of facts to exist, he does so at liis peril, and if if be done either to secure some benefit to himself or to deceive another, he is guilty of fraud. By assuming to. have knowledge of a material fact when he is conscious that he has not, and representing it as of his own knowledge, in such manner as to import knowledge in him thereof, he commits a moral wrong, similar in character as if he knew the representation to be untrue. The fraudulent purpose is essential: Moak’s Underhill on Torts, 547-8. Bigelow on Fraud sets forth the same principles, 8.nd it is there said, p. 63, “ Deceit cannot be maintained for a false representation, believed to be true, which is based on adequate information ; nor will the plea of fraud, or a bill asking for relief for fraud; be supported by such evidence.” True, it is also said that the action can be maintained “ for a false representation, believed to be true, but the truth of which the defendant was bound to know.” The illustrations given under this rule apply to the case of express or implied representation of - agency, to one professing to be a partner in a mercantile firm, and to a person professing to be an expert and thus competent to give advice in matters pertaining to his art. These and like cases rest on the ground that the representation, though made by mistake or ignorance, operates as an imposition upon the other party, and the person making it, as against an innocent man who has suffered by reason thereof, will not be allowed to say he made it honestly, believing it to be true. There is reason for his liability without holding him guilty of moral turpitude.

The plaintiffs contend their case falls within exceptions to the general rule, one of which is that an action for deceit will lie against a manufacturer or seller of goods for a particular purpose, if unfit for that purpose, although he had no fraudulent intent: Jones v. Bright, 5 Bing., 533. It was there held that if a manufacturer sells goods for a particular purpose, “ the law implies a warranty that it was fit and proper for that purpose.”.....“If a party sells an article for a particular purpose, he thereby warrants it to be fit for such purpose.” This and most other cases following in its wake are well collated by Mr. Biddle on Warranties in the Sales of Chattels, §§ 167-183, and the doctrine stated thus: “When a manufacturer or dealer contracts to supply an article, which he manufactures or produces, or in Avhich he deals, to be applied to a particular purpose, so that the buyer necessarily trusts to the judgment or skill of the manufacturer or dealer, there is'-an implied warranty that it shall be fit for the purpose to which it is to be applied, since here, the buyer does not purchase upon his own judgment, but relies upon that of the seller.” Without inquiry as to the limitations of this doctrine in Pennsylvania, it is plain that the seller’s liability is upon his warranty. An implied warranty is neither more nor less than a contract, and the remedies for its breach are the same as for breach of an express warranty. That there may be recovery in an action in the nature of deceit does not change the character of the foundation of the right to recover. Formerly it was common to sue in this form — where the claims were on contracts of warrantv, and such remedy is not obsolete in this State. The plaintiff may choose either case or assumpsit. “No matter which form of declaration be chosen the plaintiff may recover on an express warranty without either alleging or proving the knowledge of the defendant that it was false. A scienter need only bo shown when the action is for deceit: ” Vanleer v. Earle, 26 Pa. St., 277. Therefore the fact of recovery on a contract of warranty in an action of deceit does not justify an inference that when recovery is sought on the ground of deceit the scienter need not be shown.

The case of Lynch v. Mercantile Trust Co., 18 Fed. Rep., 486, is where the vendor of a block of land, by his agent, pointed out certain fences, and stated that the block included all the land between said fences; the representation was false, but believed to be true by the agent when he made it. It was held that the purchaser was entitled to the benefit of bis contract and could recover the difference between the value of the property actually sold and the value of the property as represented. Nothing in the facts and judgment in that case tends to show that the vendor was guilty of deceit, or was liable on that ground, though some remarks of the judge may have that tendencj. The true ground for recovery in such cases was tersely stated by Chief Justice Marshall: “He who sells property on a description given by himself, is bound to make good that description; and if it be untrue in a material point, although the variance he occasioned by mistake, he must still remain liable for that variance: ” McFerran v. Taylor, 3 Cranch, 270.

In Randall v. Newson, L. R., 2 Q. B. D., 102, one of the cases cited by the plaintiffs to support the action of deceit, it was held that the warranty extends to latent defects unknown to and undisco verable by the vendor, which render the article sold unfit for the purpose intended. There is no gainsaying the correctness of that ruling where there is such a warranty, express or implied. If unfit, by the terms of the contract, the seller is liable for its broach. But that case does not establish the rule that a vendor is guilty of deceit and liable in damages for a tort, where he makes and sells an article, in good faith, representing that it is good and fit for a specified purpose, which contained a latent defect that was unknown and undiseoverable until tried by use. Nor is such principle supported by any other case of which we are advised.

We are of opinion that the jury should have been instructed that if the representation by Mr. Selden respecting the boiler was made in good faith, and that he had adequate reason to believe it was true, there could be no recovery for the alleged deceit. The evidence bearing on the question whether the defendant and its agents knew that the boiler, by reason of bad workmanship or bad iron, was defective and unfit for the purpose intended, or whether there was adequate reason to believe that both the material and workmanship were good, is conflicting, and therefore was for the jury to consider and find the facts therefrom. Deceit should not be confounded with warranty, express or implied; nor with mistake which is often ground for relief of a party who suffers by it against him who made it; nor with legal fraud imputed to a party who has'committed no moral fraud.

A number of the defendant’s points were rightly refused, but that they could not be affirmed was no reason for including in the answers instruction that if the boiler was represented to be good, and was bad, the defendant was liable. “ The law raises no presumption of knowledge from the mere fact that the representation is false.”

There is some difference between a judgment for a tort and one on contract. When it comes to execution the defendant has rights in one case that he could not have in the other. The gist of the action should not be lost in its form. If the plaintiffs have chosen to rest their case solely on an alleged fraud in fact, involving moral turpitude, they should be held to its proof as firmly as if it did not appear that there was an express or implied warranty.

Judgment reversed, and venire facias de novo awarded.

The defendants in error subsequently moved for a re-argument on the ground that as the testimony disclosed that Selden assumed the character of an expert in guaranteeing the safety of the boiler, the plaintiff in error was within the exceptions, mentioned by Mr. Justice Tbuhkey, to the rule that the scienter must be proved in an action of deceit; that, therefore, the judgment of the court below should be affirmed.

The motion for a re-argument was refused on October 27, 1884, Mr. Justice Treukey delivering the opinion of the court.

Selden is not the defendant. His office and employment warranted the conclusion that he was the defendant’s general agent, and therefore whatever he did within the scope of his authority bound his principal. Of his agency there was abundant proof, and the fact does not appear to have been denied. In consummating the sale of the boiler, which had been manufactured by the defendant for the plaintiffs, his warranty and representations of quality are treated as if made by the principal. So the learned judge of the common picas charged; hub he did not submit to the jury that if Selden assumed the character of an expert, and the plaintiffs relying on him as such, accepted the boiler on the opinion and representations of said expert, the defendant would be liable. In our view it seems very plain that the case was tried and submitted as if Selden was acting as the defendant’s agent. The instructions to the jury contain nothing respecting the liability of an expert for a false statement to one who consults him upon a matter within his art. What evidence is there that the defendant authorized Selden to speak and act as an expert? We are not convinced that the court assumed that tlio defendant was liable as an expert for what Selden said, and based his instructions on such assumption.

If we have misconceived the basis and import of the instructions, we think we have understood them in the same sense as did the jury. It is true that in this court the plaintiffs contended, both in their paper-book and bv oral argument, that Selden professed to be an expert, and that the charge was correct for that reason; but we were not satisfied that the question was raised or mooted at the trial. If it was, it constituted no foundation for the instructions already ruled to be erroneous. All Selden’s representations were admissible for the purpose of showing misrepresentation and warranty by tlio defendant through its agent; not to prove that he was an agent, or an expert, and it is not shown that anything was expressly offered to establish the latter character.

It may be assumed that the law is correctly stated in Bigelow on Fraud, 59, 60, as follows: u One who professes to be an expert in any particular, and thus competent to give advice in matters pertaining to his art, is liable as for deceit or false warranty in case he makes any false statements of substance to another, intending that the same should be acted upon, though he believes them to be true. Thus one who, during negotiations for the sale of lands, professes to have peculiar scientific knowledge of the value of lands for the production of oil, and falsely represents such value, renders himself liable to the purchaser if he rely thereon and is deceived. So, too, if a party makes a representation of facts of which he assumes to have a definite knowledge, superior to that of the party to whom he makes it, or as to that of which the latter is entirely ignorant, though, the same does not relate to the party’s own business, he will be liable as for a fraud.”

All that applies to the very person who made the profession, or assumption, and representations, and to no other. Nor could any other person be held liable therefor in the absence of proof that he procured the act to be done, or participated in the doing of it. The mere relation of principal and agent does not imply that the principal is responsible for such acts done by the agent while transacting the business with which he was intrusted. It is not to be inferred from the fact of agency that the agent is authorized to profess to be an expert, and thus competent to give advice. Upon other grounds representations by the agent may bind the principal.

It is said that the expert is liable as for deceit or false warranty. Such liability may exist in a class of cases where there is no moral turpitude. If the expert has skill and adequate information of the subject of which he speaks, and makes representations w'hicli he believes to be true, though untrue, to a party who relies on them, is he liable for deceit which involves allegation and proof that he knowingly made the false representations? Upon this there is no present occasion to intimate an opinion, nor need reference be made to the views of Mr. Bigelow as expressed in the work already cited.

We are of opinion that the motion for re-argument should be denied.

Re-argument refused.