Holcomb v. Noble, 69 Mich. 396, 37 N. W. 497, is also in point. There defendant and plaintiff exchanged lands. In making this exchange plaintiff relied on certain representations of fact respecting the pine on the land transferred to him by defendant. These representations were based—and this was understood by plaintiff—upon the reports of a land looker, and defendant told plaintiff “that all he knew about the land was what he learned from the land looker.” Defendant believed these representations to be true. They were in fact false, and plaintiff sustained damages by his reliance thereon. An action of fraud was brought, and it was held that plaintiff could recover. There were two opinions in the case, one written by Justice Campbell and concurred in by Justice Champlin, one written by Justice Morse and concurred in by Chief Justice Sherwood. In the opinion of Justice Campbell it is said: “It is admitted that in equity an actual design to mislead is not necessary if a party is actually misled by another in a bargain. There was abundant evidence in this case to authorize the jury to find that defendant, whether honestly or dishonestly, expected plaintiff to act on his representations of the reliableness of the reports which he produced, and that plaintiff did rely on them. There is no reason for a difference in action, in such cases, between courts of law and courts of equity. Where an equitable cause of grievance exists, it in no way differs from a legal one, unless a different remedy is needed. A court of law cannot cancel a contract, and for such a purpose the equitable remedy must be sought. But where the relief desired is compensation for the wrong, the equitable remedy is much less appropriate, and an action in equity for mere damages will generally be denied, but denied only because the legal remedy is better. If there could be no legal remedy, there can be no doubt that equity would act. If the fraud is such that it creates a right of action anywhere, an action must lie on the case where a money judgment is needed.” I now quote from the opinion of Justice Morse, concurred in by Chief Justice Sherwood: “I was strongly impressed, upon the argument of this case, with the theory of the defendant, supported by abundant authority outside of our own state, that unless the jury found that the representations relied upon by the plaintiff as false were made by the defendant, Noble, knowing them to be false, or he made the statements as facts within his own knowledge, when he was ignorant of the truth or falsity of them, he could not be held liable in this action; that if he told plaintiff that he had never seen the lands, but that he had had the same examined by a competent land looker, who said that there were 5,000,000 feet of pine on the land, and made no representations as of his own knowledge, the plaintiff could not recover. A subsequent careful examination of the case and the authorities cited by defendant’s counsel has but confirmed me in the correctness and justness of his claim. I am satisfied that the law ought not to make a different contract for the seller than he sees fit to make for himself, and hold him in effect, for warranties that he never made. But an equally careful examination of the cases adjudicated in this state satisfies me that the doctrine is settled here, by a long line of cases, that if there was in fact a misrepresentation, though made innocently, and its deceptive influence was effective, the consequences to the plaintiff being as serious as though it had proceeded from a vicious purpose, he would have a right of action for the damages caused thereby either at law or in equity. Baughman v. Gould, 45 Mich. 483, 8 N. W. 73; Converse v. Blumrich, 14 Mich. 109, 90 Am. Dec. 230; Steinbach v. Hill, 25 Mich. 78; Webster v. Bailey, 31 Mich. 36; Starkweather v. Benjamin, 32 Mich. 305; Beebe v. Knapp, 28 Mich. 53.” I think these decisions are indistinguishable from the case at bar, and require us to say that the trial court erred in directing a verdict for the defendant. The Busch Case and the Holcomb Case cannot be distinguished from the case under consideration by saying that in them “the principal adopted the agent’s estimate as his own.” For in this case, as heretofore stated, defendant asserted to plaintiff “that those representations Barnard had made were true.” It might therefore be said in this case, then, the principal adopted the agent’s estimate as his own.
Our attention is called to Krause v. Cook, 144 Mich. 365, 108 N. W. 81. There defendant, acting for one Parker, sold mining stock to the plaintiff. Certain false representations were made, and an action to recover damages for fraud was brought. It was held that the trial court should have given the following instruction: “If a person received information from others, and believes it, repeats it, explaining that he has no personal knowledge, he is not guilty of fraud. Therefore, if you find that the defendant received information from others, and repeated that information to plaintiff, and explained to plaintiff the sources of his information, he is not guilty of any fraud, if he acts honestly and in good faith.” At first blush it would seem, that this principle is opposed to the decisions of Holcomb v. Noble and Busch v. Wilcox, supra. And it must be admitted, I think, that if this principle had been applied in those cases, a different conclusion would there have been reached. If there was no difference in the facts, it might be said that Krause v. Cook, supra, is opposed to the principle announced in the Busch and Holcomb Cases. But there is a difference in the cases, and, in my judgment, such a difference as to require a different rule of law. In the Holcomb and Busch Cases the defendant himself obtained what plaintiff lost by means of the false representations. In the Krause Case the defendant was an agent, who at most received only 10 per cent of the damages caused by the false representations. This difference, in my judgment, places the Krause Case outside the rule of the Holcomb and Busch Cases. That rule is peculiarly a Michigan rule. Elsewhere in order to create liability for deceit, it must be shown that “the person making the statement, or the person responsible for it, either knows it to be untrue, or is culpably ignorant (that is, recklessly and consciously ignorant) whether it be true or not.” See Webb’s Pollock on Torts, p. 355. In Michigan we have held (see cases cited in the opinion of Justice Morse in the Holcomb Case, supra) that in order to constitute a fraud it is not necessary that the person making the statement should either know that it is untrue or be recklessly and consciously ignorant whether it be true or not. It is sufficient if it be false in fact. It must be said, however, that in the cases in which this principle has been applied the defendant obtained what the false representations caused the plaintiff to lose. Applied in such cases, the principle is a just and salutary one. This may be illustrated by the Holcomb Case—which is a typical case. There, because plaintiff Holcomb credited a certain false statement of fact, he paid defendant Noble more for land purchased than otherwise he would have paid. The false statement of fact was an agency whereby the property of the plaintiff was transferred to defendant. The law would be justly subject to reproach if it afforded no redress in such case. In Michigan the law does give redress in such a case, and that redress may be obtained in an action for fraud. It may seem somewhat unjust to characterize such conduct as fraudulent, but the court was apparently placed in the dilemma of either so characterizing it or of altogether denying compensation, and it chose the least objectionable of these two alternatives. This principle, which is altogether just in its application to cases where the loss of the plaintiff has inured to the profit of the defendant, would be most unjust if applied to cases where the defendant has obtained no such profit. This may be illustrated by taking a concrete case, and I take a case even plainer in its facts than the Krause Case. Let us suppose that, with commendable motives and in the best of faith, one friend communicates to another with all amplitude of detail certain information he has received respecting a mine, which it is known that neither of them has ever visited. The object of this communication is to induce the one to whom it is made to purchase stock, but not from the one making the communication, but from a third person having no relation to him. The stock is purchased accordingly, without any profit resulting to the friend making the communication; the information proves to be false and the stock worthless. Did the friend who communicated the information which proved to be false commit a fraud? He did no moral wrong. Indeed, from a moral point of view his conduct was commendable, and, unless compelled to do so, the court should not announce a rule of law which penalizes commendable conduct. Are we compelled to declare that there exists a rule of law which makes such conduct fraudulent? Manifestly not unless we are bound to declare that the doctrine of the Holcomb and Busch Cases applies. Must we so declare? As already pointed out, the case differs materially from the Holcomb and Busch Cases, and this difference is such that the doctrine of those cases has no just application. That doctrine was designed to accomplish justice: as applied in the Holcomb and Busch Cases and in similar cases it does accomplish justice. As applied to cases where the loss of the plaintiff has not inured to the profit of the defendant it accomplishes an injustice, and it therefore has no application to such cases.
I have read the evidence of the appellant, and, although it is obviously unreliable evidence, it leaves on my mind the same impression that it left on that of the learned judge who heard it, that the solicitor did not consciously intend to defraud his client, but, largely owing to a confused state of mind, believed that he was properly joining with him and guiding him in a good speculation.
I cannot, therefore, treat the case, so far as based on intention to deceive, as made out. But where I differ from the learned judges in the Courts below is as to their view that, if they did not regard deceit as proved, the only alternative was to treat the action as one of mere negligence at law unconnected with misconduct. This alternative they thought was precluded by the way the case had been conducted. I am not sure that, on the pleadings and on the facts proved, they were right even in this. The question might well have been treated as in their discretion and as properly one of costs only, having regard to the unsatisfactory evidence of the appellant. But I do not take the view that they were shut up within the dilemma they supposed. There is a third form of procedure to which the statement of claim approximated very closely, and that is the old bill in Chancery to enforce compensation for breach of a fiduciary obligation. There appears to have been an impression that the necessity which recent authorities have established of proving moral fraud in order to succeed in an action of deceit has narrowed the scope of this remedy. For the reasons which I am about to offer to your Lordships, I do not think that this is so....
My Lords, it is known that in cases of actual fraud the Courts of Chancery and of Common Law exercised a concurrent jurisdiction from the earliest times. For some of these cases the greater freedom which, in early days, the Court of Chancery exercised in admitting the testimony of parties to the proceedings made it a more suitable tribunal. Moreover, its remedies were more elastic. Operating in personam as a Court of conscience it could order the defendant, not, indeed, in those days, to pay damages as such, but to make restitution, or to compensate the plaintiff by putting him in as good a position pecuniarily as that in which he was before the injury.
But in addition to this concurrent jurisdiction, the Court of Chancery exercised an exclusive jurisdiction in cases which, although classified in that Court as cases of fraud, yet did not necessarily import the element of dolus malus. The Court took upon itself to prevent a man from acting against the dictates of conscience as defined by the Court, and to grant injunctions in anticipation of injury, as well as relief where injury had been done. Common instances of this exclusive jurisdiction are cases arising out of breach of duty by persons standing in a fiduciary relation, such as the solicitor to the client, illustrated by Lord Hardwicke’s judgment in Chesterfield v. Janssen, 2 Ves. Sen. 125. I can hardly imagine that those who took part in the decision of Derry v. Peek, 14 App. Cas. 337, imagined that they could be supposed to have cast doubt on the principle of any cases arising under the exclusive jurisdiction of the Court of Chancery. No such case was before the House, which was dealing only with a case of actual fraud as to which the jurisdiction in equity was concurrent....
So far as the equity jurisdiction in cases of what is called fraud is concurrent only and exercised in actions for mere deceit apart from breach of special duty, an actual intention to cheat has now to be proved. But there are cases of other classes to which, as I have already said, the Court of Chancery undoubtedly did apply the term fraud, although I think unfortunately.
Fraud in such cases is, as James, L. J., said in Torrance v. Bolton, L. R. 8 Ch. 118, at p. 124, “nomen generalissimum, and it must not be construed so as to mislead persons into the notion that contracts for the sale and purchase of lands are in any respect privileged, so as to be free from the ordinary jurisdiction of the Court to deal with them as it deals with any instrument, or any other transactions, in which the Court is of opinion that it is unconscientious for a person to avail himself of the legal advantage which he has obtained. Indeed, the books are full of cases in which the Court has dealt with contracts of that kind—contracts obtained by persons from others over whom they have dominion, contracts obtained by persons in a fiduciary position, contracts for the sale of shares obtained by directors through misrepresentation contained in the prospectus, in respect of which it was never necessary to allege or prove that the directors were wilfully guilty of moral fraud in what they had done.” In Chancery the term “fraud” thus came to be used to describe what fell short of deceit, but imported breach of a duty to which equity had attached its sanction. What was laid down by Lord Eldon in this House in Bulkely v. Wilford, 2 Cl. & F. 102, at p. 177, explains the nature of the duty.
My Lords, I have dealt thus fully with this distinction because I think that confusion has arisen from overlooking it. It must now be taken to be settled that nothing short of proof of a fraudulent intention in the strict sense will suffice for an action of deceit. This is so whether a Court of Law or a court of equity in the exercise of concurrent jurisdiction is dealing with the claim, and in this strict sense it was quite natural that Lord Bramwell and Lord Herschell should say that there was no such thing as legal as distinguished from moral fraud. But when fraud is referred to in the wider sense in which the books are full of the expression, used in Chancery in describing cases which were within its exclusive jurisdiction, it is a mistake to suppose that an actual intention to cheat must always be proved. A man may misconceive the extent of the obligation which a Court of Equity imposes on him. His fault is that he has violated, however innocently because of his ignorance, an obligation which he must be taken by the Court to have known, and his conduct has in that sense always been called fraudulent, even in such a case as a technical fraud on a power. It was thus that the expression “constructive fraud” came into existence. The trustee who purchases the trust estate, the solicitor who makes a bargain with his client that cannot stand, have all for several centuries run the risk of the word fraudulent being applied to them. What it really means in this connection is, not moral fraud in the ordinary sense, but breach of the sort of obligation which is enforced by a Court that from the beginning regarded itself as a Court of conscience.
The result of the authorities seems to be as follows:—
1. There has been from ancient time a jurisdiction in Courts of Equity in certain cases to enforce a personal demand against one who made an untrue representation upon which he knew that the person to whom it was made intended to act, if such person did act upon the faith of it and suffered loss by so acting.
2. This was readily done where the representation was fraudulently made, in which case an action of deceit would lie at law.
3. Relief will also be given at Law and in Equity, even though the representation was innocently made without fraud, in all cases where the suit will be effective if the defendant is estopped from denying the truth of his representation.
4. Where there is no estoppel, an innocent misrepresentation will not support an action at law for damages occasioned thereby.
5. Estoppel is effective where an action must succeed or fail if the defendant or plaintiff is prevented from disputing a particular fact alleged: for example, if an assign of A. sues A.’s trustee to recover the fund assigned, and the trustee is prevented from denying its existence in his hands; or at law, if the assign of a debt should sue the alleged debtor and he was prevented from denying that the debt was due. Or, in the converse case, an estoppel may be a defence; as if a joint stock company were to sue a shareholder for calls and they were estopped from denying that the shares were paid up, their action would fail.
It is obvious that this rule does not apply to an action for deceit. In such an action the plaintiff relies, not on the truth of the statement, but upon its falsehood; and he is bound to prove, not only that the representation was untrue, but also that it was made fraudulently. Derry v. Peek, 14 App. Cas. 337, very well illustrates the difference. It was an action by a person who had been induced to take shares in a joint stock company by an untrue statement in a prospectus. The action was not against the company, but against the directors who had issued the prospectus. The representation was not fraudulently made. Preventing the defendants from denying the truth of their representation would not enable the plaintiff to succeed in such an action; so that the plaintiff could not rely on estoppel. That could only be if the defence had been that the statement was inaccurate, and the defendants were estopped from denying the accuracy of their own statement. The plaintiff’s case was not that the statement must be treated as accurate: on that supposition he could not have had any relief against the defendants. The plaintiff sued the defendants upon the ground that the statement was false, and false to their knowledge—that is, fraudulent; and the defence that prevailed was that, if it was inaccurate, it was not fraudulent.
6. I am not satisfied that relief in the nature of a personal demand against the defendant has been given in Equity in cases which did not involve fraud or to which this doctrine of estoppel would not apply. Slim v. Croucher, 1 D. F. & J. 518, is the only instance I know of; and, as Lord Campbell said that there might be relief at law in that case, he probably considered, either that it was a case of estoppel, or that an action of deceit would lie—which latter view is not consistent with Derry v. Peek, 14 App. Cas. 337.
I can only say that certificates and a blank transfer are in everyday use as securities for raising money, and that every man who lends money to A. on documents which show a title in B. is of course put on inquiry. This does not mean that he must refuse to deal with the agent at all but must refer to the principal, but that he must make such inquiry as is reasonable under the circumstances. If he is foolish enough to lend to A. without inquiry, and A. has no right or authority to deal with the documents, he loses his money, and it is perfectly immaterial whether the security is a deposit of title deeds to real estate or certificates of shares with a blank transfer. Such a question as arises in the present case can only arise when the owner of the property has authorized such a dealing with the property as is corroborated by the possession of the indicia of title. If no authority at all has in fact been given it is quite immaterial whether the lender inquires and is given an untrue answer or does not inquire at all; in either case he loses his money. But if the owner has in fact given the borrower authority to deal with the property by way of loan or by way of sale, and has entrusted him with the indicia of title, enabling him so to deal, then the owner cannot be heard to say that there is any limit on the authority so given. If the indicia of title are apparently co-extensive with the authority claimed there is nothing to suggest any limit. The estoppel arises out of the conduct of the owner of the property. Estoppel is merely a rule of evidence which prevents the person estopped from giving certain facts in evidence. If A.’s conduct amounts to an invitation to B. to advance money to C. without limit on the title deeds of A.’s property, he cannot be heard to say that he had imposed on C. a limit, any more than if he had written or said to B. that he had given C. authority to borrow money and had not mentioned any limit. If he has simply deposited his deeds with C. such deposit involves no such representation, and there is therefore no such estoppel. In speaking of estoppel, I am referring to the doctrine of estoppel by representation which Lord Macnaghten, in Whitechurch v. Cavanagh, [1902] A. C. 117, at p. 130, says “is a very old head of equity.” (See Low v. Bouverie, [1891] 3 Ch. 82.) It is sometimes called equitable estoppel or a rule of equity, and has been expressed in some of the cases as the rule which compels a man to make good his representations of fact, in reliance on which the person to whom they have been made for the purpose of inducing him to act on them has so acted. Indeed equitable estoppel is the only way in which this doctrine of making good representations has survived the decision in Derry v. Peek, 14 App. Cas. 337. The circumstances must necessarily be such as to show a duty to some one to disclose fully on the person making the representation, but it is not a question of negligence in the sense that an action for damages would lie at common law, and no bill in equity would ever have been filed for damages.[342]
[After citing Wheeler v. Baars, 33 Florida, 696.]
It is there said that the scienter may be proved by showing, first, actual knowledge of the falsity of the representation by defendant; second, that defendant made the statement as of his own knowledge, or in such absolute unqualified and positive terms as to imply his personal knowledge of the fact, when in truth defendant had no knowledge whether the statement was true or false; or, third, that the party’s special situation or means of knowledge were such as to make it his duty to know as to the truth or falsity of the representation. Under each phase the proof must show that the statement was in fact false, and in addition, under the first, that defendant had actual knowledge that it was false; under the second, that defendant made the statement as of his own knowledge, when in fact he had no knowledge whether it was true or false, which seems to bear a close resemblance to the English rule, “without belief in its truth, or recklessly careless whether it be true or false”; and under the third, that defendant’s special situation or means of knowledge were such as made it his duty to know as to the truth or falsity of the representation. From this statement it is quite evident that proof sufficient to sustain the third phase tends very strongly to sustain the idea that the defendant had actual knowledge of the falsity of his statement; for when it is shown that the statement was material and false, and that the defendant’s situation or means of knowledge were such as to make it incumbent upon him as a matter of duty to know whether the statement was true or false, the conclusion is almost irresistible that he did know that which his duty required him to know. For this reason the law conclusively presumes from the existence of these facts that defendant had actual knowledge of the falsity of his statement, or, more properly speaking, proof of these facts is sufficient to sustain a charge of actual knowledge, dispensing with further proof upon that subject, and admitting no proof to rebut the fact of actual knowledge, but only proof to rebut the existence of the facts from which such actual knowledge is inferred. We are therefore of opinion that proof of scienter in the third phase does not give another or different right or ground of action from that given by proof under the first phase, but that it simply establishes the same ultimate fact, viz., knowledge, by a different class of evidence, and consequently that an allegation that defendant “knew” his representation to be false is provable by evidence embraced in the third phase. In other words, an averment that defendant’s situation or means of knowledge were such as made it his duty to know whether his statement was true or false, and an averment that defendant well knew his statements to be untrue, are but different methods of stating the same ultimate fact, viz., knowledge.[343]
Case for false warranty in the sale of a farm. Plea, not guilty. Trial by jury, May term, 1868, Barrett, J., presiding.
The plaintiff gave evidence tending to show that he bought the farm at the time and for the price stated in the declaration, and that the defendant made representations in respect to the number of acres, as of his own knowledge, designedly intending to induce the plaintiff to suppose and believe, and thereby the plaintiff was induced to and did suppose and believe, that the farm contained at least one hundred and thirty acres of land, and relying thereupon, the plaintiff made the purchase; that the defendant knew that there was not one hundred and thirty acres, or he didn’t know that there was that quantity; that in fact there was only one hundred and seventeen acres and a few rods in the farm; that the plaintiff had no knowledge of the quantity except from the defendant’s representation.
The defendant gave evidence tending to show that he supposed there was one hundred and thirty acres and a little more in the farm, derived from what he had heard said, and from various deeds in his possession of various grantors and of various parcels, but that he did not know, and did not profess or represent to the plaintiff that he knew how many acres there were in fact; that he gave the plaintiff all the information and sources of information he had on the subject, neither making any false representation, nor fraudulent concealment, nor any undertaking as to the number of acres in the farm. There was no evidence or claim that the farm was sold by the acre; but it appeared that it was sold in lump, or as a farm entire.
The plaintiff requested the Court to charge the jury:—
First, That under the declaration the plaintiff is entitled to recover if he proves a warranty of the number of acres in the farm, or if he proves a fraudulent representation of the number of acres.
Second, That the fraudulent representation may be proved either by evidence of false representations, known to the defendant to be false, and relied upon by the plaintiff, or by proof of an absolute representation of the number of acres, which representation was made with intent that the plaintiff should rely upon it, and was made upon professed knowledge, but without actual knowledge, and which was in fact false, but was relied upon by the plaintiff as true.
The Court complied with said requests only so far as is shown by the charge, and charged as follows:—
In order to entitle the plaintiff to recover he must satisfy the jury that the defendant knew the farm did not contain one hundred and thirty acres, or that he did not believe it contained one hundred and thirty acres; and that in order to induce the plaintiff to buy the farm he falsely represented it to contain one hundred and thirty acres; and that the plaintiff was by such false representation induced to make the purchase, believing it to contain that quantity.
If he honestly believed it contained one hundred and thirty acres, the plaintiff cannot recover, though the defendant was in error about it. Honest mistake is not fraud. Incorrect is not the same as false. You must find that he represented the quantity different from what he knew or believed to be true, with the fraudulent intent. Also, that the plaintiff was thus induced to make the purchase. That is, that the plaintiff would not have made the purchase if the defendant had not represented it to be one hundred and thirty acres. Inquire as to these several points. Fraud is not presumed, but must be proved.
The jury returned a verdict for the defendant. The plaintiff excepted to the charge in the respects in which it failed to comply with, or was against said requests. In other respects the charge was satisfactory.
The declaration counted both upon a false warranty of the defendant in regard to the number of acres contained in the farm, and a warranty in regard to said quantity.
The opinion of the Court was delivered by
Steele, J. 1. The plaintiff cannot recover upon the ground of a parol warranty of the quantity of the land. If the quantity was warranted it should be provable by the deed. It is true that a deed of conveyance need not contain all the stipulations of the parties. For example, the agreements as to consideration and mode of payment need not be embraced in the deed, for the instrument purports to be the deed of but one of the parties. But it does purport to contain the convenants of the grantor with respect to the property conveyed. To add a new covenant by parol proof would be a palpable violation of the familiar rule that written contracts are not to be varied by oral testimony. Such a parol stipulation, it has been held, could not be proved in respect to an ordinary bill of sale of personal property.
Nor is the plaintiff entitled to recover in this action upon the ground of mistake. A mutual and material mistake, by which the purchaser was misled as to the quantity of land, would be a more appropriate ground for relief in a court of chancery than in a court of law. If, then, the plaintiff was entitled to recover at all in this case, it was by reason of some fraud on the part of the defendant by which the bargain was induced.
2. The plaintiff complains of the ruling of the County Court upon the subject of fraud. It is conceded that the quantity of land was represented incorrectly. The Court properly told the jury that this, in itself, would not amount to fraud. To entitle the plaintiff to a recovery upon that ground, the defendant must have made some representation upon the subject that he did not believe to be true. The plaintiff claims, and his evidence tended to prove, that the defendant did make such a representation by stating the quantity of land as a matter within his own knowledge, when, in fact, as the defendant concedes, it was a matter upon which he had only a belief. We think it very clear that a party may be guilty of fraud by stating his belief as knowledge. Upon a statement of the defendant’s mere belief, judgment, or information, the plaintiff might have regarded it prudent to procure a measurement of the land before completing his purchase. A statement, as of knowledge, if believed, would make a survey or measurement seem unnecessary. A representation of a fact, as of the party’s own knowledge, if it prove false, is, unless explained, inferred to be wilfully false and made with an intent to deceive, at least in respect to the knowledge which is professed. A sufficient explanation however sometimes arises from the nature of the subject itself, or from the situation of the parties being such that the statement of knowledge could only be understood as an expression of strong belief or opinion. But the quantity of land in a farm is a matter upon which accurate or approximately accurate knowledge is not at all impossible or unusual. If the defendant had only a belief or opinion as to the quantity of land, it was an imposition upon the plaintiff to pass off such belief as knowledge. So, too, if he made an absolute representation as to the quantity, which was understood and intended to be understood as a statement upon knowledge, it is precisely the same as if he had distinctly and in terms professed to have knowledge as to the fact. It is often said that a representation is not fraudulent if the party who makes it believes it to be true. But a party who is aware that he has only an opinion how a fact is, and represents that opinion as knowledge, does not believe his representation to be true. As is well said in a note to the report of the case of Taylor v. Ashton, 11 Mees. & Wels. 418 (Phila. Ed.), the belief of a party to be an excuse for a false representation must be “a belief in the representation as made. The scienter will therefore be sufficiently established by showing that the assertion was made as of the defendant’s own knowledge, and not as mere matter of opinion, with regard to facts of which he was aware that he had no such knowledge.” The same principle of law has been repeatedly recognized. Hammatt v. Emerson, 27 Maine, 308, 326; Bennett v. Judson, 21 N. Y. 238; Stone v. Denny, 4 Met. 151; Hazard v. Irwin, 18 Pick. 95.
In the case before us the plaintiff, under the charge of the Court, was denied the benefit of this rule of law, although there was evidence tending to show every necessary element of a fraud of the nature we have been considering. The plaintiff’s request was refused, and the jury were instructed that the plaintiff could only recover in case they found “that the defendant represented the quantity of land different from what he knew or believed to be true.” Under these instructions it would be immaterial whether he made the representation as a matter of knowledge or as a matter of opinion so long as he kept within his belief as to the quantity of land. In this we think there was error. The Court properly instructed the jury that the representation, to warrant a recovery, must have been relied on and have been an inducement to the purchase. The subsequent remark that the jury, to hold the defendant, must find that the plaintiff would not have made the purchase but for the representation, we regard as probably inadvertent.
What the plaintiff would have done but for the false representation is often a mere speculative inquiry, and is not the test of the plaintiff’s right. If the false representations were material and relied upon, and were intended to operate and did operate as one of the inducements to the trade, it is not necessary to inquire whether the plaintiff would or would not have made the purchase without this inducement.
The judgment of the County Court is reversed and the cause is remanded.[344]
Case for deceit; the declaration alleging that certain false representations were made by the defendant to the plaintiffs, merchants in London, in order to induce them to engage one Jacque as their agent at Manchester.[345]
Plea, the general issue.
At the trial before Tindal, C. J., London sittings after Michaelmas term, it appeared that in November or December, 1824, the defendant, a soap manufacturer, called on the plaintiffs, wholesale tea dealers, with whom he was on terms of intimacy, and after asking them if they did business at Manchester, said “he had a young friend for whom he was anxious to procure a commission in the tea trade at Manchester; a nice young man, who had an excellent connection there, and would be a great acquisition to any person who wanted to do business there; the defendant being on such terms with the plaintiffs, he had offered it to them before he proposed it to Smith and Co.,—a respectable house in the same line of business; that Smith and Co. would jump at the offer; that his friend was so excellent a young man, that he would rather trust him without security than most men with; that this young man had been doing business at Manchester for a London tea house, who could no longer execute his extensive orders; that he had an uncle at Manchester, a clergyman of the Scotch Church, who would afford him great facilities in the way of business, and knew all the Scotch travellers in the trade; that defendant would like him to sell soap for defendant and his partner, but feared his other connections would not allow him time.”
The plaintiffs said they had an objection to giving commissions; but the very strong recommendation defendant had given of his friend would induce them to think of it.
Accordingly, in the beginning of 1825, the plaintiffs employed James Jacque, the defendant’s young friend, to do business for them on commission at Manchester. But by the middle of 1827, after repeatedly sending incorrect statements of the amount of his receipts on their behalf, he contrived to be a defaulter to them to the extent of £900 and upwards, and to involve them in bad debts to a much greater amount.
He then took the benefit of the insolvent debtors’ act.
Instead of having been employed in the Manchester commission tea trade in the year 1824, as the defendant had stated to the plaintiffs, it appeared that he had, at the recommendation of the defendant, been taken into partnership without any capital by Mr. R. C. Stewart, a warehouseman in London, in July, 1823; but great losses having been incurred in that concern, aggravated by a robbery to some amount, Mr. Stewart closed the concern and dissolved the partnership in October, 1824.
Jacque was then indebted to Stewart in the sum of £800, which he undertook by deed, dated November 13, 1824, to pay by instalments, in two, three, and four years; but nothing was ever paid.
All this was known to the defendant, who had acted throughout for Jacque, and had negotiated the terms of the dissolution of partnership.
Letters were also put in, written by the defendant to Jacque, after the exposure of the Manchester transactions, in which the defendant exhorted Jacque to write various falsehoods to the plaintiffs with a view to the exculpation of the defendant, and to conceal from the plaintiffs his knowledge of some of the transactions at Manchester.
When the defendant was first applied to on the subject by the plaintiffs, he expressed his regret that his house should have been the means of introducing an unworthy agent to the plaintiffs; but that as they had been instrumental in bringing the loss on the plaintiffs, he would see his partner on the subject, and see what could be done towards relieving them from it. No step of that kind having been taken, the present action was commenced.
Tindal, C. J., told the jury to consider whether the representation complained of by the plaintiffs had ever been made, and if made, whether it was false within the knowledge of the defendant; for unless it were false within his knowledge, the action did not lie.
The jury returned a verdict for the defendant, which was set aside by the Court. [6 Bingham, 396.]
Upon a new trial, Tindal, C. J., told the jury that if the defendant made representations concerning Jacque, the tendency of which was to occasion loss to the plaintiff, knowing such representations to be false, and intending thereby to benefit himself, he was guilty of fraud in the common acceptation of the term; if he made such representations, knowing them to be false, without proposing thereby any advantage to himself, but proposing, perhaps, to benefit a third person, he was guilty of fraud in the legal acceptation of the term, and responsible to the plaintiff for any injury resulting from such representations.
The jury thereupon found for the plaintiff, damages £800; but added: “We consider there was no actual fraud on the part of the defendant, and that he had no fraudulent intention, although what he has done constituted a fraud in the legal acceptation of the term.”
Jones, Serjt., now contended that this amounted to a verdict for the defendant; and therefore moved that the verdict might be entered for him, instead of the plaintiff.
He urged, at some length, nearly the same arguments as he had advanced on a former occasion, and adverted to the same authorities (see 6 Bing. 402); contending that this action was substituted for the ancient writ of deceit; that the gist of the action was a fraudulent intent on the part of the defendant to injure the plaintiff by deceiving him; that a defendant was not responsible for the consequences of a statement, merely because he knew it to be false; he was not responsible for the consequences of a bare lie; in order to render him responsible, it ought to be shown that he intended to defraud the plaintiff of something by the deceit he had practised. That if a party were responsible for the consequences of a lie told without any intention to defraud the hearer of something, no line could be drawn, and parties might be called on to answer for those excusable untruths, which were sometimes told for the purpose of avoiding a greater mischief.
Tindal, C. J. No sufficient ground has been laid to induce us to disturb the verdict which has been found for the plaintiff. The application arises on a misconception of what the jury have found. They first deliver a verdict for the plaintiff, with damages, and then add, that in point of fact they consider the defendant had no fraudulent intention, although he had been guilty of fraud in the legal acceptation of the term.
Their attention had been drawn by me to two classes of motives possible on the part of the defendant; first, a desire to benefit himself by making a statement which he knew to be false; secondly, a desire to benefit some third person; and I stated that, although there might be no intention on his part to obtain an advantage for himself, it would still be a fraud, for which he was responsible in law, if he made representations productive of loss to another, knowing such representations to be false.
The jury in finding that he had no intention to defraud mean only that he was not actuated by the baser motive of obtaining an advantage for himself, but that he was guilty of fraud in law by stating that which he knew to be false, and which was the cause of loss to the plaintiff.
The question, therefore, is, whether, if a party makes representations which he knows to be false, and occasions injury thereby, he is not liable for the consequences of his falsehood.
It would be most dangerous to hold that he is not.
The confusion seems to have arisen from not distinguishing between what is fraud in law and the motives for actual fraud. It is fraud in law if a party makes representations which he knows to be false, and injury ensues, although the motive from which the representations proceeded may not have been bad; the person who makes such representations is responsible for the consequences; and the verdict, therefore, in this case ought not to be disturbed.
Park, J. I am of the same opinion. In what fell from this Court in the case of Tapp v. Lee, and upon the former decision of the present case, the doctrine has been laid down most accurately. It would be unfair to take the expressions of the jury, without connecting them with what the Chief Justice had just presented for their consideration. It is clear that the jury meant to draw the distinction between the sordid motive of personal advantage and the legal fraud which might be committed by a representation false within the knowledge of the speaker, although made without any view to his own advantage. For such a representation the defendant is responsible if mischief ensues, whatever may have been his motive; and as to its being necessary to prove the motive by which he was actuated: when the case was last before the Court, Tindal, C. J., said, “I am not aware of any authority for such a position, nor that it can be material what the motive was; the law will infer an improper motive, if what the defendant says is false within his own knowledge, and is the occasion of damage to the plaintiff.”
Here the defendant said “That his friend was so excellent a young man, that he would rather trust him without security than most men with;” when he knew the contrary to be the fact, he was guilty of a fraud in law in making such a representation; and fraud in law is sufficient to support this action.
Gaselee, J. When this verdict is taken in connection with the direction of the Chief Justice, there is an end to all doubt as to the meaning of the jury, and the finding is a perfect finding. What the jury meant by actual fraud was a sordid regard to self-interest; but the legal fraud, which is sufficient to sustain the action, was complete when the intention to mislead was followed by actual injury.
Bosanquet, J. There seems to me to be no reason for disturbing this verdict. In the course of the trial, it is probable that improper motives had been ascribed to the defendant. The Chief Justice, therefore, stated to the jury, and stated correctly, that motives of that description in the defendant were not essential to the plaintiff’s action. If a person tells a falsehood, the natural and obvious consequence of which, if acted on, is injury to another, that is fraud in law. Coupling that with what the Chief Justice addressed to the jury, their verdict only means that the defendant did not propose to benefit himself, perhaps intended to benefit another; but that what he said, intending to benefit another, was false within his own knowledge, injurious to the party who received the communication, and, consequently, a fraud in the legal acceptation of the term.