Legal Document

366 U.S. 696 81 Supreme Court Reporter 1294 6 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 614 UNITED STATES, Petitioner,v.Stanley S. NEUSTADT et ux. Number 533. Argued May 2, 1961. Decided 29, Mr. William or Haw. Hawai‘i KFH45 A2 Orrick, Jr., San Francisco, Cal., for petitioner. Lawrence Judge Latto, Washington, D.C., respondents. Justice WHITTAKER delivered the opinion of Court. 1 Pursuant to provisions National Housing Act 1934,1 as amended, Federal Administration (FHA) is authorized, in certain instances, insure partial repayment loans secured by mortgages executed finance purchase private residential properties.2 When duly requested do so a qualified lender, FHA, through its appraisal staff, makes an inspection property offered sale order determine whether eligible FHA mortgage insurance, and assign appraised value establishing maximum amount insurance obtainable.3 2 The question decision this case may be held liable, under Tort Claims Act, 28 Code KF62 § 1346(b), Annotated KF65 U5 1346(b),4 purchaser who has been furnished statement reporting results inaccurate appraisal, who, reliance thereon, induced seller pay price excess property's fair market value. answer turns upon correct interpretation 2680(h), which precludes recovery ( a)ny claim arising out * misrepresentation.' material facts giving rise controversy are not dispute, summarized follows. 3 Early 1957, question, consisting 16-year-old singlefamily brick house lot located Alexandria, Virginia, was owners. To assure that would available secure loan event purchaser, when ascertained, might desire method, owners lending institution take necessary steps have inspected FHA; pursuant agent's application,5 appraiser visited premises. On basis inspection, disclosed no defects disqualify issued agency 'conditional commitment,'6 stating had approved and, purpose, assigned $22,750. Under 203(b)(2) Act,7 obtainable on $22,750 $18,800.8 4 Shortly thereafter, respondents, Mrs. Stanley Neustadt, examined became interested buying it. After negotiations extending over period month, course respondents were advised sellers at purposes, entered into conditional contract $24,000. conditioned respondents' obtaining FHA-insured $18,000. In accordance with 226 Act,9 also provided deliver prior property, written setting forth FHA-appraised Both conditions fulfilled, settlement date, July took title acknowledged their signatures they 'Statement Appraisal.' This official document, 'has identified purposes placed such date statement. (The does establish sales price.)' (Emphasis original.) 5 Respondents moved 10, 1957. According testimony, previously 'quite carefully,' found 'absolutely nothing indicate necessity any redecoration all.' 'immaculately clean' walls ceilings 'looked fine.' However, within month after in, substantial cracks developed interior exterior throughout house. building repair contractors unable ascertain cause cracks, original builder four field inspectors summoned, thorough investigation made them. By drilling hole concrete floor basement, it discovered subsoil composed type clay becomes pliable moist. Due poor drainage surface, water seeped clay, causing shift beneath foundations produce appeared ceilings. Ten months commenced action against Government, District Eastern seeking difference between complaint alleged FHA's conducted negligently; justified relying appraisal; 'would purchased $24,000 but carelessness negligence (FHA).' 7 trial, found10 'in good faith relied (FHA's) consummating purchase,' 'reasonable care warned' 'serious structural defects' 'preponderantly proved.' basis, court adjudged Government liable $8,000, time ($16,000) (24,000). 8 appeal, judgment affirmed Appeals Fourth Circuit, 281 Reporter, 2nd 596, Government's sedulous objection barred excepts from coverage '(a)ny Because importance resolve apparent conflict Circuit's holdings other Circuits uniformly construing 'misrepresentation' exception s 2680(h) preclude closely analogous facts,11 we granted certiorari. 364 926, 354, 265. We concluded adopted Circuit erroneous, must absolved liability. 9 complete form, excludes assault, battery, false imprisonment, arrest, malicious prosecution, abuse process, libel, slander, misrepe sentation, deceit, interference rights.' added.) position that, since Congress employed both terms 'deceit' clearly meant exclude claims negligent, well deliberate, misrepresentation; therefore, even assuming correctly resulted negligent detriment,12 nevertheless fail one 'arising (negligent) 10 accord view urged unanimously all occasion pass comprehends willful, misrepresentation. 11 leading precedent Second Jones versus States, 207 563, involved plaintiffs Geological Survey erroneously estimating oil-producing capacity land. statement, sold securities representing oil gas rights land less than actual value, later sought recoup loss alleging Affirming dismissal complaint, tersely pointed applies 'deceit,' '(a)s means fraudulent misrepresentation, include otherwise word duplicative.' page 564. Following interpretation, unbroken line, cases Mfg. company Cir., 210 263; Clark 218 446; Miller Harness 241 781; Anglo-American & Overseas Corporation 242 236; Hall 274 69. Social Security Baltimore Credit Union D.C.D.Md., 138 F.Supp. 639, Van Meter, D.C.N.D.Cal., 149 493. 12 Throughout line decisions, argument plaintiffs, consistently rejected courts, until case, bar apply gist lies underlying representation, i.e., phrased of' rather 'misrepresentation.' But argument, forcefully demonstrated Tenth supra, more attempt circumvent denying agents Department Agriculture negligently plaintiff's cattle result, mistakenly reported diseased. Relying report, plaintiff his ground caused agents' report itself. claim, stating: 13 'We then look beyond literal meaning language real complaint. Plaintiff's came about misrepresented condition cattle, telling him diseased when, fact, free disease. stated predicated 14 Misrepresentation used exclusionary provision (of 2680(h)) misrer esentation.' 71.13 15 instant opposite view, could recover sole negligence. Although agreed embraces 'negligent' 'willful' 'might form misrepresentation general common-law principles,' 601, deemed inapplicable here reason 'merely incidental' 'gravamen' 'the careless making excessive (respondents were) deceived suffered loss.' Id., 602. Since Act14 requires 'shall agree deliver, person purchasing (property), *,' reasoned procedure designed protect prospective home purchasers; (through FHA) therefore 'owed specific duty' make careful 'if government assumes duty performs it, party injured thereby damages though performance accompanied some fact.' 599. 16 Whether analysis accords law seen fit allow circumstances,15 meet outside intended scope depends solely what 2680(h). 17 say, did, arises 'negligence,' 'misrepresentation,' breach 'specific owed him, use due communicating information reasonably expected rely conduct economic affairs, only state traditional commonly understood legal definition tort 'negligent misrepresentation,' clearly, if conclusively, shown authorities set margin,16 there every believe mind before As observed alone sufficient except deliberately representations.17 Certainly warrant unaware established definitions enacted 1946, spending 'some twenty-eight years congressional drafting redrafting, amendment counter-amendment.' Spelar, 338 217, 219—220, 70 11, 94 L.Ed. 3. Moreover, said considering aspects Act: 'There shows draw distinctions finespun capricious almost incapable being adequate formulation.' Indian Towing 350 61, 68, 76 122, 126, 100 48. 18 Regarding Appeals' assertion communicate accurate virtue carefully extensive legislative history statute, particular attention thereof,18 infer intended, this, limit suspend application Act. Long added 1954, requiring inform buyers recognized appraisals matter public record, thus inure, incidentally, benefit purchasers, affording them 'benefit knowing trained valuator acting reduce minimum, errors result casual hasty conclusions.'19 same time, repeatedly emphasized primary predominant objective system 'protection funds';20 program anything lender-mortgagees;21 'there relationship individual mortgagor.'22 Never once intimated would, sense, represent guarantee he receiving money. 19 Nor indication 1954 addition 226, modify legislation's fundamental design guaranty warranty received. face, goes further require shall furnish buyer, sale, disclosing value.23 That did intend convert extend actionable right redress faulty irrefutably clear Committee Hearings Houses Congress, pertinent excerpts margin.24 unreasonable suppose adopted, aware construed courts inl ude misrepresentation.'25 20 compulsory disclosure numerous instances relegated governmental either disclose directly, persons disclose, assistance guidance commercial affairs. practically owes obtain carefully, recipient misled financial harm. While condone employees gathering promulgating information, neither can justifiably ignore plain words limiting liability.26 21 It follows *misrepresentation,' hence Accordingly, below reversed. 22 Reversed. 23 DOUGLAS dissents. 24 STEWART part consideration case. 48 Statutes-at-Large 1246, 1701 seq., seq. Section 203 1934, 1709, times that: '(a) (Federal Housing) Commissioner mortgagee, hereinafter provided, prescribe, commitments insuring execution disbursement thereon '(b) section shall— '(2) Involve principal obligation exceed equal sum (i) 95 per centum $9,000 (as accepted insurance), (ii) 75 *.' Regulations §§ 200.145, 200.146, 200.148 (1959 ed.). '(T)he district exclusive jurisdiction civil actions money injury wrongful act omission employee while office employment, circumstances where person, claimant place occurred.' An mortgagee FHA. 203(a), 1709(a), 1709(a). Applications be, are, advance mortgage, 221.9 ed.), inspected, approved, still unknown. commitment mortgagor's financially able carry mortgage. 200.147, 200.148(1) Note supra. 203(b)(2), insurable was.$18,862.50 (95% $9,000, plus 75% $13,750). regulations, multiples $100. 221.17(a) (1958 Supp.). (68 0 7, 1715q, 1715q) provides follows: 'The (hereby) authorized directed connection dwelling own occupancy, determined There jury trial 2402, 2402. cited discussed pages 702—705 U.S., 1298—1299 S.Ct., infra. Neither Appeals, nor Court, chosen contest these findings. 236, 237, analyzed similar exposed true basis: '(Plaintiff), contracted sell tomato paste required acceptance satisfy standards Food Drug Administration. imported; Administration, sampling 'release notices' notified Customs officers enter country. (Plaintiff) delivery. turn government, federal officials again paste, ordered destroyed. sues now issuing accept suffer damages. 'This clear, 'arose assertedly representation quality employees. Such (which excepts) liability intentional 9, support New York Glanzer Shepard, 233 N.Y. 135 Northeastern KF135 N59 275, 276, American Law 1425, defendants, weighers, vendor weigh goods issue certificate weight buyer. weighed inaccurately, strength erroneous certificate, buyer paid price. allowing looked primarily performing weighing, defendants 'careless words' service.' widely epitomizing See, e.g., Harper James, Torts,5 46—548 (1956); Prosser, Torts, 734, 737 (1941 ed.); Bohlen, Should Negligent Misrepresentations Be Treated Negligence Fraud? Va.L.Rev. 703, 708 (1932). followed number broken earlier, virtually unanimous, subscribing English Derry Peek, L.R. App.Cas. 337, 58 L.J.Rep.Ch. 864 (1889) (refusing misrepresentation). See Torts 546, n. (1956). Cf. Ultramares Touche, 255 170, 174 441, 74 1139. Act's provisions, 1346(b). opinion, although Virginia rule our conclusion applies, need explore question. Institute's Restatement (1938), chapter 22, 'Deceit: Business Transactions,' Topic 3, 'Negligent Misrepresentations,' states 552. Information Negligently Supplied Guidance Others. 'One business profession supplies others transactions subject harm fails exercise competence expecting, '(i) class whose supplied, '(ii) because justifiable transaction influence substantially identical therewith.' 16, 'Misrepresentation,' 87, 'Basis Responsibility,' states: 'Responsibility divided usual classifications. rest upon: 'a. intent deceive, belief representations *. (S)uch ine nt deceit. 'b. representation. 'c. A policy holding maker strictly responsible truth Deceit, Negligence, Warranty, 42 Harv.L.Rev. 733, 735—739 (1929); Am.Jur., Fraud Representations' (1939). 29.13, Exceptions Liability, Page 1655 78 Cong.Rec. 11980 seq.; 1st Annual Report (1935) (passim); 12349—12360; S.Rep. 1472, 83d Cong., Sess.; H.R.Rep. 1429, H.R.Conf.Rep. 2271, Before Senate Banking Currency House Sess. First (1935). 90 A2985; 11981. Sess., Pages 66—67. 11981; R. Conf.Rep. 66. Representative Dollinger, Subcommittee 'Housing Constructed VA Programs,' 82d 163: guarantee, your getting home, condition. N Dec. Immigration Nationality Decisions before, misconception idea. never building. All says guaranteed bank.' 1402 1403, following colloquy recorded Senator Bennett Home Finance Administrator Cole: 'Mr. should understand guaranteeing home. 'Senator Bennett: correct. idea service II undertakes loan. fact made, collateral benefits owner. that. last owner cannot say 'Well, inspector my house, what's happened; you responsible; come down fix up." 25 decided, Eighth Circuits, respectively, 1954. 26 Our conflicts impairs authority 48, cognizable vessel ran aground Coast Guard's allegedly failure maintain beacon lamp lighthouse. 'arise based motor vehicle operator's misleading signal. Dean Prosser observed, many familiar forms involve element generic sense word, '(s)o far treated itself distinct tort, common deceit,' confined 'very largely invasion interests character, dealings.' 85, 'Remedies Misrepresentation,' 702—703

Classification Label: 7