Court Opinion

ID: 3403083
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:15:30.568339+00
Date Added: 2024-06-11T13:40:40.103346
License: Public Domain

I cannot bring myself to concur in the judgment in this case. While it is true that, when parties are trading at arm's length and are not already under legal and contractual duties with reference to the subject-matter of the negotiations, due diligence as to patent conditions is required and one party may not rely on the representations of the other. However, in this case, the parties were already under contractual relations with each other. The borrower had expressly agreed not to cut the timber. Under the circumstances he was a trustee of the timber until his debt was paid. While he held the property in trust he disposed of it and concealed his wrong. He was under a higher duty to divulge his action than the lender was to inspect. Under the allegations of the petition, I think that the lender was justified in assuming that the borrower had not cut or sold the timber, that he had complied with his solemn agreement, and I do not think that the lender was lacking in diligence in not inspecting the timber. I think that the borrower was under a duty, as a contracting party and trustee of the timber, to reveal to the lender the fact that the timber had been cut, and his failure to do so was as actionable a fraud as if he had made an express representation that it had not been cut. I think that the lender's cause of action against both defendants was good under Code (Ann.) § 105-1412, it appearing from the petition that by reason of the alleged fraud the entire balance due *Page 662 
on the loan had not been paid, and I think that the action is good also against the borrower because of the alleged damage caused by the alleged fraud. The policy of the law in requiring parties dealing at arm's length to exercise diligence as to matters patent and easily discoverable has as its basis the purpose to prevent frauds. I do not think that this rule was intended to apply to a situation such as the present one. To apply the rule here would encourage rather than discourage fraud.
I am authorized to state that Judge Townsend concurs in this dissent.