Court Opinion

ID: 4932319
Source: CourtListenerOpinion
Date Created: 2021-09-24 01:09:33.840898+00
Date Added: 2024-06-11T08:14:31.970430
License: Public Domain

The following dissenting opinion was delivered by
Dickerson, J.
The exceptions present the question, whether a false representation, fraudulently made, as to the cost of the property, is an element of fraud in an action of deceit to recover damages for the injury sustained, on account of such representation. Though the authorities are not in perfect accord upon this question, yet we think that the weight of authority, as well as the better opinion, is decidedly in favor of the affirmative.
While misrepresentation of the cost of property does not ordinarily increase its value, it is a material fact, and naturally calculated to mislead the purchaser by its tending to enhance its value, *586and give it an attractiveness and firmness beyond that given by the force of mere opinion. Especially is this the case when the vendee reposes confidence in the knowledge, sagacity, and integrity of the vendor, who has himself alone examined the property.
When the property is to be put into a joint stock company, the cost price is the basis for fixing the capital stock, and the price value of the share; and when the owner becomes a member of the company his investment is equalized with that of the other members of the company, though the per centage actually paid in by him may fall far short of that paid in by them. It is easy to see how the fact, that a man of known sagacity in matters of business, with favored opportunities for examining the property and judging of the prospects of the enterprise to be projected upon it, is willing to pay a large sum for such property, put it into a joint stock company at cost, and share his profits in common with the other shareholders, is calculated to increase other persons’ estimate of the value of the stock, and induce them to become its purchasers. Does the law hold a vendor harmless, who makes use of the confidence which these considerations awaken among his friends and acquaintances to obtain from them their money or other property for a moiety of its value ?
Representation of cost is different from representation of value. The one is the statement of a fact, while the other is the expression of an opinion. Yalue is a matter of judgment and estimation, about which men may differ. The question of value, too, is one open alike to the vendee and vendor for inquiry, examination, and proof; the vendee, by the exercise of common prudence, may ascertain the truth of a representation of value, and save himself from loss. Not so with a representation of cost. This is not an opinion, but a fact, specially confided to the knowledge of the owner and his vendor; and they may sustain such confidential relations toward each other, that no prudence can discover the falsity of the representation. The same distinction between the assertion of a fact and the expression of an opinion or judgment is recognized in actions of warranty or deceit founded on representations *587concerning the essential condition or qualities of the property offered for sale and exchange. This distinction is, moreover, expressly recognized in the decisions of courts of the highest authority, upon the identical question under consideration. The general principle is, that though the vendor need not speak, yet if he does, he should speak the truth.
If we pass from general principles to the authorities, we find that the English cases present an unbroken chain of decisions in harmony with these views. In Elkins v. Kesham, 1 Lev. 102, it was held that a false statement, that the property was rented for a higher sum than was actually paid, whereby the plaintiff was deceived and induced to pay a high price for the property, afforded good cause of action.' The same principle has been affirmed and applied in subsequent cases, the courts assigning as a reason for distinguishing between such cases and a false representation of value, that ‘ the value of the rents is a hard thing to be known, and secret, known to none but the landlord and the tenant, and they might be in confederacy together.’ Risney v. Selby, 1 Salk. 214.
In Bagshaw v. Seymour, 4 C. B. (N. S.) 873, the common bench held the chairman of the directors of an Australian gold mining company responsible, for causing its stock to be put on the stock exchange list, by a false representation as to the amount of money paid, by which the plaintiff was induced to buy some of its shares.
The same court in Clarke v. Dickson, 6 C. B. (N. S.) 453, held a director of a lead and copper mining company, liable to a party who had been induced to purchase stock in that company, because of the false representation, fraudulently made, that the property had been purchased at a much greater price than was actually paid.
That case is very similar to the case at bar, in its facts and principles, and the decision of the court is directly in point. The same doctrine was held by the court of exchequer in Bedford v. Bagshaw, 4 H. & N. 538.
The court of errors of New York, in Sanford v. Handy, 23 *588Wend. 268, held that misrepresentation of the cost of land, rendered the vendor liable; and this decision was subsequently affirmed by that court in Van Epps v. Harrison, 5 Hill, 70.
In Page v. Parker, 43 N H. 369, the court held the same doctrine, and in commenting upon the case of Van Epps v. Harrison, say, ‘ we think the holding of the court was right.’
The court in this State held that false and fraudulent representations of the value and amount of the income of real estate, by which a party was induced to take a lease of the premises, rendered the lease void, on the ground, as stated by Shepley, J., who delivered the opinion of the court, that a representation relating to the income or rent of an estate does not come within the rule, that the seller is not bound by representations of the value of the property sold, because the knowledge of the value of the income in such case may be, and actually is, confined to one party, and the other can be presumed to ascertain it accurately only from him, or from those standing in a confidential relation to him. Irving v. Thomas, 18 Maine, 424.
The principle upon which that decision is thus put, applies, at least, with as great force to misrepresentations as to the cost of property; for it is obvious that the means of ascertaining the truth of representations in regard to income are quite as accessible as the means of determining the truth of representations of cost. While the value of the income may ordinarily be obtained from inquiry and on examination of the premises, a knowledge of the cost price must be sought for in more recondite quarters.
Chief Justice Shaw, in Hazard v. Irwin, 18 Pick. 105, recognizes the distinction between a false averment in matters of fact, and a like falsehood in matters of judgment, opinion, and estimate, and thus illustrates the difference: ‘ If the owner of an estate affirm that it will let or sell for a given sum, when in fact such sum cannot be obtained from it, it is in its own nature matter of judgment and estimate, and so the parties must have considered it; but if an owner falsely affirm that the estate is let for £30, when in fact it is let for £20, it is fraud, because the owner knows the fact, and *589on inquiry by the vendee, the tenant might refuse to inform him, or give him false information.’
Mr. Justice Metcalf, also, in Brown v. Cottles, 11 Cush. 348, makes the same distinction, and cites the New York cases, which hold that false and fraudulent representations, in respect to cost, are actionable as coming within the rule applicable to misrepresentations in matters of fact, and as distinguishable from representations of value, former offers, probability, and like matters of opinion.
So the court in Medbury v. Watson, 6 Met. 246, held a third party responsible for falsely and fraudulently representing to the plaintiff that the owner of certain real estate paid a larger sum for it than he actually paid, whereby the plaintiff was induced to pay the same sum therefor, and was greatly damaged. But the court, in deciding that case, say that the averments in the declaration would not have been sustained, if the false representations had been made by the vendor to the vendee, thus for the first time in the history of jurisprudence upon this subject, as it is believed, distinguishing between representations made by the owner, and those made by a third party, and holding the latter alone actionable, when the representations relate to the cost of the property. There was nothing in the case that called for this remark; nor do the authorities cited warrant it, and the reasoning by which it is sought to be fortified, fails to convince us that it is good law, sound philosophy, or consistent with enlightened views of human nature. We are not quite prepared to say that.persons are naturally more inclined to tell the truth about their neighbor’s property than they are about their own, or that the statements of a third party in respect to another’s property is more likely to deceive a purchaser than those made by the owner himself. Besides, the dictum in that case is in direct conflict with the then uninterrupted series of decisions of the courts in England and in this country, and as it seems to us, repugnant to reason and public policy.
The court in Massachusetts, however, recognized the distinction suggested in Medbury v. Watson, as law, and, in a very brief opinion, drawn by the learned member of the court, who was counsel *590for the defendant in that case, without citing any other authorities than were there cited, held that fraudulent misrepresentations as to the price paid for real estate by the vendor, will not support an action for deceit in the sale of it. Hemmer v. Cooper, 8 Allen, 334.
Our objections to these two cases in Massachusetts may be thus stated: both reason and authority seem to us to be opposed to the distinction set up in the former case, and to recognize the distinction denied in the latter case. In view of these considerations, it is, perhaps, not too much to say that these cases, for some cause, failed to receive that thorough examination and careful consideration which have generally marked the decisions of the learned court in Massachusetts.
That court already seems to have felt the embarrassment which those cases present in more recent decisions. It held in Manning v. Albee, 11 Allen, 522, that false and fraudulent representations as to the market value of certain railroad bonds entitle the purchaser to rescind the contract. In delivering the opinion of the court in that case, Mr. Justice Gray felt constrained to say that the utmost limit of the rule which does not recognize a false representation of value as an element of fraud have been reached in Hemmer v. Cooper, in applying it to statements of the price paid by the person making them.
Again the court in Massachusetts enunciate principles and cite authorities in Bradbury v. Poole, 98 Mass. 182, which seem to us irreconcilable with the doctrine of Hemmer v. Cooper.' In view of the great weight of authority upon this subject, and the later decisions in Massachusetts, the dictum in Medbury v. Watson, which ripened into law in Hemmer v. Cooper, can hardly be said to be regarded as law in that State at the present time.
The rule of law upon this subject we now consider as settled, that where a vendor makes a false and fraudulent representation as to the cost of the property, and the vendee reposes confidence in such representation, and is deceived and injured thereby, he may maintain an action for the deceit against the vendor, to re*591cover the damages for the injury he has sustained. Such representation is not to be excluded from the consideration of the jury, either on the ground that it is a mere matter of opinion, or is so commonly made by property-holders that any purchaser who confides in it is to be considered too careless of his interests to be entitled to relief; but it is a fact proper to be submitted to the consideration of the jury in an action of deceit upon the question whether a fraud has actually been committed, and an injury sustained.
The instructions of the presiding justice, in the case at bar, were in substantial compliance with this rule of law. They were, at least, quite as favorable to the defendants as they had a right to require. He instructed the jury that the representation, as to cost, was important only as it was connected with the agreement, if any such there was, to put the lands into the company at cost, and that the jury were to judge of the materiality of the representation, both with respect to its effect upon the interests of the plaintiff in the subject-matter of the purchase, and as an inducement for him to enter into the contract. The instructions upon this branch of the case were clear, explicit, and full, and afford the defendants no cause of complaint.
The general rule for estimating the damages laid down by the presiding judge furnishes the defendants no legal ground for exceptions, as it is quite as favorable to them as the law allows.
The other exceptions to the judge’s charge do not seem to be very much relied upon in the argument, and are in substantial accordance with the rules of law. Nor do we see any objections to his rulings during the progress of the trial. The motion for a new-trial cannot be sustained. It was a question of fraud. There was a mass of conflicting evidence, and the jury were the proper judges of the credibility of the witnesses, and the weight of evidence. We think the entry should be

Motion and exceptions overruled.

Judgment on the verdict„
Kent, J., concurred.