Court Opinion

ID: 6859721
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:46:52.901336+00
Date Added: 2024-06-11T16:05:13.521330
License: Public Domain

HITZ, Associate Justice
(dissenting).
I am unable to agree with the judgment and opinion of the court in this case, and I leave aside any question as to whether the representations here made were ultra vires of the New York Company or beyond the authority of its officers who made them, since no sueh question is presented by the record.
This court reverses the judgment for error in overruling the motion of the New York Company for a directed verdict upon the whole evidence and sending the ease to the jury.
The representation in question states, with the weight of an important source, that the plant of the Capitol Company is “one of the finest title plants in existence; that it is unparalleled in its mechanical aspects, including every modern feature for expeditious title service; * * * ” that “the plant itself, in my opinion, is worth a very high figure as it stands today, and I know it will be a distinct benefit to the city of Washington to be able to get the type of service your company will afford it,” and “we say this because our experts have examined your plant thoroughly.”
But in fact the plant was a mere skeleton and got nowhere, consisting of conveniently arranged take-off slips from the land records in Washington, covering, more or less completely, the conveyances of a few years, variously stated in the record as going back to 1910 or 1912 or 190Q, but not pretending to reach any source of title.
The thorough examination by experts consisted of a short visit to the plant in Baltimore by two men from New York, neither of whom had ever examined a title in the District of Columbia.
These men reached Baltimore at lunchtime, there had luncheon with the Baltimore agent of the New York Company, made a short visit to the plant in the strenuous season immediately following luncheon, and returned to New York on the same afternoon.
This visit lasted from one to two hours, at least half of which was devoted to listening to Mr. Weinstein, who had put the plant together and who was trying to sell it to the Capitol Company, then in course of organization but not in business, and whom the examiners speak of as their chief source of information about the plant.
On their return to New, York the experts made a highly favorable report to their superior officers, and shortly thereafter, when the Capitol Company asked for a written repetition of their oral enthusiasm, the statement in question was written and transmitted by the chief law officer of the New York Company.
As shown by the covering letters, this statement was asked, written, and delivered for the sole and expressed purpose of a publicity campaign then contemplated and immediately begun by the Capitol Company in Washington.
My examination of the record leaves me no doubt that the plant was a fake; the inspection was a farce; and the statement touching both was false within the knowledge of the man who made it, who was one of the so-called “experts” making the so-called “examination.”
This statement, being made for purposes of publicity in a matter of business, was made *995to any person who received it; an agent of the recipient brought it to the attention of the plaintiff as a member of the public; and she acted in reliance thereon to her injury.
The falsity of the statement is recognized by the opinion, as well as by the man who made it, for, while he says in his representation that the plant was thoroughly examined in the two-hour visit which he does not mention, in his testimony he says that a thorough examination of the plant would require several weeks if not months.
But this is not all, for this managing vice president, after consultation with his senior officers, and again at the request of the Capitol Company, became a director of the Capitol Company on March 5, 1929, and remained a director until February 5, 1930.
The stock was sold to the plaintiff on March 21, 1929, being certain preferred and common shares, which were exchanged by the company for all common shares in June 1929, so that he was a director when the stock was sold to the plaintiff, and throughout the period here in question.
The Capitol Company was then in embryo, opening for business some months later, and during this period the vice president of the New York Company made repeated visits to Washington personally soliciting business for the Capitol Company and otherwise taking part in its affairs and consulting with its officers both here and in New York.
The plaintiff testified that the salesman offering her the stock read to her the letter complained of and another circular showing the vice president of the New York Company as a director of the Capitol Company; and that she was thereby influenced and in part induced to make the investment.
The vice president testified at such length that the condensed and narrative statement of his evidence occupies 32 pages of the printed record, and the contradictory statements in his evidence alone not only justified, hut required, the submission of the ease to the jury.
For he testified that, while he had previously heard of stock sales and contentions thereabout, at the first directors’ meeting which he attended, which was on May 3d, he opposed and protested against sales of stock.
But, when the minute book of that meeting was produced to Mm, it showed thát he made a motion to continue the sales of stock at the peculiar unit, price paid for it by the plaintiff, one half of the proceeds of such sales to go to Mr. Weinstein in payment of stock issued to him and the other half to the Capitol Company.
This motion was lost, but another motion to continue stock sales without requiring any proceeds to go to Mr. Weinstein was carried at the same meeting.
He further testified that, while he orally rebuked the chief stock salesman for sundry allurements he had made connecting the New York Company not only with the sale of the stock, but with the possible purchase thereof at a higher price, he saw “no reason to undertake to arouse the public against the Capitol Company,” and neither he nor his company ever repudiated the representation which it had made, or withdrew it from its known use for stock-selling purposes, or took any steps toward advising the public of what they now contend was its restricted meaning and purpose; namely, to aid in selling to the pubiic the Capitol Company’s certificates of title but not its certificates of stock.
And it is upon this distinction that the court now rests its judgment and opinion.
But the statement, in its setting, and with its implications, was capable of advantageous use for both purposes, and was extensively used Cor both purposes within the knowledge or notice of the New York Company.
“It is the duty of directors to know the condition of the corporation whose affairs they voluntarily assume to control, and they, are presumed to know that which it is their duty to know, and which they have the means of knowing.” Scale v. Baker, 70 Tex. 290, 7 S. W. 742, 744, 8 Am. St. Rep. 592; Tate v. Bates, 118 N. C. 308, 24 S. E. 482, 54 Am. St. Rep, 719; Watson v. Jones, 41 Ela. 241, 25 So. 678, 682; Ward v. Trimble, 103 Ky. 153, 44 S. W. 450, 452.
So that it is hardly accurate to say — -as the opinion does say — that the plaintiff’s case rests entirely upon the false statement, since it rests upon that statement plus the knowledge of the use that was being made of it, which is a very different thing.
One count of the declaration charges that the false statement was made knowingly; the other that it was made recklessly and negligently, but it was equally false in either aspect, and a statement untrue in fact, though made in negligence and not in fraud, if relied upon to injury, may render the maker liable for resulting’ loss. International Products Co. v. Erie Railroad Co., 244 N. Y. 331, 155 N. E. 602, 56 A. L. R. 1377.
The opinion of this court states the cow-*996trolling rule in such cases to be that one who makes a representation owes no duty of care to tell the" truth to those to whom he does not communicate it, or to whom he does not expect its communication, and quotes with approval from Wharton that the communication of a false statement to a third person so insulates the original negligence from the injury as to destroy the cause of action.
But when Wharton wrote we had not yet achieved publicity campaigns, with interlocking directorates, and brazen stock salesmen invading a woman’s house by secret information from her banker that she had saved a few dollars which might be enticed away from her.
And privity of contract between the maker of a false statement and one deceived thereby is not always essential to liability, for, where such representations are made for the purpose of influencing the mind of the public, whoever in fact receives, relies, and acts upon such representation to his injury may regard them as made to him, and have his remedy against the maker. National Bank v. Oil Mill (C. C. A.) 2021 F. 90; Davis v. Trust Co. (C. C. A.) 181 F. 10, 30 L. R. A. (N. S.) 1011; Carvill v. Jacks, 43 Ark. 454; Staver & Abbott Mfg. Co. v. Coe, 49 Ill. App. 428; Courtney v. William Knabe & Co. Mfg. Co., 97 Md. 499, 55 A. 614, 99 Am. St. Rep. 456; 2 Cooley on Torts, § 358.
And it is sufficient if the false statement was one of the inducements to invest the money in question; it need not be the sole inducement. Morgan v. Skiddy, 62 N. Y. 319.
I find no rule controlling this ease in Western Union Telegraph Co. v. Schriver, relied on by the court, but rather in Glanzer v. Shepard, 233 N. Y. 236,135 N. E. 275, 276, 23 A. L. R. 1425, where the court says that:
“Constantly the bounds of duty are enlarged by knowledge of a prospective use. * * * We must view the act in its setting, which will include the implications and the promptings of usage and fair dealing. The casual response, made in mere friendliness or courtesy * * * may not stand on the same plane, when we come to consider who is to assume the risk of negligence or error, as the deliberate certificate, indisputably an 'act in the law.’ * * * The line of separation between these diverse liabilities is difficult to draw. It does not lose for that reason its correspondence with realities. Life has relations not capable always of diidsion into inflexible compartments. The molds expand and shrink. We state the defendants’ obligation, therefore, in terms, not of contract merely, but of duty. Other forms of statement are possible. They involve, at most, a change of emphasis.”
Negligence is a modem and living subject in the law, whose scope is everwidening with the changes of modem life.
Society is constantly becoming more complex and less scrupulous, while the consequences of negligence are more far-reaching and less obvious.
As the resulting obligation to use care becomes more strict in morals, it must become more strict in law, or the courts must fall short of their duty.
And it is clear that the trend of modern decisions is toward the enforcement of a general duty to be careful, as well as a general duty to abstain from willful harm, both in statement and in act.
If the maker of this statement had negligently scratched the plaintiff’s arm with his ■ pen, he or his company would have been liable for the resulting damage, and, if his negligence in the use and custody of what he writes with the same pen results in equal or greater damage, he or his company should be similarly liable, for “there can be no controlling difference between damage to the person and damage to the purse.”
A man occupying an influential position in modem business by his false statements may affect the welfare of many persons whom he never sees or who never hear his voice, and he should be held at least to as high a measure of responsibility for his reckless pen as for his negligent motorcar.
For his pen may impoverish thousands, while his ear can hurt but few.
In my opinion, the contradictory statements of the vice presidential director and the chief law officer when testifying as witnesses for the defendant required this case to be sent to the jury under the established practice of the court, and consequently the ruling that sent it there was not error, and the judgment should be affirmed and not reversed.
The following authorities are thought to support the views and statements of this opinion. Harriott v. Plimpton, 166 Mass. 585, 44 N. E. 992; Edwards v. Lamb, 69 N. H. 599, 45 A. 480, 50 L. R. A. 160; Houston v. Thornton, 122 N. C. 365, 29 S. E. 827, 65 Am. St. Rep. 699 ; Laudie v. Telegraph Co., 126 N. C. 431, 35 S. E. 810, 78 Am. St. Rep. 668; 3 Cooley on Torts, § 497; 5 Law Quarterly Review 103;" 7 law Quarterly Review 107; 16 Harvard Law Review 184.