Court Opinion

ID: 3596096
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:43:28.758975+00
Date Added: 2024-06-11T13:57:10.887621
License: Public Domain

The plaintiffs sought to recover in an action based upon allegations of fraud and deceit practiced upon them by the defendant, the price of three bills of goods which they were induced by such fraud to sell to a firm of dealers of which the defendant was a member. The firm was composed of the defendant and another person who died before the trial, and by an order of the court the action was continued against the defendant. At the trial before the court and a jury the plaintiffs were nonsuited and their counsel excepted and this exception presents the question of law in the case. The judgment was affirmed on appeal.
There is practically no dispute about the facts and the question presented by the appeal is whether the plaintiffs' proof did not sustain or tend to sustain the action. The three bills of goods were sold and delivered by the plaintiffs to the firm at the following dates respectively: November 30, 1898, January 24, 1899, and March 25th, 1899, and amounted in the aggregate to $901.86. On the 15th day of April following the last sale both of the members of the firm were adjudged bankrupts on their own petition in the Federal court. About eighteen months prior to filing the petition and on the 16th of September, 1897, the defendant, for the purpose of securing a rating by the mercantile agency of R.G. Dun  Co., made and delivered to that agency a statement in writing as to the financial condition of the firm, which showed net assets of $152,858.22. More than a year thereafter and on the 2d day of November, 1898, in reply to a request from the agency, the defendant wrote a letter in which he practically reiterated his former statement and added that the business of the firm was "large, increasing and profitable." Still later and on March 9th, 1899, just before the purchase of the last two bills of goods from the plaintiffs, a representative of the agency called upon the defendant personally and received from him a verbal statement that there had been no material change in the financial condition of the firm. The agency gave the firm a rating of from $125,000 to $200,000, which was maintained and never changed. Substantially *Page 523 
the same rating was given to the firm by the Brad-street agency upon like statements and representations, though made at an earlier date, and the defendant at all times knew that the credit of the firm was so rated in the reference books sent by these agencies to merchants and business people. The plaintiffs had and used these reference books of both agencies in their business, and when defendant applied for credit they consulted these books and in reliance on the correctness of the rating, without any other knowledge, sold and delivered the goods in question upon credit. The statements upon which these ratings were given, at least as to the Dun agency, were grossly false. The learned court below correctly described this phase of the case in these words which we can very well adopt:
"That the statements upon which the rating of the defendant's firm was based by the mercantile agency of R.G. Dun  Co. were grossly false, and that the plaintiffs relied upon such rating in giving the firm credit for the goods purchased upon the several occasions mentioned, are facts concerning which there is and can be no serious dispute, and had such statements been made directly to the plaintiffs under circumstances which would fairly warrant the assumption that they were so made by way of inducing credit, there would, of course, be no question as to the right of the plaintiffs to maintain an action of this character."
But the learned court held that since these false and fraudulent statements were not made to the plaintiffs personally and directly by the defendant, but to the agencies, and since the plaintiffs never saw the statements themselves, but only the result of them in the reference books, the action could not be maintained. That one merchant may defraud another under modern business methods just as effectually by a false and fraudulent statement to a commercial agency as in any other way no one can doubt. That the defendant did actually deceive and defraud the plaintiffs by thus putting into circulation in the business world a false, fraudulent and fictitious rating purporting to express his true commercial standing *Page 524 
and financial ability is equally clear. Disregarding mere forms and methods, it cannot be doubted that the defendant spoke false and deceitful words to the plaintiffs through the agency just as effectually as if they had met face to face and the statements had been made directly and personally. The buyer of goods may become liable to the seller in fraud, although they have never met or seen each other, and no personal communication that is false or fraudulent has passed between them. If the former does just what this defendant did and procures a fraudulent rating, intending that it should be published to the business community and taken as true, that is a fraud upon the person who relies and acts upon it to his damage. But it is not necessary to argue this question as an original one since it has been deliberately decided by this court.
In Eaton, C.  B. Co. v. Avery (83 N.Y. 31) it was held that when a member of a firm makes statements to a commercial agency, which he knows to be false as to the financial condition of the firm, with the intent that the statements shall be communicated to persons interested in ascertaining the pecuniary responsibility of the firm, intending thus to procure credit and to defraud such persons, and such statements are communicated to one who in reliance thereon sells goods to the firm on credit, an action for deceit may be maintained against the buyer of the goods in favor of the seller who has suffered by the fraud. That decision is controlling in the case at bar, since the two cases are almost identical in their facts, and all the objections urged by the learned court below to a recovery in this case were fully answered upon principle and authority. The court states that the case was new in its facts but old in the principle involved, and the cases cited sustain the statement. The same principle was decided in a more recent case. (Bliss v. Sickles, 142 N.Y. 647. )
The objections urged to a recovery in a case like this are quite untenable. It is said that it would put business men at the mercy of commercial agencies. No one need have any fears of that, since no business man can be affected unless he *Page 525 
makes use of such an agency to give information to the business world of his financial condition in order to show that he is worthy of credit, and then it is impossible to harm him unless he makes statements that he knows to be false for a fraudulent purpose, and if he does, there is no reason why he should not respond to one who has suffered thereby. So, also, it is said that these agencies procure information from other sources than the statement of parties seeking credit. That may be so, but there is little danger that any one will be made liable in fraud for false statements other than his own. If the defendant in this case could show that he never made the statements referred to he would have little difficulty in defeating this action notwithstanding the high rating in the reference books. A party who is really innocent can always protect himself against the unauthorized statements of others. In this case there was clearly a false and excessive rating which was justified by the statements made by the defendant, and it is admitted that these statements were false and fraudulent and that the plaintiffs relied upon the rating in giving the credit. Clearly, this state of facts is a sufficient basis for a charge of fraud and deceit. The proof was certainly sufficient to carry the case to the jury and hence the plaintiffs were improperly nonsuited.
The judgment should be reversed and a new trial granted, costs to abide the event.