Court Opinion

ID: 9641730
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:39:12.44231+00
Date Added: 2024-06-11T18:10:39.464359
License: Public Domain

L. HAND, Circuit Judge
(dissenting).
I agree that when McLaren delivered to Sample the financial statement, audited as of March 31st, he should not he understood to have guaranteed that the figures still held good, or that the plaintiffs’ net worth was as great as it had then been. On its face it was the work of professional accountants, the result of an examination of the books such as accountants alone can make. Had it been less authoritative — made up from trial balances for instance — its later use might have meant more; but as it was, I think that Sample ought to have understood only that McLaren believed it to be still true in substance. I do not read what we are deciding as more than that in these particular circumstances the transaction had only that significance; we are not committing ourselves generally as to the consequences of delivering any financial statement which bears an earlier date. I also agree that the telegrams exchanged between the plaintiffs and their Havre office, although they might well have aroused suspicion, were not plain enough to put them on notice of Gerout’s thefts. But I cannot put the same interpretation as my brothers upon the talk between McLaren and Sample on the day that the note was made. When Sample asked him why he wanted the money, McLaren answered in substance that he needed it only over the week-end in which there was a holiday or perhaps two, at the end of which he expected remittances. The two versions differ a little, but it is plain that the men were talking about foreign remittances and that these were to come from customers’ accounts; what they said came to this; that the plaintiffs expected their Havre customers to pay $75,-000 by the time the note fell due. Of course I do not suggest that this was an engagement by McLaren that these accounts would be paid; Sample had to take his chances as to that; but I cannot escape the conclusion that it was a declaration that the firm in fact had that much in foreign customers’ accounts. That was not true; there were indeed foreign ac*258counts, but not in such quantity. Such a declaration says more than the bare declaration that one is a cotton broker; a cotton broker may have millions of accounts or he may have none; a prospective lender learns from that nothing of substance to guide his decision; he learns a great deal when the borrower tells him that he has accounts equal to the loan which he can collect before it falls due.
Therefore it seems to me that McLaren misstated a material existing fact. It is true that without these accounts, that is to say, in spite of Grout’s defalcation, the plaintiffs were solvent, but eventual solvency is very different to a lender from customers’ accounts, secured by the margin required by custom and the rules of the exchange. That Sample relied upon the information I do not understand my brothers to question; in any case it seems to me plain, though he also relied upon the financial statement. If he did, it makes no difference whether one views the resulting legal relations as dependent upon a mutual mistake of fact, or as being a statement by the borrower intended to be relied upon by the lender and in effect a warranty. It is perhaps simpler and less involved, to use the first pattern. Both McLaren and Sample were mistaken as to the existence of the Havre accounts; their mutual mistake had been one of the circumstances on which the lender had acted, which determined his decision, at least so the evidence is as it stands. If the plaintiffs mean to contend that the loan would have gone through in spite of McLaren’s assurance about the accounts, they should have proved it. When Sample learned of this mistake he was justified in rescinding; he did rescind for that reason, I believe, though the evidence is not so clear as it might be on that issue. For these reasons I think that the judgment ought to be affirmed.