Court Opinion

ID: 8827247
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:50:48.864347+00
Date Added: 2024-06-11T17:04:49.166680
License: Public Domain

CLAYTON, District judge
(after stating the facts as above). This is an action of trespass on the case. It is sounding in tort. It is not brought for a breach of a contract or for a false warranty. Fraud and deceit constitute the gravamen of the complaint. In the ad damnum clause of the declaration the plaintiff claims damages for $800,000. I have carefully examined the declaration in the light of the objections raised by the demurrer, which contains 31 grounds. It is my opinion that the demurrer cannot be sustained on any one of the grounds.
The first objection raised by the demurrer to the declaration is that the necessary jurisdictional facts are not alleged. This contention is without support. The diversity of citizenship of the parties and that the amount in controversy is over $3,000, both these facts requisite to the jurisdiction of this court, are shown.
It is plain that this action is a suit of a civil nature at law, within the meaning of section 24 of the Judicial Code (Comp. St. § 991). Defendants argue that the declaration does not state a cause of action. However, this does not affect the question of jurisdiction. Barrow S. S. Co. v. Kane, 170 U. S. 100, 18 Sup. Ct. 526, 42 L. Ed. 964; Chicago, etc., R. Co. v. Stephens, 218 Fed. 535, 134 C. C. A. 263; Louisville, etc., R. Co. v. Louisville Trust Co., 174 U. S. 552, 19 Sup. Ct. 817, 43 L. Ed. 1081; Davis v. Mills (C. C.) 99 Fed. 39.
And in further consideration of the objection that the matter in controversy does not exceed $3,000, it is the amount in controversy alleged in the complaint which is controlling, the value of that which the plaintiff seeks to recover, and $800;000 is the amount in the ad damnum part of the declaration for which recovery is sought. Cowell v. C. W. Supply Co., 121 Fed. 53, 57 C. C. A. 393; Baltimore v. Postal Tel. C. Co. (C. C.) 62 Fed. 500; Scott v. Donald, 165 U. S. 58, 17 Sup. Ct. 265, 41 L. Ed. 632. And in an action for unliquidated damages the amount stated in the ad damnum clause must be taken as the true measure of the value of the matter in dispute. Barry v. Edmunds, 116 U. S. 550, 6 Sup. Ct. 501, 29 L. Ed. 729; Yarde v. Baltimore, etc., R. Co. (C. C.) 57 Fed. 913; A. J. Lewis M. Co. v. Klepner, 176 Fed. 343, 100 C. C. A. 285.
Another ground of the demurrer is that it is not sufficiently alleged that Knowles’ agency was known to the defendants. An examination shows that the declaration, after alleging the incorporation and capitalization of plaintiff and its contract with the republic of France, goes on to state:
“The defendants herein entered into negotiations with, the plaintiff with a view of supplying the necessary financial assistance.”
*626It is alleged that defendants were to pay into plaintiff’s treasury $150,000 and take its notes, and they would subscribe to $15,000 of its preferred stock. It is sufficiently made to appear that all of these negotiations with the defendants were with respect to the contract with the republic of France. The contract here was between the republic of France and the plaintiff, and not between that republic and Knowles, and if, as it sufficiently appears from the declaration, defendants knew about this contract, they must have known that Knowles was acting for plaintiff in his negotiation with them. But, even if the fact that Knowles was acting as agent for plaintiff was not disclosed to the defendants, plaintiff can recover upon the doctrine of undisclosed principal. If the assumption be indulged that the defendants, on the facts alleged in the complaint, could have honestly believed that they were dealing with Knowles as principal, the plaintiff is, I think, entitled to recover. The declaration alleges, and the demurrer admits, that the defendants’ negotiations were with plaintiff’s officers and agents, Knowles and others, acting for and on behalf of the plaintiff. The plaintiff was to get the money, and defendants were to have plaintiff’s stock and notes. Plaintiff was at least an undisclosed principal. It is not necessary that the knowledge of the agency of the principal be brought home to the third person by express notice, but the third person may be charged with notice by reason of attendant facts and circumstances. Great Lakes Towing Co. v. Worthington (D. C.) 147 Fed. 926; Monticello Bank v. Bostwick (C. C.) 71 Fed. 641.
_ It is an accepted doctrine that where an agent, on behalf of his principal, enters into a contract as if made for himself, and the existence of the principal is not disclosed, such contract inures to the benefit of the principal, who may appear and hold the other party to the contract made by the agent. Buffington v. McNally, 192 Mass. 198, 78 N. E. 309; Cushman v. Snow, 186 Mass. 169, 71 N. E. 529; Lancaster v. Knickerbocker Ice Co., 153 Pa. 427, 26 Atl. 251; Milliken v. West. Union Tel. Co., 110 N. Y. 403, 18 N. E. 251, 1 L. R. A. 281; Kelly, etc., Co. v. Barber Asphalt Pav. Co., 211 N. Y. 68, 105 N. E. 88, L. R. A. 1915C, 256.
The objection raised by the demurrer that the contract is not an enforceable one cannot be considered on demurrer. By the contract between the parties the defendants were to advance to plaintiff certain sums of money, to be secured by its note and a pledge of its stock, to subscribe at par for $15,000 of plaintiff’s preferred stock, and to perform certain definite services in financing and carrying out the contract between plaintiff and the republic of France. The contract was partly executed, and all the facts and details of the enterprise were placed in the hands of the defendants by the plaintiff. I fail to see anything illegal about the contract. Possibly the statute of frauds might be invoked; but, even so, that being an affirmative defense, it cannot be considered upon the demurrer to the complaint. It is true that in some of the Code states the statute of limitations may be made available by demurrer, and this may be true also as to the statute of frauds; but as I understand it, such practice is not permissible *627in Florida. The contract, which is Exhibit E to the declaration, was definite, and shows the agreement of the parties.
However, if the contract were unenforceable, this action is for damages to plaintiff by reason of conspiracy and fraud of defendants, and if the same can be established the plaintiff would be entitled to recover. As before stated, this action is not on the contract. It is a tort action for defendants’ deceit and fraudulent representations. It is alleged that the defendants fraudulently represented that they were dealing with the plaintiff in good faith, with the intention of entering into the agreement. See Exhibit F to the declaration.
 A representation, within the meaning of the law of fraud, appears to be anything short of warranty, which proceeds from the action or conduct of the party charged, and which is sufficient to create upon the mind a distinct impression of fact conducive to action. 1 Bigelow, Fraud, 466, 467. And the fact that the contract is set out in extenso as a matter of inducement does not render the action ex contractu. Dixon v. Barclay, 22 Ala. 370. The declaration, although setting out the original contract, and alleging the making of the new contract and its procurement by fraud, should be treated as based on fraud, and not as an action for damages for breach of the original contract. Marriner v. Dennison, 78 Cal. 202, 20 Pac. 386.
The demurrer upon the ground that the defendants are not liable upon the contract is not well taken, because this is an action for deceit, and is not based upon the contract alleged to have been fraudulently procured. Harris, etc., Co. v. Pitcairn, 122 Iowa, 595, 98 N. W. 476; Corder v. O'Neill, 176 Mo. 401, 75 S. W. 764.
It is not necessary to say more in regard to ground demurrer, for the declaration shows the representation to have been made to induce the plaintiffs to enter into the contract, and this is stated as one of the fraudulent acts of the defendants, and a part of the conspiracy by which the defendants fraudulently induced plaintiff to let its profitable contract with the republic of France lapse, so that the defendants could make a new contract with the republic and thus secure for themselves the profits of which the plaintiff was deprived. The ground of the demurrer that false representations are not sufficiently alleged is untenable. The declaration does show every essential element of an actionable fraud — that is to say, that the defendants made a material misrepresentation; that it was false; ■ that, when they made it, they knew it to be false, or made it recklessly, without knowledge of the truth as a positive assertion; that they made it with the intention that it should be acted upon by the plaintiff; that plaintiff acted in reliance upon it; and that he thereby suffered injury. 1 Story, Equity, § 187; Arthur v. Griswold, 55 N. Y. 400; Brackett v. Griswold, 112 N. Y. 454, 20 N. E. 376; 1 Bigelow, 467; Leonard v. Springer, 197 Ill. 532, 64 N. E. 299; Brison v. Brison, 75 Cal. 525, 17 Pac. 689, 7 Am. St. Rep. 189; Sweet v. Kimball, 166 Mass. 332, 44 N. E. 248, 55 Am. St. Rep. 406; Hopkins v. O’Neil, 46 Mich. 403, 9 N. W. 448.
The objection made by the demurrer that the declaration does not allege that plaintiff relied upon the defendants’ representation and *628the fraudulent acts of the defendants, to his damage, is shown to be untenable. It is made to appear that the plaintiff had its valuable contract, the net profit on which would have been at least $1,000,000. It spent $50,000 in cash and other items, and used efforts in getting ready to perform the contract. It needed more cash and certain specialized services. The tugs and barges were to be delivered within an agreed time, and work upon them had to commence by a specific time. It entered in good faith into negotiations with the defendants for money and services, and continued these negotiations up to the moment when the time to commence work expired and the contract was canceled. These and other facts are alleged to show that the plaintiff was misled and deceived by the defendants, and that by reason thereof it lost its contract, its profits, and the money it had invested in the enterprise.
Facts are sufficiently alleged to show that plaintiff was damaged by defendants’ acts, the demurrer to the contrary. It-is alleged that the plaintiff expended a large sum of money on the preliminary work, and incurred large liabilities in the matter of said contract; that it lost all this solely because it relied on the good faith of the defendants. This case is very similar to Corder v. O’Neill, supra.
In considering the representations made by the defendants, it is well to remember that statements of opinion or intention might be so grossly erroneous, deceitful, and fraudulent as to repel the conclusion that the representations were mere matters' of opinion, especially in a case like this, where the allegations are to the effect that the defendants had no intention of fulfilling the promises. Williams v. McFadden, 23 Fla. 143, 1 South. 618, 11 Am. St. Rep. 345; Smith v. Parker, 148 Ind. 147, 45 N. E. 770; Ballard v. Lockwood, 1 Daly (N. Y. ) 158.
As to the objection that the damages claimed are speculative or problematical, it is shown that the plaintiff, in connection with the contract, expended certain moneys and incurred certain obligations. It does not seem to matter that these things were done before June 14, for they were all done in connection with the contract, and when the plaintiff, by the defendants’ fraud, lost the contract, it necessarily lost the money that it had put in the contract, as well as all profits. The contract was for an agreed number of tugs and barges at an agreed price, and the difference between the contract price and cost can be proven with reasonable definiteness.
I think the declaration states a cause of action. Besides the other necessary allegations contained therein, it alleges:
“That the defendants, so combined and confederated together to defraud the plaintiff, * * * undertook to negotiate or obtain a contract with the French Commission, and sought to induce the French Commission * * *■ to grant a contract to the defendants in lieu or in substitution of the contract awarded by the republic of France to the plaintiff,” etc.
This is positive allegation of the conspiracy and unlawful act in pursuance thereof. It is necessary that the declaration should set forth the substantial facts constituting the fraud, without more. Hop*629kins v. O’Neil, 46 Mich. 403, 9 N. W. 448; Ansley v. Bank of Piedmont, 113 Ala. 467, 21 South. 59, 59 Am. St. Rep. 122.
The objection to the declaration that it is duplicitous is so palpably without foundation as to render comment unnecessary. The subject of duplicity in pleading is exhaustively dealt with in SlossSheffield Steel & Iron Co. v. Smith, 166 Ala. 437, 443, 52 South. 38. Of course, the ancient rule was that the pleading should not be insensible, repugnant, ambiguous, doubtful in meaning, argumentative, in the alternative, or hypothetical, nor by way of recital; but the pleading was required to be positive, and to be stated according to the legal effect. In many respects this rule has been more or less departed frpm, sometimes with and sometimes without special statutory enactments. So here, I think, under the best modern practice, including the good practice in Florida, the declaration cannot he said to be amenable to the charge of duplicity. I believe any intelligent layman-could read the declaration and understand the plaintiff’s cause of complaint. Lawyers and courts can, equally as well as such layman, comprehend the meaning of plain English.
Order will be entered overruling the demurrer.