Court Opinion

ID: 5461047
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:36:35.554958+00
Date Added: 2024-06-11T08:32:53.223943
License: Public Domain

By the Court, Ingraham, P. J.
So far as the complaint alleges a conspiracy to defraud, the finding of the referee that Dailey entered into no combination settles that no judgment could be rendered against him therefor. He was not a director at the time, and there can be no reason for charging him, from any fact stated in the evidence. Hor is he charged with any verbal representations. On the contrary the referee finds that he made none.
*501The only fact found by the referee upon which the defendant is sought to be made liable is the publication of a card by the officers of the company, which stated the cash capital to be f>150,000. One of these cards was published after he became a director, and had his name upon it. It can not be pretended that he was liable for any other, because his name was not on it, and there is no evidence to show that he knew of their existence. Although the referee finds that the plaintiff was deceived by the cards, as Well as by the verbal representations, he does not find that the card containing the name of Dailey was ever shown to or seen by the plaintiff, and I have looked through the testimony in vain for any such proof.
We are left then to decide whether a director of a corporation, who sees a card issued by the officers of the company in the ordinary course of their business and which contains a list of the directors, is to be held liable as guilty of false representations, when the referee also finds that he did not know the representations were untrue, and had no knowledge that they were true, but allowed his name to be used without reflection as to the effect of doing so. It must follow from this finding that the defendant had no purpose to deceive.. Any other conclusion would be inconsistent with the finding that the defendant suffered the cards to be used without reflecting upon the consequences. There can be no doubt, at the present day, that a statement of a fact as true which was known to be untrue, or which was actually untrue, and was not within the knowledge of the party making it, provided such representation is made with an intention to deceive the plaintiff, would form a good cause of action. The intent to deceive is a necessary ingredient to create such liability. This was held as necessary in Allen v. Addington, (7 Wend. 9,) and there are many cases cited in that case by Ch. J. Savage, to establish that principle. And in the same case in the court of errors, (11 Wend. 374,) Walworth, Ch. says: All the cases against third persons, who are not personally interested in the transaction to which the false affirmation *502or concealment relates, go upon the ground that the defendant ■ has practiced an intentional deception upon the plaintiff for the purpose, of doing him an injury.
This rule was recognized by Denio J. in Zabriskie v. Smith, (3 Kernan, 322,) in which it was held that the complaint-should aver and the plaintiff must prove that the representations were made with intent to deceive and defraud.
In Craig v. Ward, (36 Barb. 378,) the fraud consisted in the sale of a mortgage by Ward to Craig-, and the repesen- . tations were as to the validity of the mortgage. The fraudulent intent there appeared, and the ruling on the trial and the opinion of Johnson, J. nowhere intimate that proof of a fraudulent intent was not necessary. So in Bennett v. Judson, (21 N. Y. Rep. 238,) the representations were made to induce the plaintiff to buy land, and the court held that the affirmation of what one does not know or believe to be true is equally, in morals and law, as unjustifiable as the affirmation of what is known to be positively false. If the statements were made with an intent that the plaintiff should rely upon them, and if he did rely upon them, it was as much a fraud as if they were known to be untrue. In this case as in the preceding one/ cited above, the fraudulent intent was not denied. .
So in White v. Merritt, (3 Seld. 352,) it was held that the action would lie where there was an assertion of a falsehood with a fraudulent design as to a party, and a direct and positive injury. But a mere misrepresentation without a fraudulent design is not sufficient. (Young v. Covell, 8 John. 23.)
There is a case of later date in which a contrary rule appears to have been adopted, viz : Morse v. Switz, (19 How. Pr. Rep. 275,) where Gould, J. in his opinion says: “Every one who makes a public representation which he knows to be false, and upon faith in which any one has been led into a business transaction whereby he suffers damage, may be liable.”. .If.it is intended to extend.this liability...to cases' *503where no fraudulent intent is shown, and where the misrepresentation is made through mistake or neglect, I can not assent to that doctrine. But on looking at the complaint it will he seen that a fraudulent intent to deceive is there averred, and the direct affirmation of a false statement known to be false, will justify the finding of such false intent. But I am unable to find any case where mere negligence, without any act of the party, and without any intent to deceive or defraud, has ever been held to be sufficient to cause such liability.
Such is the present case. The defendant Dailey did no act for which he can be. held liable There is even grave doubt whether he ever saw the card in question. He had no knowledge that the statement was untrue. He never circulated the cards, and the referee finds he alloAved his name to be so used without reflection as to the consequences, thereby destroying any presumption of intentional fraud.
I think, also, the referee w? sin error in making the decision of a question of fact to depend upon his view of the law. He says he thinks a court 'would instruct a jury that a defendant is to be presumed to have intended the natural effect of his acts; and retying on this view of the law he finds as matter of fact that the defendant made the representation with intent to deceive. Whether the defendant intended to deceive was a question of fact, to be decided as such, upon the evidence and not upon any view of the law which the referee might entertain. If the finding on this question of intent is made to depend bn the view of the law and not on the testimony, then it becomes a question of law and not of fact. Fraud and fraudulent intent is always a question of fact for the jury, and although there are cases where it is said the law presumes fraud from certain acts, yet that presumption is only the conclusion of the law upon the facts as they are proven.
There are other reasons why this judgment ought not to be sustained. The evidence of the plaintiff himself is that *504he did not believe the statement. He says, as stated by the referee, that he believed the statement to be nearly true. And on the 9th of August, 1855, he had the comptroller’s report, which showed the whole capital was not sound. He testified that when he made the second purchase, he relied on the report of Mr. Barnes and on representations made by the secretary and others in the office of the company. Nothing is said of the statement of the cards. That was shown to be untrue, and the plaintiff does not pretend that he gave any credit to it in making the purchases after the first. In fact he knew it to be false, and he could not thereafter claim to have given credit to them so as to entitle him to recover.
[New York General Term,
September 19, 1865.
The amount paid on these purchases of stock shows that the plaintiff must have had notice that the stock was worth much less than par. The purchases were made at less than one fifth of that value, and then paid for in part by other stock which also appears to have been at a low rate in the market. It is difficult to believe that the plaintiff, under these circumstances, could have believed or trusted to the representations.
An objection is made to the want of exceptions to the referee’s report. So far as this relates to the findings of law, the objection is well taken, as the general exception at the end of the report is insufficient. But exceptions are not necessary rub ere the findings of fact are contrary to the evidence, or where upon the whole case the judgment is erroneous.
The motion to dismiss the complaint, also, should have been granted, and to the refusal there was an exception entered. I find no evidence given afterward that could affect the defendant Dailey, except his own testimony, in which he distinctly states that he had no knowledge of any fraud, until after the comptroller’s report.
The judgment against Dailey should be set aside, and a hew trial ordered; costs to abide the event.
Ingraham, Zeonard and Sutherland, Justices.]