Court Opinion

ID: 8766500
Source: CourtListenerOpinion
Date Created: 2022-11-26 12:27:29.497145+00
Date Added: 2024-06-11T17:01:55.140801
License: Public Domain

SANBORN, Circuit Judge
(dissenting). My understanding of the facts and of the law of this case, briefly stated below, is such that I am unable to concur in the opinion of the majority. The only averments in the complaint of actionable misrepresentations were (1) that the new shaft was sunk in virgin or undeveloped ground; (2) that the ore in the sides and bottom thereof would easily run 10 per cent.; and (3) that this ore would continue on downward for at least 40 feet, growing better under normal conditions. There was no substantial evidence that the third alleged misrepresentation was ever made. There was no substantial evidence that the second alleged misrepresentation was false. The undisputed evidence was that *605the new shaft was in virgin undeveloped ground to its full depth, which was about 80 feet, but that there was a hole in the bottom of it into the old drift beneath, and that this hole had been covered with planks and earth when the plaintiff inspected it. The undisputed evidence was that he knew, before he inspected the shaft and before he bought this property, that there had been a mill upon it, and that a run of ore beneath the 80 feet, through which the new shaft was sunk, 40 feet in height, across this land at the 120-foot level, had been worked out. The old shaft was about 80 feet distant from the new shaft, and he had seen this upon the ground, and the cave-in, the edge of which was within a few feet of the new shaft. He testified, and this portion of his testimony was not contradicted:
“Q. You stated in your direct examination that one of those ‘runs,’ as you call it, northeast and southwest, across there had heen worked out- — one of these runs of ore? A. Yes, sir; that was 40 feet or so. Q. Who told you that? A. Ij. A. Tooker. Q. Tooker told you that the run had been worked out? A. Yes, sir; Tooker and his son both told me that first, in the beginning, and Boy, too, because when we went up town I always met him and told what I had seen, and what had been said and represented. It was more than natural, I suppose, I went to tell them parties, and we were partners — • Q. ■Tust answer the questions. Then you knew, from what Mr. Tooker told you, there had been a run there worked out through, that ground below there — you knew that? A. Yes, sir; he told me there was $25,000 taken out of there. It run direct 40 feet, too. Q. How deep was that run of ore through that ground? A. I don’t know, only just what he claimed. Q. I am asking what he claimed? A. That it was, well, 80 feet ores here, and then it was 40 feet more. Q. Below that? A. Yes, sir; that would be 120 feet. Q. Then the run of ore he claimed was 120 feet? A. Yes, sir; 120 feet, 1 suppose. That is my best recollection it is that; but there is mud in it 12 or 15 feet, them.”
He was not a stranger in Joplin, where this land was situated. He had heen selling whips to customers in that town and visiting it yearly for several years. Before lie made his first purchase he inquired of his customers about the defendants, and took the manager of an adjoining mine down into the new shaft, and inquired of him about this mine and about the one which adjoined it. With all this knowledge he bought one-third of the lease in January, 1905, and paid $4,000 for it. The plaintiff bought subject to the rule, “Caveat emptor.” Notice of facts and circumstances sufficient to put a reasonably prudent person upon inquiry is notice of all the facts which a diligent inquiry would have disclosed. The facts that there had been a mill upon this properly, which had been removed; that there was an old shaft, and a cave-in upon it; that the new shaft was sunk but 80 feet; that $25,000 had been taken from a run of ore in this land below the 80-foot level; and that that run had heen worked out, — constituted ample notice of the extent and character of the old workings, because it was such notice as would have inspired an ordinarily prudent man to investigate and learn their extent and character; and hence it estopped the plaintiff from asserting any damage from the alleged misrepresentations about them, and threw the risk of them upon him, because his failure to learn them was the result of his own failure to comply with the rule, “Caveat emptor.” The purchaser assumes the risk of defects in the article bought of which he has, or by. reasonable diligence may obtain knowledge.
*606In April, 1905, about three months after the first purchase, the plaintiff and Tooker bought another third of this property for $6,000. The plaintiff bought and paid for two-thirds of this third, and Tooker bought and paid for one-third of it. The only averment of any additional misrepresentation made to induce this second purchase was that Tooker falsely pretended to buy his third; but the record is barren of evidence that he did not actually purchase it. The bill of sale ran to Alston and Tooker. Alston and Tooker both made the note for $2,667 in part payment of the purchase price.
There is another significant fact, which should not be overlooked in the determination of this case. This was not a sale of a lease of a barren mine. The evidence established the fact that, after Alston purchased, ore of the value of $19,000 was taken out of the mine before the trial. It is true that there was evidence that the mining operation had been holding about even, counting expenses and product; but there was uncontradicted evidence that the owners were still operating the mine, that at the time of the trial they had 100 tons of paying ore broken down and were working upon a face of good mineral, 25 feet high and 12 to 20 feet wide. When the plaintiff purchased, he thought the lease was worth from $12,000 to $18,000; but it was a lease of a mine, and its value was necessarily unknown. It could be determined only by a thorough exploration of the land, by subsequent prospecting or working. The subsequent work demonstrated that there was $19,000 worth of ore in the mine when he purchased his interest in the lease. The remaining value in it is still unknown, because valuable ore is in sight and still remains to be removed. The burden was upon the plaintiff to prove that the lease was worth less than $12,000 or $18,000, and how much less; and there seems to me to be no sufficient evidence of the plaintiff’s damage, if he suffered any.
In view of the indisputable facts that Alston knew that there had been a run of ore worked out upon the 120-foot level, beneath the 80-foot level within which the new shaft was sunk, from which $25,000 worth of ore had been taken from this land, and that there had been an old shaft upon it, which he saw before he purchased, it seems to me that there was no substantial evidence in this case to sustain a verdict in his favor in the light of the decisions of the Supreme Court in Slaughter’s Administrator v. Gerson, 13 Wall. 379, 384, 385, 20 L. Ed. 627; Southern Development Company v. Silva, 125 U. S. 247, 252, 8 Sup. Ct. 881, 31 L. Ed. 678; Farnsworth v. Duffner, 142 U. S. 43, 48, 12 Sup. Ct. 164, 35 L. Ed. 931; Shappirio v. Goldberg, 192 U. S. 232, 241, 24 Sup. Ct. 259, 48 L. Ed. 419.
2. There was substantial evidence that the plaintiff made an independent investigation of the character, condition, and value of the mine before he bought his interest in the lease upon it, and the court refused to charge the jury in response to the request of counsel for the defendants that, if they believed that the plaintiff made such an independent investigation and that the defendants made false representations to him before the purchase, the law presumes that he acted upon the results of his independent investigation, and not upon the misrepresentations of the defendants, and that if he acted upon the former they must find for the defendants. It is true, as the majority of the court *607suggests, and as we held in Sioux Nat. Bank v. Norfolk State Bank, 56 Fed. 139, 5 C. C. A. 448, that if a false representation is a material, hut not the sole, inducement to a contract or transaction, the party injured may sometimes maintain an action upon it; but that is not the question which the request of the counsel for the defendants presented here. That question was whether, when there have been false representations and an independent investigation before a purchase, the legal' presumption is that the buyer acted upon the false representations or upon his own investigation. There is no doubt that if he acted solely upon his own investigation he could not recover from the party who made the false representations. Proof that the false representations induced the purchase is essential to a right of recovery. The question seems to be susceptible of but one true answer. The false representations and action induced by them are each essential elements of an alleged fraud. Fraud is never presumed. The legal presumption always is that a fraud and the elements of it do not exist until each of them is clearly proved. On the other hand, there is no wrong or fraud in an independent investigation by a purchaser and his action thereon. That is the course which the rule, “Caveat emptor,” requires the purchaser to pursue, and it is the natural and customary method followed by buyers of reasonable prudence. The logical, and to my mind the inevitable, result is that where there have been false representations, and an independent investigation by a purchaser, the legal presumption is that he acted upon his own investigation, and not upon the false representations, and that if he did so in this case the defendants were not liable. The refusal to give this charge seems to me to have been fatal error. Anderson v. McPike, 86 Mo. 293, 300; Farrar v. Churchill, 135 U. S. 609, 615, 10 Sup. Ct. 771, 34 L. Ed. 246, and the authorities from the Supreme Court cited supra; E. Bement & Sons v. La Dow (C. C.) 66 Fed. 185, 188; Billings v. Aspen Mining & Smelting Co., 51 Fed. 338, 348, 2 C. C. A. 252; Fauntleroy v. Wilcox, 80 Ill. 477, 480.
3. The testimony of John B. Stone was, in my opinion, immaterial and prejudicial to the defendants, and the court should have stricken his deposition from the record. The evidence he gave detailed statements made to him by the defendant Tooker in November, 1904, in an attempt either to sell an interest in the lease to him or to induce him to sell it for the defendants; but the only material statement made to him, -which was proved to be false, wTas that there had been no mining in the land below the level of the bottom of the new shaft, and this testimony was immaterial in this suit, because no such false representation was made to Alston, but, on the other hand, Tooker told him that the run of ore below the 80-foot level had been worked, and $25,000 worth of ore had been taken from it before Alston made his purchase. The other statements of the defendants which Stone recited were immaterial, because they were not proved to be untrue, and because they were not calculated to deceive, and did not deceive him. His entire testimony was, in my opinion, the relation of a transaction between other parties than the plaintiff, hearsay and immaterial.
For these reasons I think the judgment ought to be reversed, and that a new trial should be granted.