JULIUS CATLIN, Jr., et al., Appellants, v. GEORGE F. VIETOR, et al., Respondents.
False representations—when sufficient as basis of action—reliance on essential to action founded on.
Defendants’ broker offered for sale to plaintiffs several notes, amounting to about $7,000, owned by defendants, made by P. L. Freneau & Co., customers of theirs, and the broker stated as a reason for defendants’ desire to sell, that they had a large amount of orders waiting for delivery to the makers of the notes, but they were unwilling to deliver until they parted with the paper. Plaintiffs, not being satisfied with this, sent a clerk to defendants to obtain information. The clerk, without disclosing that he desired the information in regard to the plaintiffs having been offered notes belonging to the defendants, asked various questions, the answers to which were, in substance, that defendants had no information concerning P. L. Freneau & Co., other than what could be got from mercantile agencies; that they had no statement from them, but they sold them freely, and had several thousand dollars ready for delivery to them. This conversation was repeated to plaintiffs, and they bought the notes. One of the plaintiffs testified that he told the broker the next day that he did not like the statement of the makers of the notes, but thought they would pull through that season, as the defendants were going to deliver the goods, and the delivery would guarantee the payment of the notes. He also testified that the reason that actuated him was the fact that the defendants were going on to deliver their new goods through the season beginning with this particular purchase, and if they delivered this bill of $8,000 or $10,000 they would probably deliver another one.
Held, on appeal from a dismissal of the complaint, that as it was not proved either that defendants had not sold goods freely, considering the vague meaning of that term, or that they had not on hand ready for delivery a large amount, or several thousand dollars’ worth of goods, and as they were not apprised of the expediency or duty of being exact, and as the statements as to those matters being the only ones which formed the basis of the reasons on which alone plaintiffs relied in purchasing the notes, as testified to by one of them, an action for false representations would not lie.
Before Sedgwick, Oh. J., and Freedman, J.
Decided June 1, 1885.
*170Appeal by plaintiffs from judgment for defendants entered upon a direction at trial term before a jury, that the complaint be dismissed.
The action was for damages from fraudulent concealment and false representations, alleged to have been made in respect of the credit and means of Freneau & Co., the makers of certain promissory notes which the plaintiffs bought of the defendants.
The facts appear in the opinion.
Martin & Smith, attorneys, Aaron Pennington Whitehead and M. W. Divine, of counsel for appellants, argued :
I. Fraud renders all contracts voidable ab initio, both at law and in equity. No man is bound by a bargain into which he has been deceived by a fraud, and a buyer may, if he has paid the price, recover it back on offering to return the thing purchased (Benjamin Sales, § 636 ; Bank of Georgia v. Higginbottom, 9 Pet. 48 ; Baker v. Lever, 67 N. Y. 304; Pence v. Langdon, 99 U. S. 578; Kimball v. Cunningham, 4 Mass. 502 ; Coolidge v. Brigham, 1 Met. 547 ; Perkins v. Bailey, 99 Mass. 61 ; Waters’ Patent Heater Co. v. Smith, 120 Mass. 444).
II. Plaintiffs were induced .to buy the worthless notes of P. L. Freneau & Co. by false and fraudulent representations made by the defendants. The plaintiffs made out a clear prima facie case of fraud, and the court ought to have allowed the jury to pass upon the question. The representation that defendants were selling P. L. Freneau & Co. freely was clearly false. Again, it was very material to the credit of P. L. Freneau & Co., and to their ability to pay the notes, which had a very short time to run, in all very little over six weeks, that a house was about to deliver them a large amount of goods and was selling them freely. The effect of the delivery of a large amount of goods would be to strengthen their standing and put them in funds for the proceeds of these goods and to enable them to go on. Any device, and any representation, whereby the seller causes the purchaser to labor *171under a deception on a point which the purchaser thinks material, is a fraud and entitles the purchaser to the return of his money (Hill v. Gray, 1 Stark. 434 ; Duke of Norfolk v. Worthy, 1 Camp. 337 ; Bexwell v. Christie, 1 Cow. 295 ; Tapp v. Lee, 3 B. & P. 367).
III. The fraud need not be the sole inducement or even the predominant motive; it is enough that the representations had material influence upon the plaintiffs, although combined with other motives (Morgan v. Skiddy, 62 N. Y. 319 ; Hubbard v. Briggs, 31 Ib. 518 ; Safford v. Grout, 120 Mass. 20 ; Hersey v. Benedict, 15 Hun, 282; People v. Haynes, 11 Wend. 557; People v. Herrick, 13 Ib. 87 ; Clarke v. Dickson, 6 C. B. [N. S.] 453).
IV. On proof that representations are material, the burden is upon the party making them to show that they were not relied on by the other party (Kerr Fraud & Mistake, 75 ; 2 Benjamin Sales, 556 ; Smith v. Kay, 7 H. L. Cas. 750 ; Nicols’ Case, 3 De G. & J. 404 ; Holbrook v. Burt, 22 Pick. 546).
V. In any view of this case, it should have been passed upon by the jury.
Seward, Da Costa & Guthrie, attorneys, Charles M. Da Costa and William D. Guthrie, of counsel for respondents, argued:
I. There is not the slightest evidence in the case of any intent to deceive on the part of the defendants or any one representing them. The courts lean more strongly now than ever before against inferring such intent without proper evidence (Morris v. Talcott, 96 N. Y. 100 ; Leffler v. Field, 52 Ib. 621; Salisbury v. Howe, 87 Ib. 128 ; Frisbee v. Fitzsimmons, 3 Hun, 674).
II. The evidence is equally wanting to prove that what defendants or their representatives said was “ either false or known to be false,” within the language of the authorities. Yet neither of these elements can be wanting to constitute a case of fraudulent representation (Oberlander v. Spies, 45 N. Y. 175).
III. The elements of influence by and reliance on the *172alleged representations are essential (Leffler v. Field, 52 N. Y. 621; Taylor v. Guest, 58 Ib. 266 ; Dudley v. Scranton, 57 Ib. 428 ; Smith v. Chadwick, L. R. 20 Ch. D. 27 ; Macullar v. McKinley, 49 Super. Ct. 5). These were ' totally absent.
IV. The utmost, however, that the plaintiffs can by any possibility claim is, that the jury would, on the evidence, have been warranted in finding, that when Riley and Shaw, on January 30 and 31, stated that the defendants had goods ready to deliver to Freneau & Co., they (the defendants) then intended not to deliver them on February 1, or thereafter. In other words, that the defendants then, viz.: on January 30 and 31, promised to do in the future, viz.: on February 1 and thereafter, what they never intended to do. But for a breach of such a promise, no action, grounded in fraud, will he. In other words, no such action can be based on what may be termed a promissory fraud. It has its sole foundation in the falsity of the representation of an existing fact, made for the purpose of inducement (Gray v. Palmer, 2 Robt. 500 ; aff’d, 41 N. Y. 620 ; see 2 Barb. 500; Ex parte Fisher v. New York Common Pleas, 18 Wend. 608 ; Farrington v. Bullard, 40 Barb. 512 ; Lexow v. Julian, 21 Hun, 577 ; affirmed, 86 N. Y. 638 ; Lynch v. Dowling, City Court Rep. 163 ; Gallager v. Brunel, 6 Cow. 346 ; Sawyer v. Prickett, 19 Wall. 146).
Precisely the same distinction- exists in the law of estoppel in pais. To constitute an estoppel in pais there must be a representation of an existing fact. An equitable estoppel can never be grounded on a mere promise (White v. Ashton, 51 N. Y. 280; Musgrave v. Sherwood, 54 How. Pr. 338).
Under no aspect of the case is the view tenable that defendants withheld information which they were bound in duty to give (People’s Bk. v. Bogart, 81 N. Y. 101).
By the Court.—Sedgwick, Ch. J.
The plaintiffs’ alleged cause of action is that they were induced, by fraudu*173lent concealments and by false and fraudulent representations, on the part of defendants, to buy from them certain promissory notes to the amount of about $7,000. The alleged concealments and representations concerned the pecuniary responsibility of the makers of the notes, and also facts which it is argued for plaintiffs, the defendants affirmed existed, and the existence of which they represented to be their reason for offering the notes for sale.
It is a necessary part of such a cause of action to show that the plaintiffs, relied upon the statements, or were induced by them to part with the money. Perhaps this can be proved circumstantially or by presumption from the nature of the transaction. In the present case, one of the plaintiffs who acted for both, specifically stated upon what part of the alleged representations he relied. His testimony was so explicit and of such a form that the jury would not have been at liberty to find that he relied upon the other parts of the representation or upon the existence of anything that it was alleged the defendants fraudulently concealed.
The plaintiffs had procured from the makers of the notes a statement as to their property and liabilities. The broker for defendants who had presented to plaintiffs the notes for sale, had said to plaintiffs that the reason the defendants wanted to sell the notes was, “ that they had a large amount of merchandise on orders waiting delivery to the makers of the notes, and that they were unwilling to deliver the goods until they parted with the paper.” The plaintiff, who testified on the trial, was not satisfied with this, but sent his clerk to the defendants’ store. This clerk saw a clerk of defendants, and had a conversation with him, in presence, as plaintiffs’ clerk testified, of one of the defendants. Plaintiffs’ clerk had been told to go to defendants’ store and ask one of them about the paper in question. The conversation was as follows: Plaintiffs’ clerk said, “Good morning, Mr. Eiley. I have called to see if you can give Mr. Gatlin any information about Freneau & Go.” After a slight pause, Mr. Eiley replied, *174“We have no information about P. L. Freneau & Oo. that M. Catlin cannot get from the mercantile agencies.” After another slight pause, plaintiffs’ clerk said, “I presume Mr. Catlin wants to know in regard to paper, as I saw Mr. Shaw (who was defendants’ broker) in there just before I came away—whether for himself or the bank, I do not know. You have no statement from them ?” After ' another slight pause, Mr. Riley replied, “ No, we sell them freely, and have several thousand dollars ready to deliver them now.” After another slight pause, the clerk of plaintiffs said, “ Good morning. I am sorry to trouble you. I thought you could have told me more.” This conversation was repeated to the plaintiffs. The next day the plaintiff who testified, saw the broker of the defendants, and said he did not like the statement of the makers of the notes, but that he thought they would pull through that season, as defendants were going to deliver the goods, and the delivery would guarantee the payment of the notes. He "testified that that reason operated upon his mind in taking the notes; that is, that they had the goods ready and would deliver the goods. Finally, as the exact description of the operation of his mind, he testified, “The reason that actuated me was the fact that the defendants were going on to deliver these new goods through the season, beginning with this particular purchase, and if they delivered this bill of $8,000 or $10,000, they would probably deliver another one.” The substance of this consisted of a conjecture of what the defendants would do, in the future, in their dealings with the makers of the notes. The defendants or their broker had not referred, in any way, to future dealings. The only fact that they or their broker had "stated, which might be thought to be the starting point of this conjecture, was that they had sold to Freneau & Co. freely, and had on hand, for delivery to them, a large amount of goods, or several thousand dollars’ worth of goods. It was not proved that the defendants had not sold goods to Freneau & Co. freely, in consideration of the vague meaning of such a term. Nor *175was it shown to be untrue that the defendants had on hand, ready for delivery, a large amount of goods, or several thousand dollars’ worth of goods, unless it could be shown that the defendants intended that the words used on this subject should be understood in their strict sense, that is, ready fox: delivery forthwith, the defendants having definitely determined to deliver forthwith. But the plaintiffs knew there was some question on this point, for they had been told that the goods were not to be delivered, unless the notes were sold. They did not inform the defendants that they desired information, with a regard to the plaintiffs having been offered notes that belonged to the defendants. The plaintiffs’ clerk said merely that he presumed the plaintiffs’ inquiry related to some paper of Freneau & Co., generally, because he had seen the broker in plaintiffs’ store, and the answers he received must be constraed as given by a pei’son not appxised of the expediency or duty of being exact. There was no statement, at any time, that the goods in question were of the value of $7,000 and more, as the plaintiffs assumed, and in fact there was on hand, ready for delivery, so far as the bargaining between the parties went, goods to the amount of $1,800.
I think it is apparent that the clerk of defendants who talked with plaintiffs’ clerk, declined, substantially, to make statements upon which plaintiffs shoxdd act, for the latter were informed that the defendants knew nothing which the plaintiffs could not learn from the mercantile agencies. They, so far as the testimony shows, omitted to obtain information from the agencies, and should not now hold the defendants for fraud for a vague and casual remark made subject to the direction to get information elsewhere.
Judgment affirmed, with costs. •
Freedman, J.,' concurred.