Beetle v. Anderson

• Decision Date: 10 December 1897
• Parties: BEETLE ET AL. v. ANDERSON.
• Court: Wisconsin Supreme Court

98 Wis. 5

73 N.W. 560

BEETLE ET AL.

v.ANDERSON.

Supreme Court of Wisconsin.

Dec. 10, 1897.

Appeal from circuit court, La Crosse county; O. B. Wyman, Judge.

Action by Rudolphus Beetle and others against Mons Anderson. From a judgment for defendant, the plaintiffs appeal. Reversed.

This is an action to recover damages for fraud in the sale of an interest in a mortgage on lands and personal securities. The defendant sold to the plaintiffs an undivided one-half interest in certain promissory notes which were secured by mortgages on land and on chattels, and by the pledge of certain stock in a corporation for manufacturing lumber. The notes were of the amount of $20,619.20. The transaction was negotiated by a broker, one Charles Wattley, who seems to have been employed by the plaintiffs to find opportunities for safe investments. It is claimed that the defendant falsely represented to this agent of the plaintiffs that the real-estate mortgage which secured these notes was a purchase-money mortgage; that the lands described in it had been bought by the mortgagor from the Wisconsin Lumber & Manufacturing Company, of La Crosse, for $20,619.20, which was the true and actual consideration for which the land had been sold to the mortgagor, and that the lands were of that value; whereas, in truth and in fact, the lands had been sold to the mortgagor for $13,750, as the defendant well knew. The notes bore the indorsement of the Wisconsin Lumber & Manufacturing Company, of La Crosse. It is alleged that the defendant represented to the said agent, and so to the plaintiffs, that that corporation had a paid-up capital of $100,000, and a surplus of at least $10,000, and was in a prosperous condition, and solvent; that it had recently declared and paid a cash dividend of 7 per cent., and had sufficient surplus and net earnings to pay a dividend each year; that its stock was at a premium; that so it was a responsible indorser of the notes. The notes were also secured by chattel mortgage and by pledge of stock of the corporation to the amount of $10,000, which was represented to be worth above par, whereas, in truth and in fact, the corporation had not paid a cash dividend, and was not in a prosperous condition, but was practically insolvent, and its stock was not worth par, and it was not a responsible indorser, nor the pledged stock of any value as security, and that the securities were inadequate; all of which the defendant well knew, or should have known. The defendant denied the making of the alleged representations, and that denial formed the principal issue tried. The verdict was for the defendant. From judgment on that verdict the plaintiffs appeal.Fruit & Brindley, for appellants.

Higbee & Bunge, for respondent.

NEWMAN, J. (after stating the facts).

The principal errors claimed are in the instructions of the court. The court instructed the jury, at the respondent's request, that: “It was the duty of the plaintiffs to make investigationfor themselves as to the nature, quality, and value of the securities offered and purchased by them; and the maxim, ‘Let the purchaser beware,’ is applicable to the sales of all species of personal property.” The issue in the case was whether the sale had been induced by fraudulent representations of the seller. The rule of caveat emptor has no application to cases of fraud. Story, Sales (4th Ed.) § 378. While it is always wise for the purchaser to be on the alert against deception, the law still permits him to confide in the statements of the seller; and it makes no difference in the rule if the purchaser makes some investigation for himself, where the truth or falsity of the representations are not readily discoverable by him. Porter v. Beattie, 88 Wis. 22, 59 N. W. 499. So this instruction was error. But the defendant claims that the error was cured, and its bane neutralized, by an instruction which the court gave later of its own motion. The court said: “When a person makes representations of material matters affecting the kind, quality, or value of...