Bell v. Lamborn

• Decision Date: 23 October 1924
• Docket Number: No. 2209.,2209.
• Citation: 2 F.2d 205
• Parties: BELL v. LAMBORN et al.
• Court: U.S. Court of Appeals — Fourth Circuit

2 F.2d 205 (1924)

BELL v. LAMBORN et al.

No. 2209.

Circuit Court of Appeals, Fourth Circuit.

October 23, 1924.

J. Hertz Brown, of Spartanburg, S. C. (Carlisle & Carlisle, of Spartanburg, S. C., on the brief), for plaintiff in error.

A. B. Lovett, of Savannah, Ga. (Lyles, Daniel & Drummond, of Spartanburg, S. C., Hitch, Denmark & Lovett, of Savannah, Ga., and C. E. Daniel, of Spartanburg, S. C., on the brief), for defendants in error.

Before WOODS, WADDILL, and ROSE, Circuit Judges.

WOODS, Circuit Judge.

Defendant Bell, doing business in Spartanburg, S. C., in response to quotations from plaintiffs, Lamborn & Co., wired them to "book" certain quantities of sugar for him. Lamborn & Co. accepted the orders, and sent forward contracts signed by themselves for Bell to execute and return. These contracts dated April 2, April 5, and June 4, 1920, were signed and returned by Bell. He refused to accept the sugar when tendered. Plaintiffs then resold at a loss of $21,570.26, and brought this action to recover that amount and interest.

The District Judge sustained a demurrer to the affirmative defenses alleging the invalidity of the contracts. In response to motions of both sides for a directed verdict, the jury was instructed to find for plaintiff the whole amount claimed. The facts will sufficiently appear in the discussion of the errors assigned.

The defense of fraud alleged against the plaintiffs is difficult to analyze, because it is stated in long and involved sentences; one of them being 2½ pages in length. As we understand, the defendant means to allege that he was deceived into making the contracts sued on by the fraud of the plaintiffs acting in concert with Savannah Sugar Refining Company and other brokers and refiners. As alleged by the defendant, the fraudulent scheme was carried out in this way: The plaintiffs and others acting with them knew that the defendant and other individual dealers in sugar in like situation were unable to obtain and analyze information concerning the world's supply of sugar without prohibitive expense, and that they relied on plaintiffs for expert information and advice concerning the supply and movement of sugar and the trend of the market. The plaintiff under these conditions by letters and circulars falsely and fraudulently represented to the defendant and all dealers in the southeast "that it was practically impossible to obtain a supply of raw sugar in the world market, that there were frequent times at which no sugar at all was available for distribution by them, that there were frequent times at which it was impossible for them to secure more than a limited amount of sugar, that there were frequent times and long intervals during which the Savannah Sugar Refining Company had entirely withdrawn from the refined sugar market and had oversold its output and was neither taking orders nor able to supply sugar for immediate delivery." The plaintiffs further represented to defendant that they were brokers for Savannah Sugar Refining Company and as such were alloting and would continue to allot available sugar to the trade "in accordance with the plan put in operation by the President of the United States during the war with Germany." This allotment plan the plaintiffs represented was the only equitable way of distributing sugar under the conditions alleged to exist.

At the time these statements were made by plaintiffs the world's supply of sugar was normal, and plaintiffs could procure it through the ordinary channels of trade; sugar was being imported into the United States and received by the plaintiffs in normal and reasonable quantities; the Savannah Sugar Refining Company had ample stocks on hand for distribution to the trade; the plaintiffs and Savannah Sugar Refining Company had abandoned the allotment method of distributing sugar at a time when they were representing that it was the only fair and equitable way of distributing. In conjunction with these false representations of the actual scarcity of sugar and as a part of the fraudulent scheme, the plaintiffs and the Savannah Sugar Refining Company collected and withdrew from the market such large quantities of sugar as to bring about a sugar famine. The defendant avers that all this was done and defendant was induced to make the contracts sued on by the false representations set out, at a time when plaintiffs were falsely assuring defendant that they were looking after his interest and keeping him informed as to the supply and movement of sugar and to protect defendant.

We are unable to agree with the District Judge that these allegations of fraud, if true, constitute no defense. One may be adjudged guilty of fraud when he falsely expresses his opinion knowing that the facts are not what the opinion implies they are, and the other party is known to rely on the opinion. Authorities cited in note 35 L. R. A. 425; 12 R. C. L. 248; Pomeroy's Equity Jurisprudence (4th Ed.) §§ 878, 904, 956. The defendant's allegations here are not confined to such opinions expressed by the plaintiffs. The averment is that although plaintiffs knew the defendant was relying or them for information as to the supply of sugar and the sugar market, they knowingly made to the defendant the false statement that there was a great scarcity of sugar and that it was practically impossible to obtain a supply of this necessary article of commerce. Added to this is the allegation that at the very time the plaintiffs were deceiving the defendant by these false statements of the supply of sugar into making the contracts sued on, they themselves in combination with others had accumulated great stores of sugar which enabled them to greatly increase the price. The defense of fraud stated in the answer is thus shown to be very different from expressions of opinion as to future market prices or other matters depending on unknown contingencies as in Gordon v. Butler, 105 U. S. 553, 26 L. Ed. 1166; Southern Development Co. v. Silva, 125 U. S. 247, 8 S. Ct. 881, 31 L. Ed. 678; Green v. Societe Anonyme, etc. (C. C.) 81 F. 64; W. H. Goff Co. v. Lamborn & Co. (C. C. A.) 281 F. 613. It is also very different from the vague allegations chiefly legal conclusions, set out in Franklin Sugar Refining Co. v. Hanscom Brothers, 273 Pa. 98, 116 A. 140. In W. H. Goff Co. v. Lamborn & Co. (C. C. A.) 281 F. 613, relied on by plaintiffs' counsel, the allegation of fraud held to be insufficient does not appear. The demurrer to the defense of fraudulent procurement of the contracts should have been overruled.

The defense that in violation of the Sherman Act (Comp. St. §§ 8820-8823, 8827-8830) the plaintiff in association with others created a monopoly or trust in sugar is not available to the defendant to defeat the recovery of the purchase price of goods. The remedy provided by the Anti-Trust Act of 1890 is exclusive. Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 22 S. Ct. 431, 46 L. Ed. 679; D. R. Wilder Mfg. Co. v. Corn Products Refining Co., 236 U. S. 165, 35 S. Ct. 398, 59 L. Ed. 520, Ann. Cas. 1916A, 118; Geddes et al. v. Anaconda Copper Mining Co., 254 U. S. 590, 41 S. Ct. 209, 65 L. Ed. 425. In Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U. S. 227, 260, 29 S. Ct. 280, 53 L. Ed. 486, it was held that the seller could not recover because both buyer and seller were parties to an illegal conspiracy to put all wall paper into a trust forbidden by law, and both...