Clark v. Edgar

• Decision Date: 31 October 1884
• Citation: 84 Mo. 106
• Parties: CLARK v. EDGAR et al., Plaintiffs in Error.
• Court: Missouri Supreme Court

84 Mo. 106

CLARK

v.EDGAR et al., Plaintiffs in Error.

Supreme Court of Missouri.

October Term, 1884.

Error to St. Louis Court of Appeals.

AFFIRMED.

W. F. Boyle and F. A. Cline for plaintiffs in error.

(1) Neither the indorsement on the bonds nor the alleged verbal statements of the agent are such misrepresentations as will support the action for deceit. The bond proper contained no statement in regard to whether the deed of trust executed to secure its payment was a first mortgage. It was silent on the subject. And if the defendant in error believed that no other or prior incumbrance existed on the property, he derived this belief solely from the inference he drew from the words “first mortgage bond” on the back of the bond and entirely disconnected from its value. This was a mere endorsement or memorandum and no prudent person would have relied on it. (2) The petition avers that the prior deed of trust was duly recorded, hence defendant in error could have discovered the falsity of the representation by simply referring to the title records. Where the misrepresentation is upon a fact equally open to the inquiries of both parties, and in regard to which neither could be presumed to trust the other, equity will not interfere. Cooley on Torts, p. 487; Wannell v. Kem, 57 Mo. 492. The only exception to the rule just stated is where some deceit is practiced for the purpose of putting the party claiming to be deceived off his guard, or where the latter reposed special confidence in the former. Dunn v. White, 63 Mo. 186; Bailey v. Smock, 61 Mo. 217; Langdon v. Green, 49 Mo. 363; Bryan v. Hitchcock, 43 Mo. 527. (3) The verbal representations alleged to have been made are within the statute of frauds. R. S., sec. 2515; McKinney v. Whiting, 8 Allen 208; Wells v. Prince, 15 Gray 562; Kimball v. Comstock, 14 Gray 510; Browne on Stat. of Frauds. sec. 184; Swann v. Phillips, 8 Ad. & El. 457; Walther v. Menell, 6 Mo. App. 370.

Crews & Booth for defendant in error.

If the representations charged in this case were calculated to deceive, and did, in fact, deceive, it matters not that they are susceptible of a construction which may be literally true; they are only the more dangerous for that reason. But whether they were made with the intent that they should be understood in the sense which induced plaintiff to act, is a question of fact to be found by the court or jury. See Clark v. Dickson, C. P., 5 Jurist (N. S.) 1029; 1 Smith's Lead. Cases, 7 Amer. Ed., part 1, top page 353; Kerr on Fraud and Mistake, 92, 93, 94, 95. It is immaterial that the defendants did not personally go to plaintiff and make said fraudulent representations. Ibid, Vol. 1, part 1, top p. 301, side p. 240; City Bank of Columbus v. Phillips, 22 Mo. 85. Plaintiff, having believed, and relied upon the truth of the representations of defendants' agents, and, by reason thereof, bought the bonds, without notice of their falsity, defendants are clearly liable for any damage he has thereby sustained. Story's Eq. Jur., sec. 191; Wannell v. Kem, 57 Mo. 478; Dulaney v. Rogers, 64 Mo. 201; Brownlee v. Hewitt, 1 Mo. App. 360. This action is properly brought against the defendant, and not against the corporation. Green's Brice's Ultra Vires, pp. 252, 253, 255, and the notes on pp. 250, 251, and 636 (1st Am. Ed).

BLACK, J.

There was a judgment on demurrer to the second amended petition in this cause, in the circuit court, which was reversed in the court of appeals, and the cause is here on error to that court. The substantial averments of the petition are: that defendants were directors and officers of a corporation known as the “Martindale Zinc Company;” that in November, 1873, the corporation gave to Hill its note for $15,000, with twenty interest notes for three hundred dollars each, and secured the same by a deed of trust on the lands, machinery, etc., of said company, which was then duly recorded; that in 1875 the defendants, as directors, to raise money for the corporation, and to adjust and secure debts owing by it to some of the defendants for advances, and to settle debts of the company, on which defendants were liable as endorsers, etc., executed and used the bonds of the corporation, payable to one James as bearer, for $1,000 each with interest coupons attached, and secured the same by a deed of trust on the same property mentioned in the former deed of trust, but without making any mention of the former incumbrance; that the defendants caused to be printed in conspicuous letters and figures on each bond the following endorsement:

“First Mortgage Bonds.

$1,000.

Martindale Zinc Company.

Interest ten per cent. Interest and principal payable in St. Louis on the first day of January and July.”

That defendants, as directors of the company, in March, 1875, placed five of said bonds in the hands of an agent for sale; that defendants in so causing the bonds to be executed with the recitals contained therein and the endorsement thereon, represented to plaintiff that the deed of trust, executed to secure the bonds, was the first lien upon the property conveyed; that the defendants caused the agent having the bonds for sale to, and he did, to induce plaintiff to purchase the bonds, untruly represent to plaintiff that the corporation was solvent and doing a prosperous business; and that the bonds were issued to save money, to extend and enlarge its business; that plaintiff had no knowledge of the existence of the prior deed of trust, and believing and relying upon all of the said representations, purchased the five bonds and paid therefor $5,000. The petition then alleges that these verbal representations were false; that the company was not solvent; and that defendants knew them to be false, and knew that the endorsement on the bonds, to the effect that they were first mortgage bonds, was false, and that the property was subject to the prior deed of trust; that the interest coupons were paid to January, 1879, and that he then first learned of the fraud and deception; that the property was sold under the first deed of trust in October, 1878, and in 1879 the corporation suspended business, and has no property whatever, and that the bonds and remaining coupons remain unpaid.

1. The first specific ground of the demurrer is: “No representations are averred to have been made by the defendants, or either of them, such as did or should have induced plaintiff to purchase his said bonds, or which did or should have deceived him in relation to the existence of said prior mortgage.” That the representations set out in the petition did induce the plaintiff to purchase the bonds,...