Fargo Gas & Coke Co. v. Fargo Gas & Electric Co.
| Decision Date | 23 July 1894 |
| Citation | 59 N.W. 1066,4 N.D. 219 |
| Court | North Dakota Supreme Court |
Appeal from District Court, Cass County; McConnell, J.
Action by the Fargo Gas & Coke Company against the Fargo Gas & Electric Company to recover a balance due on the purchase price of a gas and electric plant sold by plaintiff to defendant. From a judgment for plaintiff, defendant appeals.
Reversed.
Judgment of the District Court reversed, and a new trial ordered.
W. C Resser, (Seth Newman, of counsel,) for appellant.
Every contracting party has an absolute right to rely upon the express statement of an existing fact, the truth of which is known to the opposite party and unknown to him, as a basis of a mutual engagement and he is under no obligation to investigate and verify statements to the truth of which the other party to the contract with full means of knowledge, has deliberately pledge his faith. Meads v. Bunn, 32 N.Y. 280; 1 Bigelow on Fraud, 30, 523, 524; McClellan v Scott, 24 Wis. 81; Schwenek v. Naylor, 102 N.Y 683; Bank v. Burdick, 87 N.Y. 40; Schumaker v. Mather, 133 N.Y. 590; Fairchild v. McMahon, 139 N.Y. 290; Redding v. Wright, 49 Minn. 322, 51 N.W. 1056; Maxfield v. Schwartz, 45 Minn. 150, 47 N.W. 448; Aultman v. Olson, 34 Minn. 450, 26 N.W. 451; Linnehan v. Strong, 107 Ill. 303; Gardner v. Trenary, 65 Ia. 646, 22 N.W. 912; Webber v. Webber, 47 Mich. 569, 11 N.W. 389; David v. Park, 103 Mass. 501; Mallory v. Tod, 19 Ind. 130; Keller v. Insurance Co., 28 Ind. 170; Jones v. Hathaway, 77 Ind. 14; Dodge v. Pope, 93 Ind. 480; West v. Wright, 98 Ind. 335; Upshaw v. DeBow, 7 Bush. (Ky.) 442; Griffiths v. Hawks, 46 Tex. 217; Redgrave v. Hurd, 20 Ch. Div. 13; Bonurant v. Crawford, 22 Ia. 40; Hale v. Philbrick, 42 Ia. 481; Caldwell v. Henry, 76 Mo. 254; McKee v. Eaton, 26 Kan. 227; Oswald v. McGeehee, 28 Miss. 340.
Chas. A. Pollock, for respondent.
An incorrect ruling on the measure of damages cannot be assigned for error, when there has been a verdict in favor of the defendant on the merits. 2 Thompson on Trials, 1751; Marely v. Shultz, 29 N.Y. 346.
The decision in Meads v. Bunn is no authority for the position that mere falsity without fraud avoids a contract. The whole decision was predicated upon a series of facts not merely untrue but fraudulently so. Marsh v. Faulker, 40 N.Y. 562; Long v. Warren, 68 N.Y. 426; Slaughter Adm'r v. Gerson, 13 Wall. 383; Poland v. Brownell, 131 Mass. 138; Dugan v. Cureton, 31 Am. Dec. 727; Foley v. Cowgill, 32 Am. Dec. 49; Moore v. Tuberville, 5 Am. Dec. 642; 5 Lawson R. and R. 2355.
The plaintiff has recovered judgment for the balance of the purchase price of a gas and electric plant located in the City of Fargo, N.D., sold by plaintiff to the defendant. A portion of the consideration was paid, and, upon being sued for the unpaid portion of the purchase price, defendant set up as a defense a partial failure of consideration from the nondelivery of some of the property purchased, and also a counterclaim for damages arising out of the alleged deceit of the plaintiff in making the sale. The view we take of the case renders a more particular reference to the defense of partial failure of consideration unnecessary. We will confine ourselves to the single question of fraud. The property purchased consisted of a gas plant, with mains and all the other classes of property which go to make up such a plant, and also an arc electric light plant, with poles, wires, and other fixtures distributed over different parts of the City of Fargo. These two plants were used by the plaintiff at the time of making the sale thereof to defendant, to light the public streets of the City of Fargo, its public buildings, stores, hotels, and dwelling houses, and had been so used for some time prior to such sale. The alleged fraudulent representations were of two classes,--one class relating to the physical condition of the plant, embracing statements as to the number of miles of wire, the number of poles, the gas mains, and as to the condition of the plant in other respects; and the other class related to the net earnings of the plant for the previous year, and the prices charged customers for gas and electric light. It appears that defendant relied chiefly upon the earning capacity of the plant in making the purchase, and was induced to believe that its net annual earnings would equal 10 per cent. of the purchase price ($ 85,300,) because of the statements of the plaintiff's officers that its net earnings during the past year had been $ 8,913. There was evidence tending to show that this statement was false, and that it must have been known to be false by plaintiff's officers who negotiated the sale. Having in this brief manner set forth the general character of the property sold, and the general nature of the fraudulent representations upon which defendant's counterclaim for deceit was founded, we can now intelligently turn to what we regard as a fatal error in the case.
In the course of his charge to the jury, the learned trial judge instructed them as follows: "If the means were at the defendant's hands to discover the truth or untruth of the plaintiff's statements with regard to the amount and character of the property, defendant must be presumed to have had a knowledge of the actual facts." This instruction must be considered in the light of the refusal of the court to charge the jury as follows, at the request of defendant's counsel: "If you find that during the negotiations, statements were made by the plaintiff as to the earnings of the plant, the defendant had a right to rely upon these statements; and if they were so relied on, and were false, and the defendant suffered injury thereby, the defendant would be entitled to recover the damages which it suffered in consequence thereof." It is apparent from this refusal to charge, and from the charge as cited given, that the court told the jury that, as a matter of law, defendant did not have the right implicitly to rely upon the representations of the plaintiff touching the character of the plant, but must make inquiries concerning them, and must make investigation as to their truth or falsity. It is true that the word "investigate" is not used; but, when we consider the nature of the property and the character of the representations made, it is obvious that something more that a mere inspection of an object present before a purchaser was necessary in order to enable the purchaser in this case to "discover" the truth or falsity of plaintiff's statements. Such an instruction to a jury might be appropriate in an action in which fraud in the sale of a horse was set up, the seller having represented the horse to be perfectly sound, and it appearing that the horse stood before the purchaser at the time the representation was made, and that the only defect consisted in the absence of a leg, easily discernible by the ordinary use of eyesight. But in the case at bar the means of discovering the truth or untruth of these false statements were not at hand in the sense that they must have been employed before the seller could be held responsible for his fraudulent representations; and, when this language was used, the jury must have drawn the inference from the fact that this plant was in the same city, and could be investigated with respect to its condition and its earnings, and the prices charged customers for gas and electric light, and with reference to the other features embraced in the statements made by plaintiff on the sale, that therefore the means were at hand, within the rule laid down by the court requiring the purchaser to discover at its peril the truth or falsity of the statements made. Such a rule of law would be unjust and intolerable. When parties deal at arm's length, the doctrine of caveat emptor applies; but the moment the vendor makes a false statement of fact, and its falsity is not palpable to the purchaser, he has an undoubted right implicity to rely upon it. That would, indeed, be a strange rule of law which, when the seller had successfully entrapped his victim by false statements, and was called to account in a court of justice for his deceit, would permit him to escape by urging the folly of his dupe for not suspecting that he the seller, was a knave. In the absence of such a suspicion, it is entirely reasonable for one to put faith in the deliberate representations of another. The jury must have understood that the means were at hand to discover the claim, because the defendant might have measured the wire, counted the poles, examined the gas mains, ascertained how much customers were paying for gas and electric light, and might have hired an expert to examine into the earnings and expenses of the plaintiff in running the plant, with a view to discovering whether a business man had told the truth. It should not have been left to the jury to determine whether the means were at hand to discover the falsity of the statements made, in view of the character of such statements and the nature of the property sold. The defendant as a matter of law, had a right to rely implicity upon the statements made by plaintiff touching the character of this plant. So long as defendant did not actually know the representations to be false, it was under no obligation to investigate to determine their truth or falsity. In Mead v. Bunn, 32 N.Y. 275, the court say: "Every contracting party has an absolute right to rely on the express statements of an existing fact, the truth of which is known to the opposite party and unknown to him, as a basis of mutual engagement, and he is under no obligation to investigate and verify statements, to the truth of which the other party to the contract, with full means...
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