Foxley Cattle Co. v. Bank of Mead

• Court: Nebraska Supreme Court
• Writing for the Court: Heard before SPENCER, McCOWN and BRODKEY, JJ., and MURPHY and COADY; COADY
• Citation: Foxley Cattle Co. v. Bank of Mead, 196 Neb. 1, 241 N.W.2d 495 (Neb. 1976)
• Decision Date: 28 April 1976
• Docket Number: No. 40227,40227
• Parties: FOXLEY CATTLE COMPANY, a Nebraska partnership, Appellee, v. BANK OF MEAD, a Nebraska Banking Corporation, Appellant.

Page 495

241 N.W.2d 495

196 Neb. 1

FOXLEY CATTLE COMPANY, a Nebraska partnership, Appellee, v. BANK OF MEAD, a Nebraska Banking Corporation, Appellant.

No. 40227.

Supreme Court of Nebraska.

April 28, 1976.

Syllabus by the Court

1. A person is justified in relying on a representation made to him in all cases where the representation is a positive statement of fact and where an investigation would be required to discover the truth. The fact that plaintiff made inquiries elsewhere which did not disclose the falsity of the representations is no defense. The plaintiff is entitled to relief if the representations were a material inducement to the contract, although he may have made efforts to discover the truth thereof and did not rely wholly upon the veracity of defendant.

2. Where ordinary prudence would prevent deception, an action for fraud perpetrated by deception will not lie, but this rule has no application where the defects are latent.

3. The purpose of section 54--116, R.S.Supp., 1969, was to afford protection to the owners of brands and not to protect those who made fraudulent misrepresentations.

4. Where the amount of a claim is liquidated, compensation in the form of pre-judgment interest is allowed as a matter of right.

Joseph Ginsburg, Ginsburg, Rosenberg, Ginsburg & Krivosha, Lincoln, for appellant.

John R. Douglas, Cassem, Tierney, Adams & Gotch, Omaha, for appellee.

Heard before SPENCER, McCOWN and BRODKEY, JJ., and MURPHY and COADY, District Judges.

COADY, District Judge.

The plaintiff, Foxley Cattle Company, a partnership and cattle feeding operation, sued the defendant, Bank of Mead, a banking corporation, on the theory that the president of the Bank of Mead made misleading statements, or misrepresented facts, and plaintiff obtained a jury verdict for damages in the sum of $227,850.71. The trial judge, after hearing and the taking of evidence, awarded prejudgment interest in the sum of $95,808.43. We affirm the total judgment of $323,659.14.

The evidence is summarized in this and the following five paragraphs. The United States National Bank of Omaha, Nebraska, notified the Bank of Mead on November 30, 1970, that Agri-Land & Beef, Inc., a corporation, cattle feeding operation and customer of the Bank of Mead, was overdrawn on its checking account in the approximate sum of $700,000. The effect thereof was that the Bank of Mead owed that amount to the United States National Bank. Mr. Schuette, president of the Bank of Mead, visited late that evening and on the morning of December 1, 1970, with Mr. Richter, president of Agri-Land & Beef, Inc. Mr. Schutte was told that Agri-Land would sell some cattle and he directed Mr. Richter to take the check to the United States National Bank.

During the morning of December 1, 1970, Mr. Richter went to the offices of plaintiff and met with the partnership's chief executive and buyer, Mr. Foxley. On prior occasions, Mr. Foxley had purchased cattle from Mr. Richter and Mr. Richter and custom fed cattle for Mr. Foxley. On this date, the two entered into an agreement wherein plaintiff was to purchase 1,802 head of cattle located on the Nygren farm for $326,353.20. A handwritten memo was made by Mr. Richter which identified the cattle by purchase date, number, weight, and as steers. During the negotiations, Mr. Foxley communicated by telephone with Mr. Holstein who was the president of the South Omaha Production Credit Association. The testimony of Mr. Foxley and Mr. Holstein was in severe conflcit as to whether Mr. Foxley was warned or put on notice that there might not be cattle free and available for purchase. Sometime during the morning, Mr. Foxley had a general discussion about the sale with Mr. Vervaecke, one of the owners of cattle also located on the Nygren farm.

About 12:30 o'clock p.m., Mr. Foxley called Mr. Holzafpel, plaintiff's office manager, to join Mr. Foxley and Mr. Richter. Mr. Foxley instructed Mr. Holzafpel to investigate the matter and to issue a check if everything was all right. Mr. Holzafpel placed a telephone call for Mr. Holstein, did not get him and then called Mr. Schuette at the Bank of Mead. Concerning that conversation, the testimony of these two witnesses was in severe conflict. By Mr. Holzafpel's account, Mr. Schuette suggested that Agri-Land owned cattle located on the Nygren farm, that he had been there that morning, that he had seen them, that title documents were at the United States National Bank, and that the cattle were free and clear of liens. By Mr. Schuette's account, Mr. Holzafpel was told that Mr. Schuette had driven by the Nygren farm that morning, that he saw cattle there, that the bank had no title documents, and that the bank had no liens on cattle there.

That same afternoon, Mr. Holzafpel did speak to Mr. Holstein by telephone. Again, these two witnesses severely disagreed. The two witnesses did agree that Mr. Holstein suggested that they go the next morning and count the cattle on the Nygren farm. Neither Mr. Foxley nor Mr. Holzafpel made any additional investigation and a check for $326,353.20, drawn on the Omaha National Bank and made payable to the 'Bank of Mead and Agri Land & Beef, Inc.,' was given to mr. Richter.

At 4 o'clock p.m., Mr. Schuette arrived at the United States National Bank, endorsed the check for the Bank of Mead, and the Bank of Mead's account was credited by the United States National Bank. Sometime during that afternoon, a vice president of the Omaha National Bank called Mr. Holzafpel to ask if the check should be honored and was instructed to cash the same.

The 1,802 head of cattle were never delviered to plaintiff. Plaintiff did recover $98,502.49 from Agri-Land which reduced plaintiff's claim for damages to $227,850.71.

The defendant's argument for reversal consists of four general areas: (1) That a rule of an ordinary and prudent cattle purchaser should apply to these facts and which it raised by three proposed instructions not given to the jury; (2) that the evidence was insufficient to prove that defendant made a material representation; (3) that the trial judge should not have awarded prejudgment interest; and (4) that defendant's objection to certain admission testimony should have been sustained. The issues will be discussed in that order.

A person is justified in relying on a representation made to him in all cases where the representation is a positive statement of fact and where an investigation would be required to discover the truth. The fact that plaintiff made inquiries elsewhere which did not disclose the falsity of the representations is no defense. The plaintiff is entitled to relief if the representations were a material inducement to the contract, although he may have made efforts to discover the truth thereof and did not rely wholly upon the veracity of defendant. Foley v. Holtry, 43 Neb. 133, 61 N.W. 120 (1894); Pasko v. Trela, 153 Neb. 759, 46 N.W.2d 139 (1951). It is generally held that fraud may be predicated on false representations although the truth could have been ascertained by an examination of public records. Linch v. Carlson, 156 Neb. 308, 56 N.W.2d 101 (1952).

The defendant argues that its proposed instruction No. III should have been given by the trial judge. Its proposed instruction is based on the language of Nathan v. McKernan, 170 Neb. 1, 101 N.W.2d 756 (1960), which states: 'Where one is put upon inquiry, he is charged with notice of all of such facts as he would have learned by reasonable inquiry. . . . A defrauded party must be diligent and prudent in his effort to detect the fraud and means of knowledge are equivalent to knowledge.' We have reviewed that case, and its antecessors, and find that such...