Hicks v. Stevens

• Decision Date: 22 March 1887
• Parties: HICKS v. STEVENS.
• Court: Illinois Supreme Court

121 Ill. 186

11 N.E. 241

HICKS

v.STEVENS.

Supreme Court of Illinois.

March 22, 1887.

Error to appellate court, First district.

Stevens, the plaintiff, was introduced to Hicks, the defendant, by Jones, who had the option for purchasing the rights in tube-closer, an invention of Hicks, for the state of New York. Stevens talked with Hicks about investing in it. Hicks asked $50,000 for each of several states, including Pennsylvania and Ohio, and that the rights for each of these states were worth that sum, as were also the rights for the state of New York. After several interviews, Stevens told Jones he should have to give it up, as Hicks' prices were too high. Jones then asked him to take half of New York with him, and that they go in as partners on an option he had to purchase that state for $20,000. Negotiations were had, and a number of interviews took place, at which representations were made by Hicks as to the capabilities and merits of his invention, and Hicks gave Stevens a circular containing a description of such capabilities. May 30, 1883, an agreement of purchase was executed by the parties, wherein Hicks sold to Jones and Stevens the territorial rights for the state of New York to make and sell the Hicks Tube-closer. Stevens executed his three notes for $2,500 each, and delivered them to Hicks, and shortly thereafter paid him $2,500 in cash. Jones did the same. Stevens paid Jones $250, half of the amount he paid Hicks for the option. This sum Hicks gave Stevens credit for on one of his notes. Being unable to sell the tube-closer, October 16, 1883, Stevens and Jones gave Hicks a reassignment of their rights, and demanded their money and notes, which Hicks refused to give up. October 23d, Stevens notified Hicks in writing that he rescinded the contract, and demanded a return of the consideration. November 5th he filed his bill to rescind the contract, and recover the money and notes. The judge found that the patent was worthless; that Hicks' representations were material and false; and decreed that the contract be rescinded, and that the $2,500 paid and the notes be returned, but did not decree the repaylment of the $250 paid by Stevens to Jones, and indorsed by Hicks on one of Stevens' notes.

On appeal the appellate court affirmed the decree, except that it added the $250 paid by Stevens to Jones to the money decree.H. W. Wolseley

, for plaintiff in error.

Utlman Strong and Edward A. Dicker, for defendant in error.

SHOPE, J.

There is no disputing as to the making of the contract of sale in this case, or as to its terms; the principal controversy being whether Hicks, before the sale, made material representations as to the utility and value of the invention sold, which were relied on by Stevens, and which were false. The evidence satisfies us that, prior to the consummation of the sale, the parties had frequent interviews, in which Hicks represented to Stevens and Jones that the Hicks Tube-closer was a new and valuable invention, and would save both steam and fuel; that it was a good and profitable thing to sell, and would bring great profits. Hicks also gave Stevens a printed circular settingforth therein its capabilities and merits, which, among other things, stated that ‘the use of the tube-closer demonstrates to a positive certainty its ability to show by the steam-guage, in the morning, before firing up, the same steam pressure that is felt at night after the day's work. It will even hold steam in the boiler from Saturday night until Monday morning. It is guarantied to save fully 15 per cent. of fuel, or whatever fuel is usually required to raise steam in the morning. The Hicks tube-closer will do it. It will save its cost every month.’ Hicks also assured Stevens, in some of the interviews, that the right to make and sell the tube-closer in either of the states of Ohio or Pennsylvania was worth $50,000; that the right to the state of New York was worth the same sum; and that the appliances could be manufactured for five dollars apiece, and would sell for $30 each, and that there was not less than 2,000 boilers in each of the states named. Most of these representations, especially those in the circulars, are not denied. Hicks, by his answer and testimony, claims that all the representations he in fact made were true, but, whether true or false, they were not relied on by Stevens in making the purchase.

It is claimed there was an error in admitting in evidence the verbal statements made by Hicks, in regard to the tube-closer, prior to the written agreement for its sale. Such statements were not admitted for the purpose of changing the terms of the written contract, but to show that its execution was procured through fraudulent misrepresentations on the part of the vendor, and for that purpose it was certainly proper. But it is said there is no charge of fraud in the bill, and hence there was no foundation in the pleadings to justify the admission of the evidence. This is a misapprehension. Good pleading requires fraud to be charged specifically, and not in general terms. The facts relied on as constituting fraud should be set forth so as to apprise the opposite party what he is called on to meet. Elston v. Blanchard, 2 Scam. 420;Davis v. Pickett, 72 Ill. 483. The bill sets forth the specific representations made by Hicks which induced the complainant to make the purchase, and then charges ‘that the representations in the circular given by Hicks to the complainant and Jones, and the representation that by Hicks' experience, by the use of said invention, great saving of steam and fuel could be made, and other representations of like effect, whereby complainant and Jones were induced to purchase said rights, are and were utterly false, and said invention is worthless, and by its use no saving of any practical value can be made,’ and were known by Hicks to be worthless and of no value. The facts alleged in the bill, if true, constitute a fraud. If it were otherwise, Hicks should have interposed a demurrer or motion to dismiss for want of equity.

It is urged that Stevens did not rely on any of the representations made by Hicks, but acted upon his own judgment; and that, if he did rely upon them, he was guilty of such negligence, in failing to properly investigate, as to deprive him of any equitable relief. To entitle a party to relief, either legal or equitable, on the ground of a fraudulent misrepresentation, he must have relied upon the representation as true; for unless the representations are believed to be true, and acted upon, it can cause no legal injury. It is necessary that he should trust the representation, but it is not essential that the false representations should be the sole inducement to his entering into the contract. 2 Pom. Eq. Jur. § 890; 2 Pars. Cont. (5th Ed.) 773. The party acting upon a representation must, under the circumstances of the case, have been justified in relying upon it, in order to entitle him to relief. As stated in Pomeroy's Equity Jurisprudence, § 891: ‘It may be laid down as a general proposition that where the statements are of the first kind, [relating to substantial matters of fact, and not mere opinion,] and especially when they are concerning matters which, from their nature or situation, may be assumed to be within the knowledge or under the power of the party making the representation, the party to whom it is made has a right to rely on them; and, in the absence of any knowledge of his own, or of any facts which should arouse suspicion and cast doubt upon the truth of the statements, he is not bound to make inquires and examination for himself. It does not, under such circumstances, lie in the mouth of the person asserting the fact to object or complain because the other took him at his word. If he claims that the other party was not misled, he is bound to show clearly that such party did know the real facts; the burden is on him of removing the presumption that such party relied and acted upon his statements.’ And in section 895 the same author says: ‘When a representation is made of facts which are, or may be assumed to be, within the knowledge of the party making it, the knowledge of the receiving party concerning the real facts, which shall prevent his relying on and being misled by it, must be clearly and conclusively established by the evidence.’

When a party, ignorant of the real facts, and having no ready means of information, makes a purchase, or enters into a transaction as to the subjectmatter of which representations...