Kimber v. Young

• Decision Date: 19 April 1905
• Docket Number: 2,096.
• Citation: 137 F. 744
• Parties: KIMBER v. YOUNG.
• Court: U.S. Court of Appeals — Eighth Circuit

137 F. 744

KIMBER v. YOUNG.

No. 2,096.

United States Court of Appeals, Eighth Circuit.

April 19, 1905

Virginia Kimber sued Frank C. Young to recover damages alleged to have been caused by his deceit and breach of warranty in respect of certain corporate bonds purchased by her. A demurrer directed to her amended complaint, which was in two counts was sustained by the circuit court. She elected to stand upon her pleading, and judgment was accordingly rendered that she take nothing by her action. This writ of error is to review the judgment.

The first count contained the charge of deceit, and it consisted of the following averments: The plaintiff, the owner of certain mining interests, contracted to sell and convey them to the defendant, or, at his request, to a mining and milling company of which he was president and a director, for a cash consideration of $162,500. Some time afterwards, and before the sale was consummated, the company executed a series of 6 per cent. bonds aggregating $750,000, and maturing in 10 equal annual installments. When defendant came to close the transaction with the plaintiff, he prevailed upon her to accept for her property $125,500 in cash and $37,0-0, the remainder of the purchase price, in bonds of that amount which were a part of the first maturing installment of the series mentioned. To induce her to accept the bonds in lieu of cash, which she was entitled to under the contract of sale, the defendant represented to her in writing that other persons who had sold mining property to the company had agreed to accept such bonds in part payment; that the bond issue was all in the hands of the trust company; that the provisions and recitals of the bonds must be met whether the company would or no; that the bonds offered to her were due absolutely July 1, 1901, and would come in before those held by defendant and his associates; that she might depend upon being honorably dealt with, and upon the interest coupons being promptly met; that he (the defendant) knew the bonds offered her to be good, and that as to said bonds she would occupy a preferred place among the bondholders. With like purpose he also represented to her son, who was her agent that the bonds 'were first-class securities, good in all respects, and that he knew the same would be paid, principal and interest, at the maturity thereof. ' When these representations were made, the defendant was president of the company which issued the bonds, was largely interested in and wholly conversant with its affairs and condition, and knew that she would rely upon and be governed by what he said. She was ignorant and had no means of acquiring knowledge of the value and character of the bonds other than through his representations as he well knew. She had been acquainted with him for many years, and, he being a broker, she had from time to time employed him to invest her funds, and therefrom arose a relation of trust and confidence which had long existed between them. Under these circumstances she relied upon what he said concerning the bonds offered her, and in such reliance delivered the conveyances of her mining interests to the defendant for his company, and accepted in payment $125,500 in cash and the bonds to the amount of $37,000. The representations of the defendant proved to be wholly false and without foundation. Default was made in her bonds at maturity. She sued the mining company, the maker thereof, and her action was defeated through the efforts of defendant. The bonds were worthless, and had been so long before their maturity, and in view of the premises she had been damaged in the sum of $37,000.

The second count of the complaint was based upon the same transaction, and was for breach of a warranty as expressed in these paragraphs:

'That at the said time and to induce this plaintiff to accept the said bonds in place of said sum of $37,000 the said defendant then and there in writing expressly affirmed their regularity and validity to this plaintiff, and did assure her in writing that he, the said defendant, knew them and each of them, to be good, whereby and by means whereof the said defendant represented and warranted the said bonds to this plaintiff, and that the same would, by reason thereof, be paid principal and interest at the maturity thereof, and the plaintiff, relying wholly upon said representations, assurances, and warranties of said defendant, did accept and was induced to accept the said bonds as aforesaid for and in place of the said sum of money, and deliver her conveyances of said mining claims and premises to said company.

'The plaintiff, further complaining, alleges that said representations and warranty of said plaintiff to this defendant that said bonds were good and valid and that same would be paid as aforesaid, were wholly false; that the said warranty has been broken and disregarded, in consequence whereof the said plaintiff has suffered great damage and injury, to wit, the face or pretended value of said bonds being and just and full sum of thirty-seven thousand dollars ($37,000).'

In addition to the charge of a breach of warranty this count also contained averments found in the first count, and tending to give it the character of a cause of action for deceit. They may be disregarded, however, because counsel for both parties have treated the first count as containing a cause of action for deceit and the second as setting forth merely a cause of action for a defaulted warranty; and we shall so consider them.

Charles S. Thomas (Wm. H. Bryant, Harry H. Lee, and Wm. P. Malburn, on the brief), for plaintiff in error.

Charles R. Bell (Daniel Sayer, on the brief), for defendant in error.

Before SANBORN and HOOK, Circuit Judges, and LOCHREN, District Judge.

HOOK Circuit Judge, after stating the case as above, .

Eight grounds were assigned in defendant's demurrer, but, so far as they need be considered, they present but three questions: Was there an improper joinder of causes of action in the same complaint? Did the first count state a cause of action for deceit? Did the second count state a cause of action for breach of warranty?

There was no misjoinder of the causes of action. The existence of one was entirely compatible with the existence of the other. They grew out of and presented but different phases of the same transaction, and both tended to support a single recovery. It is contended that the court for breach of warranty is upon contract, and therefore could not be united with one for deceit which is ex delicto. But an action for breach of warranty may be either in contract or in tort, at the pleasure of the pleader. Schuchardt v. Allens, 1 Wall. 359, 368, 17 L.Ed. 642; Shippen v. Bowen, 122 U.S. 575, 581, u Sup.Ct. 1283, 30 L.Ed. 1172. In fact, the ancient remedy was an action in tort, and the practice of declaring in assumpsit was an expedient afterwards adopted for the purpose of enabling the plaintiff to join the money counts with those upon the warranty. Williamson v. Allison, 2 East, 451. Under the modern system of pleading the actual facts constituting a cause of action are narrated, and, as a consequence, the line of distinction between tort and contract is frequently so shadowy and uncertain that it is difficult to determine to which class an action belongs. The proper construction in such cases is that which makes the complaint or declaration, as a whole, maintainable, and the different counts consonant with each other. It is well settled that, when they grow out of the same transaction, an action for deceit and an action on the case for breach of warranty may be joined. Shippen v. Bowen, supra; Dushane v. Benedict, 120 U.S. 630, 7 Sup.Ct. 696, 30 L.Ed. 810; Schuchardt v. Allens, supra; Bliss on Code Pleading, Sec. 120. The joinder was permissible under the Colorado Code. Mills' Ann. Code, Sec. 70.

To afford sufficient basis for an action of deceit the representation must have been of material facts, and must have had such relation to the transaction in hand as to operate as an inducement to the action or omission of the complainant party (Slaughter's Adm'r v. Gerson, 13 Wall. 379, 383, 20 L.Ed. 627; Smith v. Chadwick, 20 Ch.D. 27); and it must have been relied on by him (Marshall v. Hubbard, 117 U.S. 415, 6 Sup.Ct. 806, 29 L.Ed. 740; Stratton's Independence v. Dines (C.C.) 126 F. 968, 977). The basis of the action of deceit is the actual fraud of defendant-- his moral delinquency; and therefore his knowledge of the falsity of the representation, or that which in law is equivalent thereto, must be averred and proved. There is much confusion in the authorities upon this subject, due in part to the erroneous assumption that that which is merely evidence of fraud is equivalent to the ultimate fact which it tends to prove, and also to the assumption, likewise erroneous, that an untrue representation which would be sufficient to support a suit in equity for a rescission of a contract is equally as available in an action of deceit. In Derry v. Peek, 14 App.Cas. 337, 356, a well-reasoned case, Lord Fitzgerald said:

'The action for deceit at common law is founded on fraud. It is essential to the action that moral fraud should be established, and since the case of Collins v. Evans, 5 Q.B. 804, 820, in the Exchequer Chamber, it has never been doubted that fraud must concur with the false statement to maintain the action. It would not be sufficient to show that the defendant knew at the time of making it that the representation was untrue, or, to adopt the language of the learned editors of the Leading Cases, that 'the defendant must be shown to have been actually and fraudulently cognizant of the falsehood of his representation, or to have made it fraudulently without belief

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