Law v. Sidney

• Decision Date: 06 January 1936
• Docket Number: Civil 3601
• Citation: 47 Ariz. 1,53 P.2d 64
• Parties: T. E. LAW, Appellant, v. ELIZABETH SIDNEY, Appellee
• Court: Arizona Supreme Court

53 P.2d 64

47 Ariz. 1

T. E. LAW, Appellant, v. ELIZABETH SIDNEY, Appellee

Civil No. 3601

Supreme Court of Arizona

January 6, 1936

APPEAL from a judgment of the Superior Court of the County of Maricopa.M. T. Phelps, Judge.Judgment reversed and case remanded with instructions.

Messrs Beer, Walsh & Wilmer, and Mr. T. A. Carson, for Appellant.

Mr. E H. Karz and Mr. William C. Fields, for Appellee.

OPINION

LOCKWOOD, C.J.

Elizabeth Sidney, hereinafter called plaintiff, brought this action against T. E. Law, hereinafter called defendant, seeking damages in the sum of $2,977.80.The case was tried to a jury, which returned a verdict for plaintiff for the full amount prayed for, and from the judgment rendered on the verdict and the order overruling the usual motion for new trial this appeal has been taken.There were other partiesdefendant, but a verdict in their favor was instructed by the court, and as plaintiff has not appealed from the judgment rendered thereon, we need not consider them.

There are nine assignments of error based upon five propositions of law.The first question for our consideration raised by these propositions is whether or not the evidence sustains the verdict.The action is based upon the theory that defendant obtained from plaintiff the sum of $2,977.80 by means of certain false and fraudulent representations.This court, in the case of Moore v. Meyers,31 Ariz. 347253 P. 626, 628, stated the elements of actionable fraud as follows:

"(1) A representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) his reliance on its truth; (8) his right to rely thereon; (9) his consequent and proximate injury.26 C.J. 1062.If these factors all appear, a cause of action for fraud will unquestionably exist."

We first consider the character of the representations on which an action of this nature may be based.The general rule is that in order to constitute actionable fraud, the false representation must be of a matter or fact which exists in the present, or has existed in the past and cannot be predicated upon the mere expression of an opinion or upon representations in regard to matters of estimate or judgment.The person to whom statements of the character last mentioned are made has no right to rely upon them and does so at his peril, nor can they be supposed to influence his judgment.For instance, mere general commendations of property which it is sought to sell, usually known as "seller's statements" or "puffing," do not amount to actionable misrepresentations.This rule is based upon the fact that it is universally recognized a seller is apt to recommend an article or thing offered for sale in more or less extravagant language.The law does not hold him to a strict accountability for such commendation of his wares as are manifestly open to difference of opinion.

While a statement of a matter to occur in the future, if affirmed as a fact, may amount to a false or fraudulent representation, it must be an actual assertion of a fact and not merely an agreement to do something in the future.It is the general rule that statements or representations as to the future value or profitableness or prospects of a business are mere expressions of opinion, and a representation that something will be done in the future or a promise to do it is at most a contract and not a fraudulent representation such as will sustain an action of this nature.There is one exception to this last-named rule, and that is where the promise to perform a future act was made with a present intention on the part of the promisor that he would not perform it.In such a case the promise is a basis for an action of fraud.

With these rules for testing the nature of the representations upon which an action like this can be based, we examine the complaint to see what it alleges.It is quite lengthy and it would serve no useful purpose to set it forth in full.We, therefore, give only so much of its substance as will enable us to determine what, if any, allegations of false representations it contains which if proved, would sustain the action.It sets up that defendant was engaged in the manufacture of a certain insecticide; that he desired to secure additional capital for the purpose of increasing his business, and in order to induce plaintiff to invest such capital made many false representations to her.We set forth those which we think are material in two classes, the first consisting of representations of material present facts, and the second of material promises for the future.In the first class we find the following: (1) That defendant was the exclusive owner and possessor of a secret formula for the manufacture of insecticide; (2) that the insecticide so manufactured was fatal and death dealing to all varieties of insects and vermin coming in contact therewith; (3) that this product was already being handled in the open market by a large number of stores in Arizona and Texas; and (4) that such business was profitable.These are the only material representations of present existing facts.In the second class of promises to perform future acts were the following: (1) That defendant would cause a corporation to be formed for the purpose of exploiting the insecticide, and would give plaintiff an interest therein proportionate to her investment; (2) that he would place the secret formula in the custody of the Valley Bank at Phoenix, Arizona, before she invested any money; (3) that he would at the same time place a bond there in the sum of $3,000 for the protection of plaintiff, conditioned to indemnify her against any loss that she might sustain on account of her investment; (4) that he would furnish the corporation the finished product at as nearly cost as possible.There are many other promises and statements alleged in the complaint, but we think they are all either immaterial or fall within the class of mere statements of opinion which are not actionable.

It was, of course, incumbent upon plaintiff to establish by clear and convincing evidence the fact that defendant had made these representations or some of them; that they were false as to matters of existing fact, and as to the future promises; that at the time they were made defendant did not intend to perform them; and that relying on them, she invested her money.In determining whether she has successfully met the burden placed upon her, it is necessary that we examine the transcript of the evidence and see whether it, construed as strongly as is reasonably possible in support of these allegations, will sustain them.So far as the making of the representations is concerned they rest entirely upon the testimony of plaintiff, corroborated to some extent by that of one Arthur F. Merritt.

Considering first the representation that the formula was a secret one, known only to defendant, the undisputed testimony is that the formula was composed of certain ingredients which defendant had learned of by reading of a newspaper, together with one additional ingredient which he had added thereto and which he declined to reveal, and concerning the nature of which there was no testimony.We are of the opinion that assuming that he did represent to plaintiff that the formula was a secret one, a matter which the evidence leaves somewhat in doubt, there is no...