Maxted v. Fowler

• Decision Date: 22 December 1892
• Citation: Maxted v. Fowler, 94 Mich. 106, 53 N.W. 921 (Mich. 1892)
• Court: Michigan Supreme Court
• Parties: MAXTED v. FOWLER.

53 N.W. 921

94 Mich. 106

MAXTED v. FOWLER.

Supreme Court of Michigan

December 22, 1892

Error to circuit court, Manistee county; J. BYRON JUDKINS, Judge.

Action by John D. Maxted against Smith W. Fowler. Judgment for plaintiff. Defendant appeals. Reversed.

Cahill & Ostrander, for appellant.

Niskern & Withey, for appellee.

MONTGOMERY, J.

The plaintiff brought an action to recover damages for a breach of warranty alleged to have been made by defendant on an exchange of property owned by plaintiff for stock in a mining corporation transferred to him by the defendant. On a trial before a jury in the Manistee circuit a judgment was rendered for $1,657.50. From this judgment defendant appeals.

The plaintiff's testimony tended to show that he exchanged property in Manistee, valued at $1,800, for mining stock which, at 75 cents per share, amounted to $1,300, and $500 in cash; that the defendant exhibited specimens which he claimed came from the mine of the company, and assured plaintiff that he (defendant) was going to make a rich man of him, and that the stock was then selling for $1 per share, but that, as the company desired to engage plaintiff's services, and to have him interested, he would let him have the stock at 75 cents; that he (defendant) would make the stock worth $2 a share inside of six months. The mine owned by the corporation was not developed, consisted of little more than an excavation, and the plaintiff testified that he was wholly unacquainted with mining property, and of this the defendant was advised. The circuit judge charged the jury: "If the defendant represented to the plaintiff that the stock was worth a dollar a share, that he would make it worth two dollars a share, and that the plaintiff relied upon and acted upon this representation, and turned out his property for the $500 and the stock, and if the jury also find that the stock was utterly worthless, the plaintiff would be entitled to recover." Defendant's first contention is that these representations of value are not such as a purchaser has a right to rely upon. He invokes the rule that any purchaser must expect that the vendor will seek to enhance his wares, and must disregard the vendor's statements as to value. This is undoubtedly the general rule but it is subject to exceptions. Where the defendant knows that the plaintiff is wholly ignorant of the value of the property, and knows that he is relying upon the defendant's representation, and such representation does not take the form of a mere expression of opinion, and is in the nature of a statement of fact, the rule of caveat emptor does not necessarily apply. Picard v McCormick, 11 Mich. 68; Manning v. Albee, 11 Allen, 520; Lawton v. Kittredge, 30 N.H. 500; Bradley v Poole, 98 Mass. 169; Miller v. Barber, 66 N.Y. 558; Gerhard v. Bates, 20 Eng. Law & Eq. 129. We think, under the circumstances of this case, that the plaintiff had the right to rely upon the defendant's statement that the stock was readily selling at a dollar a share. This was a statement of fact which the testimony shows to be untrue, and it cannot be doubted that such a statement would have a material influence upon the purchaser. In Medbury v. Watson, 6 Metc. (Mass.) 259, an action was maintained for false and fraudulent representations as to the price paid by a third person for the property in question. In Manning v. Albee, supra, it was said: "In the case now before us the plaintiff offered to show that he was induced to part with his goods by the false and fraudulent representations of French and the defendant, not only as to the value of the bonds offered by French to secure the note given by him for the goods, but also as to the sales of such bonds in the market at a certain price, appearing by a published list of sales of stocks and securities, which they exhibited to him to have actually taken place. This last representation was one which the plaintiff is not shown to have had equal means of knowing the truth or untruth of, and on which he might, without imputation of negligence, rely, and, upon discovering it to be false and fraudulent, maintain an action." In Miller v. Barber, a representation that a patent owned by the company was of great value, and that certain other persons were owners of stock, was held to have been such a representation as the purchaser had a right to rely upon. In Lawton v. Kittredge, a representation that certain stock "is good property or investment, and is about to make a dividend," is held to be a false representation when untrue, and where the person taking the stock objected to receiving it on account of his doubt or ignorance as to its value. In Bradley v. Poole, representations that a corporate property is valuable, and one of the best properties in Colorado, when in fact the company was a bubble company, raises a question of fraud for the jury to pass upon. We think that the representations as to the market value of stock of this character is a representation of a fact which bears upon the question of the actual value, and there was no error in so instructing the jury.

But it is said that, inasmuch as the plaintiff retained this stock and went into the...