McNeill v. Bay Springs Bank

• Decision Date: 23 October 1911
• Docket Number: 14727
• Court: Mississippi Supreme Court
• Parties: GEO. D. MCNEILL AND G. H. MCNEILL v. BAY SPRINGS BANK

56 So. 333

100 Miss. 271

GEO. D. MCNEILL AND G. H. MCNEILL v. BAY SPRINGS BANK

No. 14727

Supreme Court of Mississippi

October 23, 1911

APPEAL from the circuit court of Newton county, HON. G. C. TANN Special Judge.

Suit by Bay Springs Bank against Geo. D. McNeill et al. From a judgment for plaintiff, defendant appeals.

The facts are fully stated in the opinion of the court, except instruction No. 2 which was refused by the court and is as follows:

The court charges the jury for the defendant G. H. McNeill that if they believe from the evidence that the defendant G. H McNeill signed the note sued on upon an agreement that it was to be used to raise money to complete a grading contract of McPherson and McNeill, that no money was ever raised on said note, that on the 22nd day of June, 1905, said note was credited on the overdraft of McPherson and McNeill at the plaintiff bank, that the said firm of McPherson and McNeill not only failed to raise any money on said note but that a short while after the execution of said note the said McPherson sold and disposed of half of the outfit of said firm with which said grading was to be done, that a month later the other member of said firm Geo. D. McNeill abandoned said work, and that after three months the said McPherson sold the balance of said outfit and threw up said contract then there was a failure of consideration and the defendant G. H. McNeill is not liable.

Reversed and remanded.

Witherspoon & Witherspoon, for appellant.

"In Alabama it is settled that a contract may be rescinded at law because of false representations, though the party making them may not have known they were false." Atwood v. Aright, 29 Ala. 346; Blackman v. Johnson, 35 Ala. 252; Sledge v. Scott, 56 Ala. 202; Davis v. Betr, 66 Ala. 206; Ball v. Farley, 81 Ala. 292.

"It is thoroughly well settled by the common law that misrepresentation of a material fact, made by one of the parties to a contract, though by mistake and innocently, if acted on by the other party, constitutes legal fraud." Woodruff v. Saul, 70 Ga. 271.

"In Michigan it is settled that a contract may be rescinded at law for false representations as to material facts, innocently made." Mooney v. Davis, 75 Mich. 188, 13 Am. St. Rep. 425; Angell v. Loomis, 97 Mich. 5.

In Nebraska a contract may be rescinded at law for innocent misrepresentations if the other party relied upon them and had a right to rely on them. Leavitt v. Sizes, 35 Neb. 80; Johnson v. Gulich, 46 Neb. 817, 50 Am. St. Rep. 629.

Whoever positively and generally makes a false assertion as an inducement for another to contract with him and succeeds on that ground, is guilty of a fraud which vitiates the contract. It must be as represented or it is fraudulent. A man who does so assert ought to suffer, he must answer for the truth." Snyder v. Findley, 1 N. J. L. 92, 1 Am. Dec. 193.

In the case of King v. Hopkins, 13 Ohio Cir. Ct. Rep. 305, 7 Ohio Cir. 362, it was held that a sale of goods may be rescinded because of false representations as to material facts, though made without knowledge of their falsity, and not recklessly but in bona fide belief that they are true.

If innocent misrepresentations do not avoid the contract in the case where it is the duty of the person to speak, then it is impossible that concealment should, because a mere failure to speak could not be as bad and harmful as a misrepresentation, however innocently made.

But the seventh charge, like the sixth, is fatally defective, because it ignores the fraudulent concealment set up in the plea. It tells the jury that the note was not procured by fraud, unless McPherson was cashier and made statements as to the solvency which he knew to be false. The charge might as well have told the jury in express language that a fraudulent concealment would not be procuring a note by fraud.

The court erred in refusing the second charge for the defendant. This charge was unobjectionable and should have been given.

The charge enumerates these facts all of which were established by undisputed testimony.

First. That the agreement by which the note was signed was that it was to be used to raise money to complete the grading contract.

Second. That the note was not used to raise money as agreed but to pay an overdraft at the bank.

Third. That soon after the execution of the note McPherson sold half of the outfit, and a month later the other member of the firm abandoned the contract, and three months later McPherson sold the other half of the outfit and abandoned the contract.

The charge tells the jury that if they find these facts then there was a failure of consideration. Certainly this is good law. If the agreement with which the note was signed was that it should be used to raise money to complete the contract, and if it was not used for that but a different purpose, and if the very contract which it was to raise money to complete was abandoned and the grading outfit sold, then there was a failure of consideration, if it is possible for a consideration to fail.

Amis & Dunn, for appellee.

Defendants by tenth assignment complain of the action of the court in granting the sixth instruction for the plaintiff, on the ground that the charge tells the jury that the misrepresentation must have been intentional.

The instruction is correct. The note sued on was executed by the defendants for a certain, definite purpose, to-wit, the purpose of raising two thousand dollars to be offset by two thousand dollars to be raised by McPherson; all of which was to go into the business of McPherson & McNeill, and to be used for their benefit. The bank was not a party to the transaction at the time of the execution of the note. It was an arrangement entered into between G. H. McNeill and the two partners in the firm of McPherson & McNeill, and the note was delivered to McPherson to be negotiated for the purpose of raising the two thousand dollars. It is true that McPherson was also cashier of the plaintiff bank, and that notice or knowledge that he may have had, as an individual or member of the partnership, would, perhaps, be imparted to the bank, because of his official connection with it. But certainly, unless it were shown by the testimony that he was acting for the bank, in procuring and in discounting the note, then any fraudulent act of his, in an individual capacity, or as a partner in the firm, done for his own benefit or for the benefit of his firm, would not be imputed to the bank.

Indeed, it clearly appears from the testimony, first, that McPherson was not acting for the bank in the negotiation which resulted in the execution of the note sued on; that he did not misrepresent, intentionally or otherwise, to G. H. McNeill, any material fact, nor did he ever conceal from G. H. McNeill the insolvency of the firm, because, as a matter of fact, the firm was not insolvent. Nor is it true, under the testimony, that a single fact represented by him to G. H. McNeill was at the time false and untrue; nor is it true, from the testimony, that G. H. McNeill was ignorant of the truth of the matters of fact represented to him by McPherson, because McPherson told him the truth about it. This being true, it cannot be said that the instruction complained of by this assignment was in the least harmful, even if it should be held not to state the law correctly, a thing we do not concede. 20 Cyc. 68.

Eleventh assignment. This assignment complains of the action of the court in granting the seventh instruction for the plaintiff, because the said instruction states that the statements touching the solvency of McPherson & McNeill to G. H. McNeill must have been untrue, within the knowledge of the said McPherson. This instruction is correct, because, if the statements were true, then there was no fraud; and if they were untrue, as a matter of fact, though McPherson believed them to be true, then the bank cannot be charged with any notice or knowledge of the fraud. Under the recent case of Bank of Newton v. Simmons, 49 So. 616, the plaintiff's right of recovery would not be affected by any fraud shown. If McPherson, who made the statements, believed them to be true at the time, then the bank had no notice of any fraud or deceit in the procurement of the note, and it must be remembered that in the transaction which resulted in the execution of the note, McPherson was acting, as shown by the record, for the benefit of the firm of McPherson & McNeill, and not for the benefit of the bank. 20 Cyc. 68.

OPINION

WHITFIELD, C.

The appellee sued appellants on a promissory note for two thousand dollars, dated June 9, 1905, payable January 1, 1906, to the Bank...