Morgan County Coal Company v. Halderman

• Decision Date: 10 February 1914
• Parties: MORGAN COUNTY COAL COMPANY, JEPTHA D. RYAN and C. C. MAGENHEIMER, Appellants, v. ANNA B. HALDERMAN, JOHN P. ST. JOHN and ASA L. ROSS
• Court: Missouri Supreme Court

163 S.W. 828

254 Mo. 596

MORGAN COUNTY COAL COMPANY, JEPTHA D. RYAN and C. C. MAGENHEIMER, Appellants, v. ANNA B. HALDERMAN, JOHN P. ST. JOHN and ASA L. ROSS

Supreme Court of Missouri

February 10, 1914

Appeal from Howard Circuit Court. -- Hon. E. W. Hinton, Special Judge.

Affirmed (as modified).

D. E Wray, Scott J. Miller and W. M. Williams for appellant.

(1) The representations of defendant's agents that shafts had been sunk and coal found at different places upon the tract of land in controversy, and the quality and quantity of coal actually discovered at each of these places, were statements of fact and not mere matters of opinion. False and fraudulent representations of previous explorations and the results thereof furnish ground for the rescission of a purchase of miningproperties. Kendrick v. Ryus, 225 Mo. 166; Brown v. Lead Co., 194 Mo. 704; Turner v Green, 80 F. 41; Green v. Turner, 86 F. 537. (2) The testimony clearly indicates that the falsity of the representations was known to defendant and her agents, and that they were aware of the results of prior drillings showing that actual coal did not exist upon the land as represented. It is unnecessary, however, to consider that question. Relief on the ground of fraudulent representations which will entitle an injured party to equitable relief need not have been made with knowledge of their falsity. "Where a party to a bargain makes to the other party a statement of a material fact, which he either knows to be false, or which he does not know to be true at the time when he makes it, and the other party acts upon the representation to his loss, this entitles him to equitable relief. The reason is that it is against good conscience for a party to keep the fruits of a bargain obtained by such means." Florida v. Morrison, 44 Mo.App. 538; Glasscock v. Minor, 11 Mo. 655; 14 Am. & Eng. Ency. Law (2 Ed.), 94; Webster v. Bailey, 31 Mich. 36; Warvelle on Vendors, sec. 224. "Where one makes, as of his own knowledge, a false representation, not knowing whether it is true or false, it is a fraud as much as if he knew it to be false." Hamlin v. Abell, 120 Mo. 188; Brokerage Co. v. Gates, 190 Mo. 391; Derby v. Donahoe, 208 Mo. 700. It is not necessary to show actual knowledge of the falsity of the representation in a suit in equity for a rescission, as is required in an action at law for damages. Florida v. Morrison, 44 Mo.App. 538; Lovelace v. Suitor, 93 Mo.App. 440; Herman v. Hall, 14 Mo.App. 270. (3) The defendant cannot retain the fruits of the fraudulent representations of her agents, and at the same time escape liability for such misrepresentations. She cannot hold to the bargain and repudiate the means by which it was obtained. Chase v. Rusk, 90 Mo.App. 25; Heath v. Shroer, 119 Mo.App. 93; Millard v. Smith, 119 Mo.App. 701; Bank v. Hoeber, 88 Mo. 37; McKinon v. Vollmar, 43 N.W. 800. (4) It is not necessary that the false and fraudulent representations should have been made at the time the deed was executed and the deed of trust given. If false representations were made in January, 1903, and these operated in whole or in part to bring about the contract of Nov. 24, 1903, and the subsequent acceptance of the deed and the execution of the deed of trust, it is sufficient. 20 Cyc. 71; Reeve v. Dennett, 11 N.E. 944; Kost v. Bender, 25 Mich. 522; 14 Am. & Eng. Ency. Law (2 Ed.), 198. It is competent to prove subsequent representations as corroborative of those previously made. 20 Cyc. 602b. (5) False and fraudulent representations made to the promoters of a corporation and upon which such corporation acted after its organization, may be made the basis of a suit in its behalf. Heater Co. v. Heater Co., 32 F. 735; Gear & Pulley Co. v. Schoefield, 40 A. 1046. (6) While the false and fraudulent representations complained of must be relied upon by the injured party to constitute grounds for relief, still it is not necessary that they should form the sole or even the principal inducement for the trade. It is enough if they contributed to bring about the bargain complained of. Hardwood Co. v. Dent, 121 Mo.App. 108; Saunders v. McClintock, 46 Mo.App. 216; Burnham v. Elmore, 66 Mo.App. 617; 20 Cyc. 41; 14 Am. & Eng. Ency. Law (2 Ed.), p. 113, sec. 6. "If the representation is clearly established, it will not alter the vendee's right of recovery, if after the representation he employed a person in whom he had confidence to examine the cave, and such person reported favorably." Perkins v. Rice, 12 Am. Dec. 298. (7) "If by false representations one actually misleads another to his injury, he commits an actionable fraud, even though some of his representations are true; and the same result follows, where representations are made, which are in fact true, but are accompanied by concealment of material facts, so that considering the representations and the concealment together, a false impression is produced." 20 Cyc. 24; Lomerson v. Johnston, 20 A. 675; Denny v. Gillman, 26 Me. 149. (8) Defendant's agents cannot shield her on the ground that they simply repeated what they had heard from others, if stated by them as facts. Fisher v. Mellen, 103 Mass. 503; Hansen v. Kline, 113 N.W. 504; Buford v. Caldwell, 3 Mo. 477; Hamlin v. Abell, 120 Mo. 188. (9) Plaintiffs were not guilty of laches. The plaintiff corporation certainly would not have invested the money of its stockholders in the payment of $ 25,000 on the purchase price, and $ 25,000 more in the grading of a railroad, and several thousand dollars additional in exploration work, if its officers and representatives had known at the time the deed was accepted and the deed of trust executed that the coal did not exist as had been represented. It cannot be successfully maintained that the purpose was to sell to others when the corporation itself had the drilling done by Prof. Ray for the express purpose of determining whether the land contained coal as had been represented by defendant's agents. Certainly there would have been no thorough drilling of this character if the object had been to mislead and entrap innocent parties into buying stock. There was no change in the situation of the parties with reference to the property that would prevent equitable relief. The defendant Halderman, at least, had made no expenditures and had incurred no obligations which would make it inequitable for her to take back the land and refund the purchase money she had received. She, at least, would be in as good position as before the sale. Spurlock v. Sproule, 72 Mo. 510; Real Estate Co. v. Lindell, 152 Mo. 79; Newman v. Newman, 152 Mo. 415; Sicher v. Rambousek, 193 Mo. 546; Witte v. Storm, 236 Mo. 491.

Samuel C. Major, Black & Black and Gage, Ladd & Small for respondents; Wollman & Wollman of counsel.

(1) In a case of this kind, "the court will not act without the clearest proof of the fraudulent misrepresentations, and that they were made under such circumstances as show that the contract was founded upon them." Holland v Anderson, 38 Mo. 59; Langdon v. Green, 49 Mo. 363; Bryan v. Hitchcock, 43 Mo. 527; Bigelow on Fraud, p. 145; Ludington v. Renick, 7 W.Va. 273; Bement v. LaDow, 66 F. 185. (2) If any such statements whatever were made by defendant or agents, such statements were clear matters of opinion and did not amount to representations in law, being representations as to the character of mining lands and what they would produce, said representations pointing out by their very terms that they were made on information and belief and the sources of such information; they were not statements of facts but mere expressions of opinion which do not constitute representations in law. Brown v. Lead & Zinc Co., 194 Mo. 681; Bigelow on Fraud, p. 473; Dawson v. Graham, 48 Iowa 378; Wilson v. Jackson, 167 Mo. 135; Cornwell v. McFarland, 150 Mo. 377; Lucas v. Crippen, 76 Iowa 507; Anderson v. McPike, 86 Mo. 294; Development Co. v. Silva, 125 U.S. 247; East v. Worthington Co., 88 Ala. 537; Kinne v. Webb, 49 F. 512; Gordon v. Butler, 105 U.S. 553; Franklin v. Holle, 7 Mo.App. 241; Bank v. Hunt, 76 Mo. 439; Warner v. Benjamin, 89 Wis. 290; Tuck v. Downing, 76 Ill. 71. (3) St. John and Noyes having told Magenheimer and Ryan that their information came from third persons, and that they had no personal knowledge other than thus derived, their representations founded upon such information afford no ground for rescission. Moore v. Scott, 47 Neb. 346; Cooper v. Lovering, 106 Mass. 77; Bank v. Trust Co., 179 Mo. 664. If a person receives information from others and believing the information to be true, honestly repeats the same, explaining that he has no personal knowledge, he clearly is not guilty of fraud. 14 Am. & Eng. Ency. Law (2 Ed.), p. 102; Davidson v. Jordan, 47 Cal. 353; Hillyer v. Dickinson, 154 Mass. 502; Hume v. Brelsford, 51 Mo.App. 651; Robinson v. Flint, 58 Barb. (N. Y.) 100; Christ v. Drie, 18 O. S. 536; English v. Grinstead, 12 Wash. 670. When St. John and Noyes sent the plat to plaintiffs, they told them that they believed that there was an error in it, showing that the plat came from other sources and could not be implicitly relied upon. If a representation, at the time it is made, is accompanied by a qualified statement which shows that the person making it does not intend that it shall be relied upon, and which is reasonably calculated to suggest inquiry on the part of the person to whom it is made, the latter has no right to reply upon it, and, on being deceived, claim that it was fraud. 14 Am. & Eng. Ency. Law (2 Ed.), 117. (4) Even if these statements by these real estate agents amounted to representations in law and were false, yet plaintiffs having had these lands tested by experts and having made thorough investigations regarding them before the notes and deed...