Nash v. Minnesota Title Insurance & Trust Co.

• Decision Date: 12 June 1895
• Parties: NASH et al. v. MINNESOTA TITLE INSURANCE & TRUST CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

163 Mass. 574

40 N.E. 1039

NASH et al. v. MINNESOTA TITLE INSURANCE & TRUST CO.

Supreme Judicial Court of Massachusetts, Suffolk.

June 12, 1895

COUNSEL

R.M Morse and J.W. Keith, for plaintiffs.

Strout & Coolidge and E.L. Rand, for defendant.

OPINION

KNOWLTON J.

These cases have once before been considered by this court (see 159 Mass. 437, 34 N.E. 625), and the principal question then raised was whether there was any evidence of fraud on the part of the defendant. It was held that the defendant's statement in regard to the title, taken in connection with the context of the letter and the circumstances under which it was written, purported to be a representation that the defendant had examined the title to the mortgaged real estate, and had found it to be perfect. The property was subject to a prior mortgage of $30,000, as the defendant's officers well knew. On this part of the case the only question was whether there was any evidence of fraud to submit to the jury, not whether there might be explanations which would relieve the defendant from the imputation against it. At the last trial the defendant offered to show that the words were not used in the sense in which they were understood by this court, and that its officers acted honestly, and that there was no intention on their part to state anything falsely. The evidence was rejected, and the ruling was, in substance, that in view of the admitted facts that the defendant's officers knew of the existence of the prior mortgage, and that this letter was to be used to induce persons to buy the mortgage bonds, the representation was, as matter of law, fraudulent. The exception to this ruling presents the question what must be proved to establish a charge of an actionable false, and fraudulent representation? On the precise question now before us the law of England has been finally settled by the case of Derry v. Peek, 14 App.Cas. 337, in which it was held unanimously that in an action of deceit there can be no recovery unless fraud is proved. In delivering the principal opinion, Lord Herschell said: "I think the authorities establish the following propositions: First. In order to sustain an action of deceit there must be proof of fraud, and nothing short of that will suffice. Secondly. Fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief of the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth; and this probably covers the whole ground, for one who knowingly alleges that which is false has obviously no such honest belief. Thirdly. If fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or to injure the person to whom the statement was made." In other parts of the opinion, and in the opinions of the other law lords in the same case and in other cases which have since been decided, it is made clear that by the law of England mere ignorance or negligence or stupidity on the part of the person making the representations does not constitute fraud if he intends honestly to tell the truth, although his statements, understood according to their seeming meaning, may be ever so misleading. Glasier v. Rolls, 42 Ch.Div. 436; Angus v. Clifford [1891] 2 Ch.Div. 449; Le Lievre v. Gould [1893] 1 Q.B.Div. 491. In this particular the decisions in this commonwealth are of similar import. Tryon v. Whitmarsh, 1 Metc. (Mass.) 1; Page v. Bent, 2 Metc. (Mass.) 371; Pearson v. Howe, 1 Allen, 207; King v. Eagle Mills, 10 Allen, 548; Insurance Co. v. Matthews, 102 Mass. 221; Furnace Co. v. Moffatt, 147 Mass. 403, 18 N.E. 168; Fisher v. Mellen, 103 Mass. 503; Holst v. Stewart, 154 Mass. 445, 28 N.E. 574. See, also, Page v. Parker, 40 N.H. 47; Hammatt v. Emerson, 27 Me. 308; Marsh v. Falker, 40 N.Y. 562; Chester v. Comstock, Id. 575; Cowley v. Smyth, 46 N.J.Law, 380. There is a good reason for this rule. The general test to determine whether there is a liability in an action of tort is the question whether the defendant has by act or omission disregarded his duty. In applying this test, it is always necessary first to inquire what the defendant's duty is. In an action of deceit, the defendant is ordinarily sued as one whose only relation to the transaction is that of a gratuitous informer, who had no interest in the subject to which the representations related. On the necessary allegations of the declaration he may be assumed to have answered inquiries put by a stranger, or to have volunteered statements out of apparent friendship. Under such circumstances, although he thinks that his statements will be acted upon by the inquirer, he has no higher duty than to answer honestly and in good faith. If one makes a statement for a consideration as a part of a contract, it is his duty to be accurate, and ignorance or mistake will not relieve him from the consequences of an error. In seeking a remedy from him for a mistake so made, the plaintiff in his declaration states his relation to the transaction, and sues in contract. But one who merely answers the inquiries of a stranger, or courteously volunteers information in a matter which does not concern him, is in a position analogous to that of a gratuitous bailee of property, from whom a less degree of care is required than from a bailee for hire. He must not intentionally mislead; but if he answers honestly, to the best of his ability, he does his whole duty. If he is an ignorant, stupid man, and on that account the inquirer is led astray, it is not his fault, but the fault or misfortune of the person who relies upon him. It would be unjust to visit upon him the consequences of his ignorance in a matter in which he had no interest. If he happens to have an interest in the subject to which his representations relate it is a matter of which the law takes no cognizance in an action of deceit. It is not necessary to allege or prove it, and proof of it does not affect the rights of the parties unless the proof goes far enough to create a liability of another kind. Of course, one will be presumed to have intended his language to be understood according to its usual meaning, and in ordinary cases, in the absence of a reasonable explanation of his mistake, his testimony that he meant something different from what he said will have but little, if any, weight. But inasmuch as the question involved is what was his state of mind, and his actual intent as distinguished from his apparent intent, he is entitled to explain his language as best he can, if it is susceptible of explanation, and to testify what was in his mind in reference to the subject to which the alleged fraud relates. In this respect his expressions, whether spoken or written, are not dealt with in the same way as when the question is what contract has been made between two persons who were mutually relying upon the language used in their agreement. Brown v. Insurance Co., 151 Mass. 127, 23 N.E. 733; Thacher v. Phinney, 7 Allen, 146; Hazard v. Loring, 10 Cush. 267; Snow v. Paine, 114 Mass. 520, 526; Edwards v. Currier, 43 Me. 474; Norris v. Morrill, 40 N.H. 395-401; Gifford v. Thomas' Estate, 62 Vt. 34, 35, 19 A. 1088; Seymour v. Wilson, 14 N.Y. 567; Thurston v. Cornell, 38 N.Y. 281; Phelps v. Railroad Co., 60 Md. 536; Berkey v. Judd, 22 Minn. 287. In the present case we need not determine whether the excluded evidence on this subject was very important. It is obvious that, if the defendant's officers knew that their statement in regard to the title was false in the sense in which they supposed it would generally be understood, it is immaterial whether or not they had a purpose to do injury or cause loss to anybody who might rely upon it. It is enough to furnish the foundation for a liability if they used language in regard to the title which they intended should be understood as a representation that the title was perfect, when they knew it was not perfect. Com. v. Coe, 115 Mass. 481; Spaulding v. Knight, 116 Mass. 148; Forbes v. Howe, 102 Mass. 427; Nash v. Trust Co., 159 Mass. 437, 34 N.E. 625. But a majority of the court are of opinion that it was competent for them to testify what their understanding and intention were in regard to the meaning of the representation, and that the presiding justice gave too broad an interpretation to our former decision in the case.

The next exception relates to the rule of damages. The presiding justice ruled that, on a recission of the contract for fraud, the plaintiffs could recover back from this defendant the whole consideration paid for the bonds. That is the rule where the suit is between the original contracting parties. The reason of the rule is that on a recission of a contract the contract is avoided ab initio, and the rights of the parties in reference to the subject-matter of it are as if no contract had ever been made. Snow v. Alley, 144 Mass. 546, 11 N.E. 764; Nealon v. Henry, 131 Mass. 153; Milliken v. Thorndike, 103 Mass. 382; Bassett v. Brown, 105 Mass. 551; Ballou v. Billings, 136 Mass. 307-309. But the defendant in this case is a stranger to the consideration, and his relation to the contracting parties is not such as to make this reason applicable. The rule of damages in an action against a tort feasor is that the plaintiff shall recover an amount commensurate with the wrong done him. In a suit for a fraud in a sale of personal property, the measure of damages in common cases is...