Sachs v. Blewett
| Decision Date | 30 January 1934 |
| Docket Number | No. 26341.,26341. |
| Citation | 188 N.E. 674,206 Ind. 151 |
| Parties | SACHS et al. v. BLEWETT. |
| Court | Indiana Supreme Court |
OPINION TEXT STARTS HERE
Appeal from Superior Court, Marion County; Wm. O. Dunlavy, Judge.
On rehearing.
*674For former opinion, see 185 N. E. 856.
Saul I. Rabb and Richard Ewbank, both of Indianapolis, for appellants.
Telford B. Orbison, of Indianapolis, for appellee.
Rehearing denied.
I think the petition for rehearing should be granted and judgment for the plaintiff below affirmed. In the writer's opinion the complaint states a perfect cause of action in deceit. The essential elements of legal deceit are (1) false representations (2) fraudulently made (3) under circumstances which entitled the plaintiff to rely thereon and (4) plaintiff's reliance upon the representations (5) to his damage. Harper on Torts, § 217. That the averments of the complaint bring the instant case within the foregoing requirements*675is clearly shown by the summary of the allegations in the opinion of Bridwell, J., in Sachs v. Blewett (Ind. App. 1931) 175 N. E. 676, 679. The summary is as follows:
“The averments of the complaint sufficiently show that the appellants represented to appellee that they were good-faith bidders for the property offered for sale, and that they had the present intention to purchase and would purchase same at the price bid by them; that this representation was false, and that their purpose and intention in bidding was to prevent the sale of said property to any good-faith bidder; that appellee relied on their representation and bid, and said bid was accepted; that, on account thereof, the sale of said property to a good-faith bidder who was willing and ready to pay the price bid by him was prevented; that appellants knew that foreclosure proceedings were imminent, and their purpose and intent was to bid more for said property than any good-faith bidder offered, then refuse to take the property at the price bid, and afterwards acquire same from appellee at a price much less than the price bid, they believing this to be possible because of the appellee's financial condition and the desire on her part to sell in order to prevent foreclosure proceedings; that appellee made a diligent effort to sell at a price at least equal in amount to the amount bid in good faith, by a bona fide bidder at the first sale, but was unable to do so, and was compelled to and did sell the property in question at a second public auction sale for a sum much less than she would have received for said property had it not been for the fraudulent actions of the appellants.”
It is true, as stated in Franklin Insurance Co. v. Humphrey (1879) 65 Ind. 549, 32 Am. Rep. 78, “fraud can not be predicated upon acts which the party charged has a right by law to do, nor upon the non-performance of acts which by law he is not bound to do, whatever may be his motive, design or purpose, either in doing or not doing the acts complained of.” This proposition follows from the requirement that fraudulent representations, in order to be actionable, must be made under circumstances which entitled the plaintiff to rely thereon. Granting that the plaintiff was not legally justified in relying upon the defendants' oral promise to buy the real estate in question, it does not follow that she was not justified legally in relying upon the good faith of the bid of defendants made at a public auction. The situation, as presented by the averments in the complaint, involves two relationships which must be kept distinct. There is the relationship of vendor-vendee involving the transaction of sale and purchase of the real estate. There is also the relationship that arose out of the fraudulent conduct of the defendants. It is the latter relationship which is material in this case.
The appellant was a bidder at a public auction where the whole situation presupposes good faith on the part of bidders. The owner of the property is at the mercy of the bidder, and this is especially true when, as in the instant case, the property is real estate and requires a period of time to complete the sale after the bidding has been closed. The whole value of a public auction rests upon the good faith of bidders and any conduct on their part which prevents a fair sale is wrongful. It is hard to conceive of any conduct more calculated to destroy the value of a sale for seller, or for other bidders, than bad faith bidding. The minimum standard of business honesty would require a duty of good faith bidding and the seller is justified in relying upon a bid as the representation of a present intention to buy; and in rejecting the next lower bid. Legal fraud is not predicated upon a special pre-existing relationship of trust and confidence. It is predicated upon the general duty, which the law imposes upon all persons, not to fraudulently misrepresent a fact to another person for the purpose of inducing action thereon. As already indicated, the representation must be such that the party to whom it is made is justified in relying upon its truthfulness and injury must result from the reliance. I do not think it is material in the instant case that appellants owed no legal duty to carry out their oral promise to buy the real estate or that they owed no legal duty to execute a written promise. The legal duty which they owed, and which they violated, was duty not to deceive the appellee by a false bid made for the purpose of preventing a sale to the next highest bidder. The appellee relied upon the false bid and thereby lost a sale to a good faith bidder whose bid was only a few dollars less than appellants' bid.
The majority opinion states that it “was the failure of the appellants to carry out their contract to purchase the real estate which caused the damage.” In the judgment of the writer the foregoing reveals the fallacy of the reasoning of the majority opinion. The appellee is not seeking compensation for a loss legally caused by appellants' failure to carry out his oral contract; she is complaining of the loss occasioned by her failure to sell to the second highest bidder, and the facts alleged show that this failure was caused by the fraudulent conduct of the appellants. We are not interested in appellants' oral promise as an element in a contractual relation; it is of significance only as the appellants' fraudulent device to prevent a sale to a good-faith bidder who was ready and willing to carry out his bid.
Appellee's complaint alleges, in substance, that the appellants had attended the auction sale for the fraudulent purpose of “blocking the sale” of her property and to make fraudulent bids therefor in order to prevent *676a sale to any honest bidder; and that the bids of appellants were made with no intention of complying therewith and solely for the purpose of preventing a sale to any other bidder. Appellants' bid was an offer of a promise to buy the real estate and this offer became an oral promise when it was accepted by the auctioneer. It was a promise made with the intention of not performing and for the purpose of causing appellee to reject a good-faith bid.
“To profess an intent to do or not to do, when the party intends the contrary, is as clear a case of misrepresentation and of fraud as could be made.” Herndon v. Durham & S. R. Co. (1913) 161 N. C. 650, 656, 77 S. E. 683, 685, cited in Harper, Law of Torts, § 220.
It cannot be questioned that one who promises to do an act with an existing intention not to do it...
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