Stewart v. Monad Engineering Company

• Decision Date: 18 June 1912
• Citation: 84 A. 209,26 Del. 165
• Court: Supreme Court of Delaware
• Parties: HAMILTON STEWART, trading as STEWART AND DONOHUE, defendant below, plaintiff in error, v. MONAD ENGINEERING COMPANY, plaintiff below, defendant in error

84 A. 209

26 Del. 165

HAMILTON STEWART, trading as STEWART AND DONOHUE, defendant below, plaintiff in error, v. MONAD ENGINEERING COMPANY, plaintiff below, defendant in error

Supreme Court of Delaware

June 18, 1912

[Copyrighted Material Omitted]

Supreme Court, June Term, 1912.

WRIT OF ERROR (No. 1, June Term, 1911) to the Superior Court for New Castle County. Action of assumpsit brought by the Monad Engineering Company against Stewart and Donohue to recover damages for failure to perform a written contract. Judgment for plaintiff. (See 2 Boyce 35, 78 A. 598). Affirmed.

STATEMENT OF FACTS.

This was an action of assumpsit brought by the Monad Engineering Company against Stewart and Donohue to recover damages for their failure to perform a written contract entered into with the Monad Engineering Company, the terms of which contract are set out in a letter, a copy of which is as follows:

"Wilmington Del.,

Dec 13, 1907.

The Monad Engineering Co., 147 Cedar St., New York, N. Y.

Gentlemen:--

Confirming prices given your Mr. A. T. Prescott on riprap would say that we will furnish and deliver in car load lots f. o. b. cars B St. wharf, Wilmington, Del., in pieces ranging in weight from 150 to 250 lbs., each for the sum of One Dollar ($ 1.00) per ton of 2,000 lbs. subject to Railroad weights, delivery to be made as follows: three cars per day, subject to the weather. Terms, 30 days after delivery.

Yours truly,

Stewart and Donohue.

Accepted Dec. 13, 1907.

Monad Engineering Co. Prescott. 1,000 tons, more or less required."

Prescott, who accepted the offer on behalf of the Monad Engineering Company, testified that he had authority to accept the same.

The Monad Engineering Company was engaged in constructing the foundation of a lighthouse at the Elbow Cross Ledge in the Delaware Bay under contract with the United States Government. Before actually commencing the work on the contract, it awarded a contract to Joseph H. Ward's Sons of the Crum Creek Quarries, Pa., for riprap of the same character and specifications. Stewart claimed that he was induced to enter into the contract by fraudulent misrepresentations, and that on the same day he dictated a letter to Prescott, in which he stated that "We have looked into the financial end of the Monad Engineering Company, and find that your Company is rather dilatory in paying bills, especially within the last year, therefore we will be justified in not living up to the terms of our letter of this P. M. unless you can give us good securities. Your order for one thousand tons has been canceled until we hear from you further." On December fifteenth plaintiffs notified Stewart of their readiness to accept the stone, and that on his failure to comply with his contract, they would be compelled to get it elsewhere; and on the thirty-first of December notified Stewart that they were purchasing the stone on his account.

The fraud practiced upon the defendant, according to his contention, consists of two things: (1) That he was deceived as to the purpose for which the Monad Engineering Company desired to use the stone; and (2) that Prescott stated to him that they had paid their bills for all material received by them on the present job within thirty days, and that the credit of the Monad Engineering Company was A No. 1.

As to the first ground of fraud Stewart testified that he asked Prescott, "Is this the same job that I bid on in the month of June? Oh, no, he says, it is another job. The specifications are practically the same. I said if it was, I would give him no figure. I would not furnish him a pound of stone. He satisfied me that it was not for the same job."

As to the second ground of fraud Stewart testified "We then went into the question of his financial standing. I asked him what was his Company's standing in the financial world, and he said it was A No. 1; that they paid all their bills in thirty days. I said, have you paid your bills for all materials received by you on the present job to within thirty days? He says, we have."

"Q. If he had not satisfied you that his credit was good, and that he had paid his bills to within thirty days, you would not have given him any credit? A. Not for a pound. Q. And you would not have made the contract? A. I would not. Q. You say he satisfied you as to his credit? A. Yes, sir."

To establish the fact that they did not pay their bills within thirty days after delivery, one witness was called by the defendant. This witness had a contract to deliver stone to the Monad Engineering Company for the Cross Ledge Light work. He testified that on December 13, 1907, there had been no payment for stone delivered, and that his first delivery was made on August 16, 1907. He didn't think there were any terms of payment in his contract. On cross examination he was asked whether his contract was not that he was to be paid on the twenty-fifth of the next succeeding month after the rendering of his bill, to which his answer was: "Possibly it was. I don't remember." When he was further asked whether there was any overdue account from the Monad Engineering Company to him on the thirteenth of December, 1907, his reply was: "I don't say that it was an overdue account. I said that I had not received any money on the thirteenth of December." Again when asked about the same matter as to whether there was an overdue account on the thirteenth of December, 1907, from the Monad Engineering Company, his reply was: "I don't think I did say that."

There was evidence by Ward to the effect that he was not paid in full, and had disputes about the final payment of his account.

ARGUMENT OF COUNSEL FOR PLAINTIFF IN ERROR.

In the consideration of the effect of fraudulent representations of collateral matters as inducements to the contract, the law is usually stated that the collateral matter must appear from the circumstances of the case to be material to the contract in its direct sense, or be such as has been made by the parties an essential preliminary to the making of the contract in question.

Admitting that the right of disposal is an incident to the ownership of property, it follows that Stewart, in this case, had the absolute right, if he considered it good business policy, to refuse to sell stone to a purchaser who was at that time under contract to purchase stone from another quarry for the same work. Brett v. Cooney, 75 Conn. 338, 53 A. 729, 1124.

The better rule for deciding whether fraud be material or not is this: If the fraud be such that had it not been practiced the contract would not have been made, or the transaction completed, then it is material to the contract. 2 Pars. on Cont. 937; Higbee v. Trumbauer, 112 Iowa 74, 83 N.W. 812; Brown v. Search, 131 Wis. 109, 111 N.W. 210.

"It may often be difficult to say when a representation is material, but it is probably safe to say that it is always material if had it been known to be false the contract would not have been entered into." Clark on Contracts, 226; 1 Page on Cont. 208; McAleer v. Horsey, 35 Md. 439; Powers v. Fowler, 157 Mass. 318, 32 N.E. 166; Holst. v. Stewart, 161 Mass. 516, 37 N.E. 755, 42 Am. St. Rep. 442.

"The misrepresentations must be material, that is it must have been an inducement to the contract; otherwise it will not be a ground for avoiding it." 9 Cyc. 424; Taylor v. Scoville, 3 Hun. (N. Y.) 301; Stewart v. Lester, 49 Hun, 60, 1 N.Y.S. 699; Smith v. Countryman, 30 N.Y. 670; Pulsford v. Richards, 17 Beaver, 87, at 96; 17 Jur. 865; 22 L. J. Ch. 559; 1 Weekly Rep. 295; Stone & Wellington v. Robie, 66 Vt. 245, 29 A. 257.

A careful examination of the authorities will disclose, beyond question, that the misrepresentation of the fact known to the person making it to be untrue amounts to a fraud in law, if the representation be expressly intended to induce a person to act upon it. Kent County R. R. Co. v. Wilson, 5 Houst. 50; Richardson v. Horn, 8 Houst. 26, 31 A. 896.

While in an action for deceit all the elements of fraud, including injury, must be present, where fraud is urged as a defense to an action on contract, the element of damage is not necessary to justify rescission.

The argument of the court below is to the effect that inasmuch as it does not appear that Stewart would have suffered an injury by reason of the statements made, one of the essentials in the proof of fraud is wanting, and therefore the case of fraud is not made. That this is error, the authorities recognize the very important distinction between fraud as a ground for an action of deceit and as the ground for rescission in a defense to an action on contract. Taylor v. Scoville, 3 Hun. (N. Y.) 301; Stewart v. Lester, 49 Hun. 63, 1 N.Y.S. 699; Higbee v. Trumbauer, 112 Iowa 74, 83 N.Y. 812; McLaren v. Cochran, 44 Minn. 255, 46 N.W. 408; Williams v. Kerr, 152 Pa. 560, 25 A. 618; Fox v. Tabel, 66 Conn. 397, 34 A. 101; Cruess v. Fessler, 39 Cal. 336; Baker v. Maxwell, 99 Ala. 558, 14 So. 468; Harlow v. La Brum, 151 N.Y. 278, 45 N.E. 859; Short v. Cure, 100 Mich. 418, 59 N.W. 173.

That the court below erred in considering the element of injury essential in this case must clearly appear from an examination of all of the authorities.

It was without the province of the court in this case to pass upon the materiality of the statements and the defense of fraud should not have been taken from the jury.

The court below erred in refusing to instruct the jury that if a purchaser makes false representations to pay, or as to his property or credit, the contract is vitiated.

(A statement as to assets and debts of a business is a material fact): Nevada Bank v. National Bank, (C. C.) 59 F 338; Mayberry v. Rogers, 81 Ill.App. 581; Garrison v. Electric Works, 55 N.J.Eq. 708, 37 A. 741; Townsend v....