Talcott v. Friend

• Decision Date: 04 December 1909
• Docket Number: 1,511.
• Citation: 179 F. 676
• Parties: TALCOTT v. FRIEND et al.
• Court: U.S. Court of Appeals — Seventh Circuit

179 F. 676

TALCOTT v. FRIEND et al.

No. 1,511.

United States Court of Appeals, Seventh Circuit.

December 4, 1909

Petition for Rehearing Overruled June 10, 1910.

Roger Sherman, for plaintiff in error.

S. O Levinson, for defendants in error.

Before GROSSCUP, BAKER, and SEAMAN, Circuit Judges.

BAKER Circuit Judge, .

Plaintiff in error, who was plaintiff below, brings this writ of error to reverse a judgment that he take nothing by his action on the case against defendants for their alleged deceit in obtaining goods from him by means of false written representations concerning their financial responsibility. Among various pleas, defendants filed one setting forth certain records in bankruptcy proceedings in the District Court for the Northern District of Illinois, and alleging that by reason thereof plaintiff was barred from prosecuting his present action. Plaintiff filed several replications, in one of which he set forth an additional portion of the same bankruptcy proceedings, and claimed that by reason thereof he was not within the alleged bar of former adjudication. Defendants filed a similiter. Thereafter plaintiff made a 'motion to have the court find the issues on the question of former adjudication in favor of plaintiff. ' Without objection by defendants, the court proceeded with a trial of the aforesaid motion, without the intervention of a jury. And each side, at such trial, introduced in evidence, without objection, the records in bankruptcy set forth in the plea and replication. Thereupon the court, in the form of a finding of facts, recited the contents of those records stated as a conclusion of law that the matters involved in plaintiff's declaration herein had been fully adjudicated in the bankruptcy proceeding, and entered the judgment which is brought up by this writ of error.

Each side now seeks to take advantage of alleged infirmities in his adversary's pleadings. But we will not stop to judge of the merits of this fencing, because in the light of the record it is impertinent, particularly when we bear in mind that pleadings were primarily intended, not as traps and snares, but as means of fairly advising the adversary in advance of the trial what the pleader would offer to prove at the trial. The plea fairly advised plaintiff that defendants would offer certain records. So, too, the replication fairly advised defendants that plaintiff would offer certain additional records. Each side deliberately refrained from seeking a ruling upon the legal sufficiency of his adversary's pleadings, but joined with his adversary in asking judgment with regard to the legal effect of a concededly existent and true record, in its entirety, upon plaintiff's right to a trial of his present alleged cause of action. On such a record the parties cannot properly inquire of us what rulings the Circuit Court ought to have made if demurrers or motions for judgment on the pleadings had been duly interposed.

Defendants also contend that nothing can be considered on this writ of error, because a trial by jury was not waived by written stipulation. There was no question of fact to be decided at the aforesaid limited hearing. On what was virtually an agreed statement of facts the parties submitted to the court questions of law.

Briefly, the facts were these: On February 1, 1904, defendants were adjudged bankrupts. Plaintiff filed a claim for $3,204 as the agreed price of goods sold and delivered by him to defendants. The claim was allowed, and plaintiff received his share under a composition which was confirmed. Plaintiff opposed the confirmation, and filed a specification in which he alleged that defendants in January, 1903, made a statement in writing to the Woods Dry Goods Commercial Agency, in which statement defendants showed net assets of $92,900 over and above all debts and liabilities; that defendants gave the statement to the agency for the purpose of having the agency communicate it to plaintiff and other wholesalers in order that plaintiff and others should sell and deliver goods to defendants on credit in reliance upon the truth of said statement; that the agency communicated said statement to plaintiff and others; that plaintiff and others sold and delivered goods to defendants on credit, and in so doing relied upon the truth of said statement; that the statement was false; that defendants, at the time of making the statement, had no assets in excess of their debts and liabilities, but were utterly insolvent, as they well knew; and that plaintiff and others were ignorant of the falsity of said statement until after the petition in bankruptcy was filed. The District Court, construing section 14b (3) ^[1] (Act July 1, 1898, c. 541, 30 Stat. 550 (U.S. Comp. St. 1901, p. 3427), as amended by Act Feb. 5, 1903, c. 487, Sec. 4, 32 Stat. 797 (U.S. Comp. St. Supp. 1909, p. 1310)) to mean that a bankrupt debtor should not be refused a discharge (confirmation of a composition operating as a discharge) ^[2] on account of having made a materially false statement in writing, unless the statement was made by the debtor directly to the creditor whom the debtor intended to deceive, ruled that the specification aforesaid failed to state facts sufficient to constitute a bar to defendants' discharge, and entered judgment as follows:

'It appearing that the composition has been accepted by a majority, * * * and that the bankrupts have not been guilty of any of the acts, or failed to perform any of the duties, which would be a bar to a discharge, * * * it is therefore hereby ordered that the said composition be, and it hereby is, confirmed.'

This judgment has remained in full force and effect. The deceit counted on in the declaration in the present action is the defendants' giving of the same false statement in writing which was set forth in plaintiff's objection to the confirmation of the composition. The damages alleged to have been suffered as the consequence of the deceit are the unpaid balance of the price fixed in the contract of purchase.

I. What effect upon plaintiff's right to maintain this action on the case for deceit is exerted by the fact that plaintiff filed against the estate in bankruptcy his claim under the contract of purchase, and shared in the distribution?

Filing the claim was an affirmance of the contract of sale, and constituted an election not to rescind and attempt to recover what plaintiff had delivered to defendants in pursuance of the contract.

But an action for deceit is not based on recission. It too, implies an affirmance. It means that plaintiff has elected to abide by the contract, to retain and make the best of what he received thereunder, and to recover the difference between what he received and what he parted with, as his damages in being misled.

In Cheney v. Dickinson, 172 F. 109, 96 C.C.A. 314, we pointed out that an action for deceit can be maintained against any one who intentionally deceived the plaintiff into making and carrying out the contract. Against any one--quite irrespective of whether the deceiver was himself a party to the contract or not. 'In such an action it is immaterial whether the defendant did or did not receive the consideration or other benefit, because the gravamen of the action is that the plaintiff has been deceived to his injury, not that the defendant has profited by the transaction. ' So there was no inconsistency in plaintiff's realizing all he could from defendants' explicit promise to pay, and afterwards demanding damages for having been deceived into accepting such a poor obligation in exchange for his goods, because the defendants were sued in two separate and distinct capacities. That the promisors in the contract case and the fraud doers in the deceit case were the same persons was an incident immaterial to either case.

In Frey v. Torrey, 70 A.D. 166, 75 N.Y.Supp. 40, 8 Am.Bankr.Rep. 196, affirmed by the Court of Appeals in 175 N.Y. 501, 67 N.E. 1082, which was an action by respondent plaintiff below, to recover damages suffered through appellant's deceit in inducing respondent to deposit money with appellant while insolvent, the court sai...