Vulcan Metals Co., Inc. v. Simmons Mfg. Co.

• Decision Date: 07 January 1918
• Docket Number: 35,36.
• Parties: VULCAN METALS CO., Inc., v. SIMMONS MFG. CO. VULCAN METALS CO., Inc., et al. v. SAME.
• Court: U.S. Court of Appeals — Second Circuit

248 F. 853

VULCAN METALS CO., Inc., v. SIMMONS MFG. CO.

VULCAN METALS CO., Inc., et al. v. SAME.

Nos. 35, 36.

United States Court of Appeals, Second Circuit.

January 7, 1918

Writ of error to two judgments of the District Court for the Southern District of New York, entered in the first case upon a verdict directed by the court dismissing the complaint, and in the second case, upon a verdict directed by the court in favor of the plaintiff for the sum of $43,423.04. The complaint in the first action was for deceit, brought in the state court and removed for diversity of citizenship to the District Court. The complaint in the second was originally brought in the District Court, about a month after the first suit, and was upon three notes, for $15,000, $12,500, and $12,500, respectively. In the complaint on the second action the defendants set up the same facts which they laid in their complaint in deceit, and which they here pleaded as a defense to the action on the notes and as a counterclaim.

The gist of the complaint in the first action was the fraudulent procurement by the Simmons Manufacturing Company of a contract executed by the defendant Freeman on behalf of the Vulcan Metals Company, Incorporated, by which he purchased from the Simmons Company for $75,000 all the tools, dies, and equipment owned by it for the manufacture of its vacuum cleaning machines, all manufactured machines and unassembled parts, as set forth in a schedule thereto attached, and all inventions, applications, and letters patent owned by the Simmons Company in vacuum cleaners, together with certain proposed improvements to be made thereon. The complaint further alleges that the officers and agents of the Simmons Manufacturing Company made false representations as to the character of the vacuum cleaners so sold and the extent to which they had been used upon the market, to which the Vulcan Metals Company, Incorporated, acted to its prejudice, because the machines and patents were totally inefficient and unmarketable. The notes sued on in the second cause of action were three of those given as part of the purchase price. The District Judge directed a verdict for the Simmons Manufacturing Company in both actions, upon the theory that no actionable fraud had been made out, and the correctness of this ruling is the turning point in the case.

The second class of misrepresentations was that the Simmons Manufacturing Company had not sold the machine, or made any attempt to sell it; that they had not shown it to any one that it had never been on the market, and that no one outside of the company officials and the men in the factory knew anything about it; that they had manufactured 15,000 of them but before making any attempt to market it they had been told by their agent that it would be a mistake for them to attempt to sell these along with their ordinary line, which was furniture; that on that account they had withdrawn them from the market and had never made any attempt to put them out. Sweetland, one of the promoters of the Vulcan Metals Company Incorporated, swore that Flynn had stated that the machines had been marketed, but marketed successfully. There was therefore a discrepancy between the testimony of these two representations, but for the purposes of the action it is not here material, since the complaint was based upon the representation that the machines had not been sold.

There was evidence that the machines, when exploited by the Vulcan Metals Company, Incorporated, proved to be ineffective and of little or no value, and that their manufacture was discontinued by that company not very long after they had undertaken it. There was also evidence that several of the Western agents of the Simmons Manufacturing Company had had the machines in stock and had attempted to market some of them; that they had been unsuccessful in these efforts, owing for the most part to the fact that the water pressures, where they had been sold, had not been sufficient to establish the necessary vacuum. Just what the vacuum was in the places where the machines were unsuccessful did not definitely appear in any of the proof.

Wilson B. Brice, of New York City (Charles H. Hyde, of New York City, of counsel), for Vulcan Metals Co., Inc.

Sullivan & Cromwell, of New York City (Clarke M. Rosecrantz and E. H. Sykes, both of New York City, of counsel), for Simmons Mfg. Co.

Before WARD and HOUGH, Circuit Judges, and LEARNED HAND, District judge.

LEARNED HAND, District Judge (after stating the facts as above).

The first question is of the misrepresentations touching the quality and powers of the patented machine. These were general commendations, or, in so far as they included any specific facts, were not disproved; e.g., that the cleaner would produce 18 inches of vacuum with 25 pounds water pressure. They raise, therefore, the question of law how far general 'puffing' or 'dealers' talk' can be the basis of an action for deceit.

The conceded exception in such cases has generally rested upon the distinction between 'opinion' and 'fact' but that distinction has not escaped the criticism it deserves. An opinion is a fact, and it may be a very relevant fact; the expression of an opinion is the assertion of a belief, and any rule which condones the expression of a consciously false opinion condones a consciously false statement of fact. When the parties are so situated that the buyer may reasonably rely upon the expression of the seller's opinion, it is no excuse to give a false one. Bigler v. Flickinger, 55 Pa. 279. And so it makes much difference whether the parties stand 'on an equality.' For example, we should treat very differently the expressed opinion of a chemist to a layman about the properties of a composition from the same opinion between chemist and chemist, when the buyer had full opportunity to examine. The reason of the rule lies, we think, in this: There are some kinds of talk which no sensible man takes seriously, and if he does he suffers from his credulity. If we were all scrupulously honest, it would not be so; but, as it is, neither party usually believes what the seller says about his own opinions, and each knows it. Such statements, like the claims of campaign managers before election, are rather designed to allay the suspicion which would attend their absence than to be understood as having any relation to objective truth. It is quite true that they induce a compliant temper in the buyer, but it is by a much more subtle process than through the acceptance of his claims for his wares.

So far as concerns statements of value, the rule is pretty well fixed against the buyer. So. Dev. Co. v. Silva, 125 U.S. 247, 256, 8 Sup.Ct. 881, 31 L.Ed. 678; Gordon v. Butler, 105 U.S. 553, 26 L.Ed. 1166; Lehigh Zinc, etc., Co. v. Bamford, 150 U.S. 665, 14 Sup.Ct.

219, 37 L.Ed. 1215. It has been applied more generally to statements of quality and serviceability. Kimball v. Bangs, 144 Mass. 321, 11 N.E. 113; Neidefer v. Chastain, 71 Ind. 363, 36 Am.Rep. 198; Warren v. Doolittle, 61 Ill. 171; Hunter v. McLaughlin, 43 Ind. 38. But this is not always so. Iowa, etc., Co. v. Amer. Heater Co. (C.C.) 32 F. 735. As respects the validity of patents it also obtains. Reeves v. Corning (C.C.) 51 F. 774; Dillman v. Nedlehoffer, 119 Ill. 567, 7 N.E. 88; Huber v. Guggenheim (C.C.) 89 F. 598. Cases of warranty present the same question and have been answered in the same way. Chalmers v. Harding, 17 L.T. (N.S.) 571; Farrow v. Andrews, 69 Ala. 96; Bain v. Withey, 107 Ala. 223; ^[1] Gaar, etc., Co. v. Halverson, 128 Iowa, 603, 105 N.W. 108; Bartlett v. Hoppock, 34 N.Y. 118, 88 Am.Dec. 428. Contra, Elkins v. Kenyon, 34 Wis. 93.

In the case at bar, since the buyer was allowed full opportunity to examine the cleaner and to test it out, we put the parties upon an equality. It seems to us that general statements as to what the cleaner would do, even though consciously false, were not of a kind to be taken literally by the buyer. As between manufacturer and customer, it may not be so; but this was the case of taking over a business, after ample chance to investigate. Such a buyer, who the seller rightly expects will undertake an independent and adequate inquiry into the actual merits of what he gets, has no right to treat as material in his determination statements like these. The standard of honesty permitted by the rule may not be the best; but, as Holmes, J., says in Deming v. Darling, 148 Mass. 504, 20 N.E. 107, 2 L.R.A. 743, the chance that the higgling preparatory to a bargain may be afterwards translated into assurances of quality may perhaps be a set-off to the actual wrong allowed by the rule as it stands. We therefore think that the District Court was right in disregarding all these misrepresentations.

As respects the representation that the cleaners had never been put upon the market or offered for sale, the rule does not apply; nor can we agree that such representations could not have been material to Freeman's decision to accept the contract. The actual test of experience in their sale might well be of critical consequence in his decision to buy the business, and the jury would certainly have the right to accept his statement that his reliance upon these representations was determinative of his final decision. We believe that the facts as disclosed by the depositions of the Western witnesses were sufficient to carry to the jury the question whether those...