Walker v. Russell

• Citation: 71 N.E. 86,186 Mass. 69
• Parties: WALKER v. RUSSELL et al.
• Decision Date: 20 May 1904
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

186 Mass. 69

71 N.E. 86

WALKER v. RUSSELL et al.

Supreme Judicial Court of Massachusetts, Middlesex.

May 20, 1904

COUNSEL

Chas.

F. Choate, Jr., for plaintiff.

Geo. R Nutter, John G. Palfrey, and Brandeis, Dunbar & Nutter, for defendants.

OPINION

LORING J.

This is an action to recover $11,000 paid by the plaintiff to the Basin & Bay State Mining Company, a Montana corporation, for 100 new shares in its capital stock issued by said corporation to him. The plaintiff's evidence tended to show that he was induced to subscribe to and pay for these shares of stock by the following representations which were made by the defendants, to wit: That the corporation owned a gold mine free and clear from all incumbrances; that all bills due from the corporation were paid, and that it 'positively owed nothing'; that there was from $60,000 to $65,000 surplus in the treasure that the corporation paid no salaries except to the men at the works, and no commission for selling shares in the capital stock; and that the company's operations had resulted in a net return of 25 per cent. and over per ton. There was also evidence that each and all of these representations were false, and known by the defendants to be false, and the plaintiff, relying on them, subscribed to and paid for 100 shares at $110 a share; and finally that the stock was worthless, and the plaintiff's money was wholly lost to him. The defense set up was that these representations were representations 'concerning the character, conduct, credit, ability, trade or dealings' of another person, within Rev. Laws, c. 74, § 4. The presiding judge ruled that the provisions of Rev. Laws, c 74, § 4 had no application to payments for treasury stock under the circumstances shown by the evidence in the case, and ruled that, upon all the evidence, the said provisions of the Revised Laws had no application to the case. The case is here on an exception to that ruling.

We are of opinion that the ruling was right. The original act, of which Rev. Laws c. 74, § 4, is a re-enactment, is section 5, St. 1824, c. 182. The other sections of that act have no bearing upon section 5, the section now in question. The whole act (including the section in question) was originally taken, almost word for word, from five of the eight sections of Lord Tenterden's act (9 Geo. IV, c. 14), passed in 1828. The section in question was taken from section 6 of that act, word for word, with this exception: In the English act the clause succeeding that in substance stated above is, 'to the intent or purpose that such other person may obtain credit, money or goods upon.' In Massachusetts (St. 1824, c. 182, § 5), the word 'thereupon' is substituted for the word 'upon,' which makes that sentence grammatical. It was pointed out in Lyde v. Barnard, 1 M. & W. 101, 110, 115, 116, 123, that the corresponding sentence in the English act was not grammatical. The true explanation of the word 'upon' being in the English act was considered in that case; Lord Abinger expressing the opinion that the word 'upon' was originally 'thereupon,' a conclusion which had been adopted in the Massachusetts act two years before. In determining the effect to be given to this section of Lord Tenterden's act, the most material consideration is the object which Parliament had in its enactment. The object of the enactment was to extend to a defendant, in case of an attempt to charge him with the debt of another person by parol evidence of a false representation as to the solvency of that third person, the same protection that is given to him by the fourth section of the statute of frauds (29 Car. II, c. 3) in case of an attempt to charge him with the other's debt by parol testimony of a contract guarantying the debt. The occasion for Lord Tenterden's act was the practice introduced by Pasly v. Freeman, 3 T. R. 51, decided in 1789. In that case it was decided that a defendant could be charged with another's debt if he had fraudulently represented that other to be solvent, and at common law such a representation could be proved by parol. Parliament thought that the danger of injustice from allowing a disappointed creditor to charge a defendant with the debt due him from a third person by parol testimony of a fraudulent representation as to the solvency of that third person was such that this act was passed, providing that no such action should be maintained unless the representation was made in writing signed by the party to be charged. See Lyde v. Barnard, 10 M. & W. 101, 103, 114, 117; Williams v. Mason, 28 T. L. R. N. S. 232, 233; Cook v. Churchman, 104 Ind. 141, 148, 3 N.E. 759; Bush v. Sprague, 51 Mich. 41, 47, 16 N.W. 222.

To pass to our own act and our own decisions: The typical case which the Legislature had in mind in enacting St. 1824, c. 182, § 5, was the case where the plaintiff is induced to extend a credit to the third person by representations made by the defendant as to his 'character, conduct, credit, ability trade or dealings.' The case where a plaintiff is selling his goods to a third person, and is induced to take the note of that third person on time in payment for them, relying on the defendant's representation as to his credit, is an example. Kimball v. Comstock, 14 Gray, 508; McKenney v. Whiting, 8 Allen, 207; Bates v. Youngerman, 142 Mass. 120, 7 N.E. 549. See, also, Stannard v. Kingsbury, 179 Mass. 174, 60 N.E. 552; and see Haslock v. Ferguson, 7 A. & E. 86. The case where the plaintiff is induced by representations of the defendant to indorse the note of a third person for his (the third person's) accommodation is another example. Mann v. Blanchard, 2 Allen, 386; Clydesdale Bank v. Paton, [1896] A. C. 381. In such a case the plaintiff is induced to extend a credit to the third person. Whether a particular representation is or is not within the statute does not depend alone upon what is said, but depends also upon the purpose for which the representation is made. For example, it was assumed in Medbury v. Watson, 6 Metc. 246, 39 Am. Dec. 726, that a representation that a third person had paid $4,000 for a sawmill bought by the plaintiff for $4,000 paid in cash in reliance upon that representation was not within the statute, upon its being decided that no change was made in the effect of the statute when the final clause of the original act was omitted in the re-enactment of it in the Revised Statutes, to wit, 'to the intent or purpose that such person may obtain credit, money or goods thereupon.' On the other hand, a representation that the third person owned a specified piece of property, which is not in form a representation concerning his 'character,...