Boulden v. Stilwell

⁵⁵⁰ Pearce, J., delivered the opinion of the Court. The plaintiff in this case complains that by means of certain false and fraudulent representations made to him by the defendants, he was induced to sell to Leroux, one of the defendants, certain stock held by the plaintiff in the Structural Iron and Steel Company of Baltimore City, whereby he has sustained damage. The declaration, in substance, alleges that Stilwell was psesideut, and Leroux vice-president and general manager of the company, each holding a large number of shares therein; that plaintiff was acting secretary and treasurer, holding two hundred and fifteen shares therein; that defendants, desiring to obtain from the plaintiff his said shares of stock at a less sum than their real value, entered into a conspiracy, fraudulent combination, and arrangement between them, by which defendant, Stilwell, should represent to the plaintiff that he had sold his shares of stock in said company to Leroux; that the company was losing money; that it was about to “fall down,” meaning thereby that it was about to fail and become insolvent; that he, Stilwell, would not carry it financially-much longer; that Leroux should represent to plaintiff that he had bought Stilwell’s stock, which would give him a majority of the stock in the company, and would result in removing plaintiff from his employment in the company; that these representations were made to him by the defendants in pursuance of said conspiracy, and by reason thereof he was induced to sell and deliver his two hundred and fifteen shares of. stock for $5,625, whereas they were of the value of $21,500, which value was then unknown to him, and of which he had no means of knowledge, though such true value was then known to defendants; that these representations were falsely and fraudulently made, with intent to deceive and defraud him, and did so deceive and defraud him, and that if the same had not been so made and relied on, he would not have sold .his stock, and that by means of the premises he had sustained damage to the extent of $15,850. The general issue plea was filed, and at the close of the ⁵⁵¹ plaintiff’s testimony, the defendant moved the Court to strike out certain evidence which had been admitted subject to exception, which motion was granted, and thereupon the Court granted a prayer offered by the defendant, that there was no evidence legally sufficient to entitle the plaintiff to recover, and that the verdict must be for defendants.

The single exception is to the granting of this motion and prayer, and in considering the instruction given, which will be first taken up, we are required to assume the truth of all the plaintiff’s evidence, and all inferences fairly deducible from it. The general principles which must control our judgment in this case, have been established in a series of cases in Maryland, the most important of which are, McAleer v. Horsey, 35 Md. 439 ; Buschman v. Codd, 52 Md. 202 ; Robertson v. Parks, 76 Md. 118 ; Byrd v. Rantman, 85 Md. 414 ; Cahill v. Applegarth, 98 Md. 493 . When the decision in McAleer v. Horsey was rendered, it was there said that we then had for our guidance, no express decision of this Court upon several points involved, but that decision has ever since been regarded as a notable contribution to the learning upon this subject, and later cases have covered almost every point likely to-arise in such actions. Most of these decisions have been made in cases where damages were claimed as the result of purchases induced by false and fraudulent representations, but there can be no good reason why sales, so induced, and resulting in damage, should not be governed by the same principles, and these have been so applied in this State in Byrd v. Rantman, supra.

In McAleer v. Horsey , Judge Miller obsereved that “neither the common law, nor any code of human laws, seeks to enforce the rule of perfect morality declared by divine authority, which acknowledges as its one principle, the duty of doing to others as we would that others should do to us, and which, by consequence, absolutely excludes and prohibits all cunning, and craft, or astuteness, practiced by any one for his own exclusive benefit. And it hence follows that a certain amount, of selfish cunning passes unrecognized by Courts of justice,. ⁵⁵² and that a man may procure to himself, in his dealings with others, some advantages to which he has no moral right, but to which he may succeed in establishing a perfect legal 'title.” In determining, in each case, whether the fraud complained of is one which, falls within the class above described, or within that other class which Courts of Justice will recognize and redress, “by stepping in and annulling what has been done, or rectifying the wrong by sustaining an action for the deceit,” we must be governed by certain precedents and rules which have been established as the result of all the ca.ses, and which in general terms may be stated as follows: • The foundation of the action is actual fraud, and nothing short of this will suffice. Consequently, a misrepresentation believed by the speaker to be true, though induced by his ignorance or negligence, will not sustain an action for deceit. There must be, either knowledge of the falsity of the repre-* sentation, or such reckless indifference to truth in making it, as is held equivalent to actual knowledge.

The fraud must be material, by which is meant that without it, the transaction would not have been made. It must be a statement of an alleged existing fact, or facts, and not merely of some future or contingent event, or an expression of opinion as to the subject of the statement. The party to whom it is made must rely upon its truth, and must have the right, as a person of ordinary business prudence, to rely upon it, “otherwise it is his own folly or fault, for the consequences of which he cannot ask relief of the law; ” and finally there must be damage, directly resulting from the fraud. Nearly all the Maryland cases, and a number of the leading English cases, have been carefully considered in the recent case of Cahill v. Applegarth, supra, and there is no-occasion to review-them here.

Keeping in view the principles stated above, we will now briefly consider the testimony upon which this case was withdrawn from the j ury. ; In support of the averments of the narr. a summary of which we have given, the plaintiff-testified that in June, 1900, while he was employed by the receivers of the Columbian Dry ⁵⁵³ Dock and Iron Works Company, having been with that company for twenty-four years previously, Stilwell proposed to him to go with a company which he and Leroux were about to re-organize as the Structural Iron and Steel Company, and said, if he would go with them they would appoint him secretary and treasurer, at the same salary they received; “each one of the three also to share and share alike in all profits, emoluments, &c.; ” that he accepted the offer, and a written agreement was entered into between them covering the offer, and assuring him the position for five years at a salary of $50 per week; that he put $5,000 in the company, representing fifty shares of preferred stock at par, with which he received, as a bonus, 165 shares of common stock; that the company had quite a number of government contracts, and things went on pretty well until the spring of 1901, when Stilwell and Leroux had several quarrels in hjs presence, in which each threatened to get out the company, and which he then thought real quarrels, but which he afterwards learned were mock, or feigned quarrels intended to deceive and frighten him into getting out of the company; that in April, 1901, Stilwell told him that he was going to sell out to Leroux, that the company was going “to fall down,” and that as he had gotten him into the company and was his friend, he did not want him to remain in a company that was going “to fall down,” and handed him a letter, signed by himself, and addressed to plaintiff, informing him that he had sold his stock to Leroux on the terms stated in his proposition of April 12th, and he then repeated his advice to plaintiff to get out. Plaintiff then saw Leroux, who said he had agreed to buy Stilwell’s stock, which would give him a controlling interest; that the business was not productive enough to pay three salaried officers, and that he intended to run it as a family company. He told plaintiff this was his last opportunity to accept his offer, and that in reliance upon these statements he accepted the offer, and got out, receiving from Leroux for his 215 shares of stock $5,650 in cash, of which, $.5,000 was the par value of his 50 shares of preferred stock, and $650, was to compensate him ⁵⁵⁴ for loss to that amount in the sale of some houses which he had sold to raise the money