Cahill v. Applegarth

Boyd, J., delivered the opinion of the Court. This is an action for deceit brought by the appellee against the appellant to recover damages sustained by the former by reason of the purchase of thirty shares of stock of the South Baltimore Bank from the appellant in October, 1897. The alleged false representations and statements relied on in the declaration are that the appellant, who was a stockholder,, director and president of the bank, said it was in a prosperous condition and making money; that none of the stock was then on the market, but the defendant was anxious to have the plaintiff connected with the bank as a stockholder and director, and if he heard of any of the stock for sale he would advise the plaintiff; that on the first of October, 1897, the defendant informed him that he had heard of a small block of stock for ⁴⁹⁸ sale and had purchased it for him at $23.50 per share, and was afraid to take time to consult with the plaintiff for fear some other person might buy it, as it was then worth on the market $25.00 per share, but the party having it for sale wanted to raise some money quick, and was hot posted. It is further alleged that plaintiff said that he did not have time to examine the stock market, or the condition of the Bank, “and he guessed he would not take the stock,” and the defendant thereupon reminded him that he, the defendant, was president of the bank and, as such, familiar with its affairs, and repeated what is alleged above as to the value of the stock, and said the defendant himself would have taken it if it were not for the fact thát he wanted plaintiff’s name connected with the bank; that he then said to the defendant that as he had been connected with the bank a long time and, as its president, ought to know what he was talking about, he would on his statement and representation as to the condition of the bank and the market value of its stock, take the thirty shares, which he did and paid him $705.00 for them.

The falsity of the representations is thus alleged. “That the said statements and representations made by the defendant to the plaintiff were false and 'known to the defendant at the time to be false, or were made by him with a reckless disregard of their truth or untruth, and were made for the purpose of deceiving the plaintiff” The trial of the case resulted in a verdict for the plaintiff for the full amount paid for the stock and interest. During the trial eleven exceptions were taken—ten of them being to rulings of the Court in admitting or rejecting evidence offered and the other embracing the prayers, seven of which were offered by the plaintiff and thirteen by the defendant. The Court rejected all of the prayers, excepting those of the defendant numbered 4 and 8)4, and gave an instruction of its ■ own to which the defendant excepted specially as well as generally. As that instruction of the Court presents the most important question in the case, we will first consider it. 1.

Several objections are urged by the appellant to it, but ⁴⁹⁹ that which we deem to be of most importance is the portion of it referring to the alleged untruth of the representations. After submitting to the jury to find whether at or before the sale the defendant, being a director and president of the bank and a member of its finance and book committees, as an inducement to the plaintiff to buy said stock, made representations to him concerning the financial condition of the bank, etc., or as to the real ownership of the thirty shares, which representations in whole or material part were false in fact, it then proceeds as follows: “And were either known to the defendant to be false, or by the exercise of ordinary care (that is, such care as might reasonably be expected of an ordinarily prudent and intelligent bank president under the circumstances) ought in your judgment to have been known by him to be false. McAleer v. Horsey, 35 Md. 439 , is the leading case in this State in actions for deceit, and there have been a number of them before this Court since that decision was made. In that case the subject as presented by the facts therein considered was very thoroughly discussed.

Amongst other things it was stated that “The cases in the English Courts on this subject are carefully reviewed in Benjamin on Sales, 338 to 345, where It is stated that the settled law of England now is, that to support'án action for false representation, the representation must not only have been false in fact, but also have been made fraudulently." That case proceeded wholly on the theory that the representations wrere false, were made with intent to induce the plaintiff to purchase, the defendant “knowing them at the time to be false f and that the plaintiff was thereby induced to purchase. In Buschman & Cook v. Codd, 52 Md. 202 , the false representations were concerning matters pertaining to the business of the defendants, the falsity of which was clearly within their knowledge and the principles announced in McAleer v. Horsey were followed. In Robertson v. Parks, 76 Md. 118 , the plaintiff sued the defendants, who were stockholders and officers managing the affairs of a corporation, for misrepresentations made by them concerning the condition of the ⁵⁰⁰ company which induced the plaintiff to invest five thousand dollars in its stock. That case went further than the two above cited, and it was held that: ‘ ‘It is not necessary in all cases to show that the defendant knew at the time that the representation made by him was false in fact.

It is sufficient if the statement be made for a fraudulent purpose, and without a bona fide belief in its truth by the defendant, with the intention of inducing the plaintiff to do an act, and that act is done, in reliance upon the truth of the representation, which turns out to be false to the damage of the plaintiff. In such case an action for damages sustained may be maintained.” The case of Taylor v. Ashton, 11 Mees, and W. 401, was cited with approval. That was an action against the directors of a bank for false and fraudulent representations alleged to have been made by them concerning its condition : Judge Alvey said of it: “It was held, that if a party makes an untrue representation to another for a fraudulent purpose, with the intent to indu.ce the latter to do an act which he afterwards does, to his prejudice, an action for deceit will lie ; and that it is not necessary to show that the defendant knew the representation to be untrue in point of fact It is only necessary to show that the defendant pretended to a knowledge which he must, according to principles of reason and good faith, have known that he did not possess at the time- of the misrepresentation made.” In Melville v. Gary, 76 Md. 221 , this Court quoted with approval what was said by Buller, J., in Pasley v. Freeman, 3 Term Rep. 57, that “The foundation of an action of this kind is fraud and deceit in the defendant, and damage to the plaintiff Fraud without damage, or damage without fraud, gives no cause of action ; but when these two concur an action lies.” In Weaver v. Shriver, 79 Md. 530 , we said that a prayer of the defendant which thus referred to the question of knowledge was correct: “That the defendant, at the time of making the representations knew them, or any of them, to be untrue, or made them or either of them with a reckless disregard of their truth or untruth.” In Phelps v. G. C. & C. R. R. Co., 60 Md. 536 , where it was claimed that certain es ⁵⁰¹ timates given to the plaintiff by the defendant’s officers, on which he relied in making a contract to build a railroad, were false, a prayer was approved which required the plaintiff to satisfy the jury that the engineer did not make the representations in good faith “but that they were false to his knowledge, or that he had no reasonable ground to believe them to be true at the time,” and that was in substance stated in an instruction given by the lower Court, which was also approved of by this Court. We have thus referred to some of the principal actions for deceit that have been in this Court.

Some of them present facts which are quite analogous to those now before us, but none of them go so far as this instruction of the Court, which left to the jury to find either that the representations were known by the defendant to be false, or by the exercise of ordinary care ought in the judgment of the jury to have been known by him to be false. In other words, the jury was not only not required to find that the defendant did know ‘that they were false, but the only substitute for that knowledge (which must generally he shown in actions for deceit) required by the instruction was the negligence of the defendant in not knowing his representations to be false, for that is what it amounts to. In Robertson v. Parks , it was said to be sufficient “if the statement be made for a fraudulent purpose, and without a bona fide belief in its truth by the defendant,” and in Weaver v. Shriver , the alternative stated by this Court was that the defendant made the representations “witlfa reckless disregard of their truth or untruth,” and in Phelps v. Railroad Company, “that he had no reasonable ground to believe them to be true at the time.” But in such cases when the plaintiffs have been permitted to recover, without proving actual knowledge on the part of the defendants, there have been conditions which at least showed a moral delinquency and not merely a lack of knowledge, by reason of the fact that the defendant had not exercised ordinary care in connection with his duties, to inform himself of the real facts.' There are many cases elsewhere to the effect that such an alternative as ⁵⁰² was given in this instruction connot be allowed in an action for deceit. In Kountze v. Kennedy, 117 N. Y. 124 , it was said “The gravamen of the action is actual fraud, and nothing less will sustain it.

The representation upon which it is based must be shown not only to have been false and material, butJ that the defendant .when he made it knew that it was false, or not knowing whether it was true or false and not caring what the facts might be, made it recklessly, paying no heed to the injury which