Gittings v. Von Dorn

Pattison, J., delivered the opinion of the Court. This is an action for deceit, brought by the appelleesi against the appellant to recover damages said to have been sustained by them because of certain alleged misrepresentations made to them by the appellant. The declaration consists of four counts,. In the first it is ■alleged, that: “In September, 1913, the appellee, Theodore F. Von Dorn entered into a contract or an agreement with one Eoseoe Crary, ‘both individually and as president of the Dare Lumber Company, a body corporate, duly incorporated under the laws of the State of New York, whereby the said plaintiff agreed to seek a purchaser for the properties of the Dare Lumber Company, situated at Elizabeth City, North Carolina,’ consisting of sawmills, timber, lumber, supplies, etc., ‘and ■of the East Lake Lumber Company, a body corporate, duly incorporated under the laws of the State of New York, consisting of 180,000 acres of land, more or less, with the timber thereon, situated in Dare County, North Carolina, and for his services in finding such purchaser the said Eoseoe Crary, individually and as president of the Dare Lumber Company, and as the ■alleged authorized agent- of the East Lake Lumber Company, agreed to pay to the said Von Dorn, plaintiff, * * * a consideration, commission, or brokerage, in the event of a sale of the said property, amounting to ■$50,000.00.

And, thereafter, to wit, in the month of October, 1914, the said Von Dorn, the plaintiff, * * * entered into negotiations with Julian E. (liftings, the defendant, * * * (appellant in this court) both individually and upon representation by him that he was the president and a director of the East Lake Lumber Company, and a large stockholder in said company, and ¹² further, upon his representation that he was the authorized agent of the said East Lake Lumber Company, and also of the Dare Lumber Company, whereby the said Von Dorn, plaintiff, * * * undertook to seek a purchaser for the properties of the said Dare Lumber Company and the East Lake Lumber Company, and such negotiations were had between the said plaintiff and the defendant, * * * as that on the 24th and 25th days of November, 1914, and at divers other times, the defendant, * * * craftily contriving and intending to deceive, defraud and cheat the plaintiff, * * * represented to the plaintiff, Von Dorn, that if the said Von Dorn could furnish and procure a purchaser for the said property, he, the said Von Dorn, could and would obtain a contract for compensation or commissions for such sale, and falsely informed the said Von Dorn that he was a large stockholder in, and a director and president of the East Lake Lumber Company, and that by a resolution of the stockholders or Board of Directors of said company and said Dare Lumber Company, he was authorized to contract for the payment of a commission or brokerage or compensation to be paid in the event of a sale of the properties of the said companies, amounting to $50,000.00, and that as soon as a sale was negotiated to any person introduced by the plaintiff, * * * the defendant would procure and deliver to the plaintiff, Von Dorn, a formal contract for the sum of $50,000.00, and that he would personally assume or adjust the compensation or commissions to be paid to the plaintiff, * * * in the event of a sale of the said properties, and that the said Crary and the defendant, * * * were the only persons authorized by the above-named corporations to sell and dispose of the said properties. That during the month of October, 1914, the plaintiff, Von Dorn, associated himself, as party to the above-named contract, with the knowledge and consent of the defendant, * * * the plaintiff, Frank Weeks, as co-contractor with the plaintiff, Von Dorn. And relying upon said false and fraudulent ¹³ representations, on or about tbe 5th day of February, 1915, the plaintiffs, * * * believing at tbat time the said representations to be true, and having no knowledge nor notice of their falsity, agreed with the defendant, * * * tbat tbe compensation or commissions to be paid to tbe plaintiffs in tbe event of a sale of tbe said properties should be $50,000.00.

And thereafter the plaintiffs, * * * relying upon tbe truth of the statements made by tbe defendant, * * * to wit, tbat be and tbe said Crary were tbe only persons authorized by tbe said companies to dispose of tbe said properties, and tbat be was a large stockholder and a director and tbe president of tbe said East Lake Lumber Company, and tbat by resolution of tbe stockholders or Board of Directors of said East Lake Lumber Company and said Dare Lumber Company, he was authorized to contract for tbe payment of a commission or brokerage or compensation to be paid in tbe event of a sale of tbe properties of tbe said companies, amounting to the sum of $50,000.00, and tbat as soon as a sale was negotiated to any person introduced by tbe plaintiff, * * * tbe defendant would procure and deliver to tbe said Von Dorn a formal written contract for tbe said sum of $50,000.00, and tbat be would personally assume or adjust the said compensation or commissions to be paid to tbe plaintiffs, * * * in tbe event of a sale of the said properties, introduced to tbe defendant,. * * * and to tbe said Crary a certain George F. Montgomery, of New York City, as a prospective purchaser of tbe said properties, and actively aided and assisted in carrying on such negotiations with tbe said Montgomery as that said negotiations were finally consummated by tbe sale of said properties to tbe said Montgomery, and tbe purchase of the same by him for the sum of $1,000,000.00. “ ‘And tbe plaintiffs further say tbat tbe said representations of tbe defendant, Gittings, * * * were in fact false and fraudulent, and known to be false and fraudulent by tbe said Gittings when made, in tbat ¹⁴ said Gittings was not at that time the president and director, or a stockholder, of the said companies, or either of them, and was not authorized by the said companies to make a contract with the plaintiffs, * * * or either of them, to bind the said companies, or either of them, to pay to the plaintiffs, * * * a commission or compensation for the making of said sale, but said false and fraudulent representations and statements were made by the defendant, * * * craftily contriving and intending thereby to induce the plaintiffs, * * * to secure a purchaser for the said properties, and to deceive, defraud and cheat the plaintiffs, in that in fact the said Julian E. Gittings then had a contract with the said companies, whereby he was to be paid a commission in the event of a sale of the property of the East Lake Lumber Company of 10%. in case he procured a purchaser of the said companies, knowledge of which fact the said Gittings fraudulently and maliciously suppressed and kept from the plaintiffs, * * * and the plaintiffs had no knowledge nor notice of the falsity of any of the statements made by the said Git-tings, as above recited, and no knowledge nor notice of the real and true agreement between him and the •said East Lake Lumber Company, whereby the plaintiffs have been deceived, cheated and defrauded, in that they have not received any commission from either of the said companies, or from the defendant, or from any other person, for negotiating the sale of the properties above mentioned, although upon such sale the said Gittings has received his commission for the same.’ ” In the second, third and fourth counts of the declaration, no allusion is made to the alleged contract between Von Dorn and Crary, which is mentioned in the first count of the declaration. In other respects, these counts are very similar to the first count. In the second it is alleged that the defendant represented to the .plaintiff that he was the authorized agent of the two corporations and was authorized by them “to contract so as to bind them and each of them for the payment of ¹⁵ a commission” to the plaintiff if be furnished or procured a purchaser for said properties. While in the third count it is alleged that the defendant, in addition thereto, represented himself to be the president and a director of the East Lake Lumber Company; and in the fourth count, that he was the agent of the East Lake Lumber Company and authorized by it to make a contract binding upon said company to pay commissions for the sale of said property.

A demurrer filed to each of the counts of the declaration was overruled and the general issue plea, that the defendant did not commit the wrongs alleged, was filed. The ease then proceeded to trial and resulted in a verdict for the plaintiffs for the sum of $50,000.00. A judgment was entered thereon for that sum and it is from that judgment this appeal is taken. Eleven exceptions are found in the record to the rulings of the Court upon the admission, or rejection, of testimony and one to its rulings upon the prayers.

The defendant’s first prayer asked that the jury be instructed that “there is no evidence in this case legally sufficient to entitle the plaintiffs to recover under the pleadings in the ease, and their verdict must be for the defendant.” This prayer was refused. In considering this prayer we must be controlled by the well established principles of law upon which the plaintiff’s right to recover in oases of this character depends. To entitle the plaintiff to recover it must be shown: (1) that the representation made is false; (2) that its falsity was either known to the speaker, or the misrepresentation was made with such a reckless indifference to truth as to he equivalent to actual knowledge; (3) that it was made for the purpose of defrauding the person claiming to he injured thereby; (4) that such person not only relied upon the misrepresentation, but had a right to rely upon it in the full belief of its truth, and that he would not have done the thing from which the injury resulted had not such misrepresentation been made; and (5) that he actually suffered damage directly resulting ¹⁶ from such fraudulent misrepresentation. McAleer v. Horsey, 35 Md. 439 ; Buschman v. Codd, 52 Md. 202 ; Robertson v. Parks, 76 Md. 118 ; Cahill v. Applegarth, 98 Md. 493 ; Boulden v. Stilwell, 100 Md. 551 . “The foundation of the action is actual fraud, and nothing short of this will suffice. * * * 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 events, or an expression of opinion as to the subject of the statement.” Boulden v. Stilwell, supra. As said by Judge Miller, speaking for this Court in McAleer v. Horsey, supra, the leading case in this State upon the action for deceit: “No better rule can be given for deciding the question (whether the fraud is material) than this —if the fraud be such that, had it not been practised, the contract could not have been made or the transaction completed, then it is material to it, but if it be shown or made probable that the same thing would have been done in the -same way if the fraud had not been practised, it cannot be deemed material.” The evidence in this case discloses that on the 7th day of October, 1912, and for years prior thereto, there existed two corporations located in the State of North Carolina, one known as the Dare Lumber Company and the other as the East Lake Lumber Company, both incorporated under the laws of the State of Newi York. The property of the first consisted of saw mills, machinery and equipments, boats, warehouses, etc.; while the property of the other consisted of one hundred and eighty thousand acres of timber lands situated in said State of North Carolina, upon which the Dare Lumber Company held a mortgage for the sum of one hundred fl-nd fifty thousand dollars. For several years prior to the date above mentioned the Dare Lumber Company had been cutting and sawing the timber of the East Lake Lumber Company under a contract with it, by the terms of which the ¹⁷ latter company "was to be compensated for its timber by the payment to it of onenfourth of the profits of the Dare Lumber Company.

It seems, however, that no profits were earned by that company and nothing was paid to the East Lake Lumber Company for its timber, and consequently the payments of interest on its mortgage were not met. In this condition of affairs it was finally decided by the two companies to make a joint sale of their properties, be^ lieving that it would be to their mutual advantage that such joint sale should be made. Therefore the directors of the Dare Lumber Company held a special meeting on the said 7th day of October, 1912, and the minutes of that meeting, which were offered in evidence by the plaintiffs, show that a committee appointed at a previous meeting, “to meet with Messrs. John O. Gittings and Julian E. Gittings (the defendant) at Philadelphia, on September 9th, 1912,” made its retport and at such meeting a resolution, approved by John C. Gittings, president of the East Lake Lumber Company, was passed, authorizing, empowering and directing Mr. Eoseoe Crary as president of the Dare Lumber Company “to act with Mr. John O. Gittings, president of the East Lake Lumber Company, each in behalf of his own company, to negotiate and sell all the property interests of both companies at such price as they may mutually agree upon,” and of the net amount received therefor two-thirds were to be paid to the Dare Lumber Company, which it was understood should “include the payment and satisfaction” of the mortgage held by it against the East Lake Lumber Company, and one^third to the last named company.

Oil the 25th day of March, 1913, at a meeting of the directors of the East Lake Lumber Company, a resolution was passed by which John C. Gittings, the president of that company, “was appointed a committee of one to make sale of the property of the East Lake Lumber Company, jointly with Mr. Eoseoe Crary as a committee appointed by the Dare Lumber Company, upon such terms and conditions as the ¹⁸ presidents of the two companies may agree upon; in accordance with the understanding of the two companies expressed in the resolution of the Dare Lumber Company under date of October 7th, 1912.” The plaintiff, Von Dorn, a practicing lawyer of New York Oity, in July or August, 1913, heard through a client that the properties of these companies were in the market. He first wrote to one, Greenleaf F. Van Gorder, a lawyer of Buffalo, who, he was told, had the properties for sale, but after an exchange of three or four letters, nothing was done and the matter was dropped. He next wrote to O. F. Hotchkiss, who, he had heard, was the president of the Dare Lumber Company. In reply thereto he received a letter from Roscoe Crary of Elizabeth Oity, N. 0., president of the Dare Lumber Company, dated September 4th, 1913.

In this letter he, Crary, states that the letter to Hotchkiss had been referred to him, and in it he asked Von Dorn to send to him a statement that Von Dorn said in his letter was given him, containing data as to the company’s property, and declined to answer further until his request was complied with. On September 6th, Von Dorn replied to this letter sending to Qrary the statement requested and urged upon him the necessity of immediate action so that he could at once place the property before a client with whom he seemed to think delay would be dangerous. This letter was answered by Crary on September 8th, in which he acknowledged receipt of certain correspondence between Von D'om and others in reference to the property, but stated he was then too busy to' go through it, but would do so at his earliest convenience and would forward it to the president of the East Lake Lumber C'ompany. On September 16th Von Dorn again wrote Orary acknowledging receipt of his letter of the 8th, stating that he would leave New York for St. Louis on the 24th and would be away more than two weeks and asked, if the property was to be offered for sale, that authorization contracts be executed at an early date, as the parties interested in the property were ¹⁹ planning extended trips, and that lie would immediately arrange for the introduction of the seller and buyer upon re>ceiving proper authorization.

On September 18th Crary called to see Von Dorn, and after his departure, he, Von Dorn, on ,the same day wrote him a letter asking for further information as to the property and terms of sale. On September 20th Crary wrote stating he had talked with Mr. Gittings of the East Lake Lumber Company and they had concluded, inasmuch as he was a stranger to both of them, they would first make some inquiry as to him, and, if upon such inquiry they were satisfied with him, they were “willing to do the following”: “Providing we can trade with the people you name as your customers, we will give you a commission of $50,000. We would not care to give any more. We will not make it any specified per cent, and we will not give you any price, but we will deposit our agreement in some trust company, and you can deposit the name of your customer, and it will be distinctly understood that you will have the privilege of naming no other customer than this man first mentioned, just as I talked with you the other day. “When you have named your man and he is on the ground, we will take it up with him and do the figuring; we being familiar with the lumber business can of course handle him very much better than you can.

Will this arrangement be satisfactory to you? “We don’t want you to say to Mr. Barnes, or Mr. Van Gorder or anyone else that you are in any way figuring with us in this matter,, nor do we want your customers to talk about it. * * * “So far as your going to St. Louis is concerned, to attend court, why that need not interfere with this. You could give us the name of your people even from there, and it can then be taken up with them.” On September the 22nd, Von Dorn wrote Crary that he had received his letter of the 20th, and had forwarded it to B, A. Howland, Boston, Mass., who he said was associated with ²⁰ Mm in the transaction, and that Howland would commuMcate with Orary concerning the plan for submission of the business to interested parties. He then referred to the offer contained in Clary’s letter to pay him $50,000.00 for that which was to be done by him, saying that he thought it was hardly adequate for a proposition of two millions of dollars', especially in view of the fact that he expected the brokerage to be divided into four, if not five parts, and that, in his opinion, the brokerage should not be less than $100,000.00, but “whatever arrangements you make with Mr. Howland will be satisfactory to me, and he will explain the situation in detail and give you the names of the parties to whom the business is to be offered.” Von Dorn testified that the matter was then turned over to Mr. Howland and there was no further communication between himself and Orary until Orary telephoned Mm in October, 1913, and two or three days afterwards he had a further conversation with him. After that conversation, there was correspondence between John W. Field and Orary, and finally a correspondence between the defendant and Field.

That he first heard of the defendant in the latter part of November, 1913, when Orary mentioned him over the ’phone, and that his first communication with the defendant was by a letter received from him, dated September 22nd, 1914. In his cross-examination, Von Dorn stated that Orary in said conversation with him over the ’phone, when he was about to leave for the State of Wyoming, told him that if he had a prospective purchaser', to take it up or communicate with Julián E. Gittings, the defendant; who had full authority to negotiate the sale of the property. John O. Gittings, president of the East Lake Lumber Company, and brother of the defendant^ when placed upon the stand by the plaintiffs, testified that the two companies agreed at the time they decided to make a joint sale of their properties “that there should be no general offer of these properties for the reason that it interfered with the operations and ²¹ cheapened them, and further, that the properties should not go on the market, and any application- that came from anyone-who desired to examine the property, if upon investigation it turned out they were responsible people and wanted to buy, then their proposition would be entertained.” That the defendant (Julian E. Gittings.) was employed “to make such preliminary investigations for the two companies,” and was to be compensated therefor by the payment to- him of 10% commissions on the amount of