McAleer v. Horsey

Stewabt, J., delivered the following dissenting opinion: As the question is an important one in the law of evidence, I take occasion to record my dissent from the views of a ma ⁴⁶⁸ jority of the Court as to the admissibility of Samuel Ahalt’s testimony, referred to in the 2d bill of exceptions, to support and corroborate the testimony of the plaintiff, who was sworn as a witness, and whose character for truth was not impeached, directly or substantially, I understand it to be agreed on all sides that the rule, or rather exception, recognized in Cooke vs. Curtis, 6 H. & J., 93, and Washington Fire Insurance Co. vs. Davison, 30 Md., 104 , is to have but a limited operation, and sound reason forbids its further extension. The evidénce now in question can be readily contra-distinguished from that admitted in the above cases. The fact that parties can now be admitted as witnesses, affords no ground for the extension of the rule, but furnishes the greater reason for confining such testimony within the strictest limits. I do not see how such testimony can, upon any principle of reasonable construction, be considered in point of fact as corroborating evidence.

Where there is a disclaimer of any design to impeach the witness, and his reputation for truth is really not impeached, but the opposing evidence only offered to show the different recollection of another witness as to what occurred, it seems to me that in such case it cannot be fairly considered the witness is impeached. Unless the mere contradiction amongst witnesses is made ground for the introduction of corroborating testimony to support a witness, as if he were directly impeached, I do not perceive why such testimony should be admitted. It is well settled that the contradictory statements of wit- ' nesses affords no ground of impeachment, and is not to be made the occasion for the introduction of corroborating testimony to support the character of a witness, as if in fact that ■were impeached for truth. Vernon vs. Tucker, 30 Md., 462 .

Nor does the testimony offered come within the rule of admission as a part of the res gestee. ' Miller, J., delivered the opinion of the Court. This is an action to recover damages alleged to have been sustained by the plaintiff by means of false and fraudulent ⁴⁵¹ representations made to him by the defendant, by which he was induced to purchase shares in certain silver mines in the State of ^Nevada, and was thereby cheated and defrauded. The record presents many questions which this appeal makes it our duty to decide. We shall consider first those relating to the law of the case raised by the pleadings and the prayers, and then the two exceptions to the rulings admitting certain testimony offered by the plaintiff.

The defendant filed a demurrer to the several counts of the declaration which was overruled, and this raises the question whether each count states a good and sufficient cause of action. Actions of this kind have not often been brought in this State, and avc have for our guidance no express decisions of this Court on several of the points now to be determined. The legal principles that must control our judgment have however been well settled by the highest authority elseAvhere, and wo shall state them as briefly as Ave can before noticing the particular averments in the three counts of this nav. On some points the decisions have not been altogether uniform, but it may be safely stated they agree on certain general propositions.

It is admitted, or rather conceded, as matter of necessity, that neither the common law nor any code of human law 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 practised by any one for his own exclusive benefit. And it thence follows that a certain amount of selfish cunning passes unrecognized by Courts of justice, 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. But if any one carries this too far: if by craft and selfish contrivance he inflicts an injury upon his neighbor and acquires a benefit to himself beyond ⁴⁵² a certain point, the law steps in, annuls all that he has done, or rectifies the wrong by sustaining an action for the deceit. The practical question then is, where is this point? and to this no specific answer is afforded.' The common law not only gives no definition of fraud, but perhaps wisely asserts as a principle that there shall be no definition of it, for, as it is the very nature and essence of fraud to elude all laws in fact, without appearing to break them in form, a technical definition of fraud, making everything come within the scope of its words before the law could deal with- it as such, would be in effect telling to the crafty precisely how to avoid the grasp of the law.

Whenever, therefore, any Court has before it a case in which one has injured another directly or indirectly by falsehood or artifice, it is for the Court to determine in that case whether what was done amounts to cognizable fraud. Still, this important question is not left to the arbitrary or . accidental decision of each Court in each case, for all Courts are governed, or at least directed by certain precedents and rules, among which it is sufficient to state at present, that the fraud must be material to the contract or transaction which is to be avoided, for if it relate to another matter or to this only in a trivial and unimportant way, it affords no ground for the action of the Court. It must, therefore, relate distinctly and directly to this contract and affect its very essence and substance. But there is no positive standard by which to determine whether the fraud be thus material or not.

No better rule can be given for deciding the question 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. Whether the fraud be material or otherwise seems to be, on the decided weight of authority, a question for the jury and not a question of law, but it is obvious, that in many cases the jury cannot answer this question without instructions ⁴⁵³ from the Court. Again, the fraud must work an actual injury to the party complaining, and it must appear that he not only did in fact rely upon the fraudulent statement, but had a right to rely upon it in the full belief of its truth, for otherwise, it was his own folly or fault, and he cannot ask of the law to relieve him from the consequences. If, however, the plaintiff mainly and substantially relied upon the fraudulent representation, he will have his actioji for damages, though he was in part influenced by other causes.

These are, in substance, the well-considered views and careful deductions from the authorities held and stated by Bausons in his work on Contracts. 2 Parsons’ Cont., 767 to 773. The same thing is stated substantially and more concisely in Kerr on Fraud and Mistake, 73 to 75. The doctrine is also announced by all the text-writers, as derived from the leading case of Pasley vs. Freeman, that fraud, accompanied with damage, is a good cause of action. That case, says Chancellor Kent, though it has met with powerful resistance, has been repeatedly recognized, and the doctrine of it is now well settled both in the English and American jurisprudence. 2 Kent’s Com., (11th Ed.,) 651.

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 an action for false representation, the representation must not only have been false in fact, but also have been made fraudulently. In Addison on Torts, 827 to 829, the principles are well stated thus: “An action cannot be supported for telling a bare, naked lie, i. e., saying a thing which is false, knowing or not knowing it to be so, and without any design to impose upon or cheat another, and without any intention that another should rely upon the false statement and act upon it; but if a falsehood be knowingly told, with an intention that another should believe it to be true and act upon it, and that person does act upon it and thereby suffers damage, the party telling the falsehood is responsible in damages in an action for deceit, there being a conjunction ⁴⁵⁴ of wrong and loss entitling the injured person to compensation. If a defendant has made a false representation, knowing it to be false, with intent to induce, and has thereby induced the plaintiff to enter into a contract into which, but for that representation, he would not have entered, and the plaintiff has been damnified by the falsehood, a case of fraud is made out and an action for damages is maintainable; and whether the defandant has any interest in the assertion he makes, or in the matter respecting which it is made, is perfectly immaterial.” Applying these well settled principles to the case before us as we are now considering it on demurrer to the declaration, there is no room for debate so far at least as the first and third counts of the nar. are concerned. They charge in substance that the defendant professed and claimed he and two other ¡parties were the owners or shareholders of certain silver mines in Nevada, for an undivided fourth of which he alleged and represented he had paid $25,000 in actual cash, and was desirous of selling parts or shares thereof"'to the public; that so professing and representing ho solicited the plaintiff to purchase shares as a good and profitable investment and speculation, that the latter, having no personal knowledge of the facts so represented, but having unlimited confidence in the integrity, truthfulness and business capacity of the defendant whom he had long known, and being willing to make the investment if the defendant had in fact so paid his $25,000 in money, he personally asked and inquired of the defendant if he had paid $25,000, not in property or stock valued, but in actual cost for this one-fourth, and stated to him he would purchase an interest if ..such was the fact, as he had grgat confidence in his business sagacity, and would regard such an investment by the defendant as conclusive evidence of his approval and confidence in the speculation as a safe and profitable one; that he then told the defendant he made this inquiry expressly for the purpose of determining whether he would or would not purchase, and that he would ⁴⁵⁵ rely on and be governed altogether by the defendant’s answer to this inquiry, and would purchase if the defendant stated he had in fact made such payment of $25,000 in money as contradistinguished from stock, lands or any other thing at a valuation, and would not purchase unless the defendant so stated, and that he requested the defendant to answer frankly, as he would be governed absolutely by such answer; that the defendant thereupon did reply and represent to the plaintiff that such investment was a good and profitable one to make, and that he had in fact paid $25,000 for one-fourth of these mines, not in stock or land or any other thing at a valuation, but in good faith in actual money, and had moreover paid $10,000 in actual money besides as working capital for said mines, whereupon the plaintiff relying and confiding altogether and exclusively upon the faith and truth of these statements and not upon any other cause or inducement whatever as the defendant well knew, did purchase two undivided one-hundreth parts or shares of these mines as and for a safe and profitable investment, and paid to the defendant therefor the sum of $2,000; that these statements and representations as to his having paid the $25,000 in money for the one-fourth, and as to his having paid $10,000 besides for working capital for the mines were, and each of them was, false, fraudulent and deceitful, and so well known to be by the defendant when he made them, and that the same were made with intent to cheat and defraud the plaintiff, and by means of such fraud and deceit to induce and procure him to believe that these mines were worth $100,000, and to purchase an undivided interest therein at that rate, and that the defendant by means of these false, fraudulent and deceitful representations, wrongfully induced the plaintiff to become, and he did by reason thereof become, the purchaser of shares and paid his money as before stated, and as and for a safe and profitable investment as aforesaid, whereas the said alleged mines were in fact valueless as the defendant well knew. ⁴⁵⁶ The demurrer admits the truth of all these averments, and that leaves no question open for discussion.

The representations are thus by the parties themselves made the material and determining ground of the contract, and without them it never would have been entered into; the plaintiff acted solely and exclusively upon their faith and credit, and they therefore went to the very substance and essence of the transaction; he was deceived by them and has suffered loss in consequence; the defendant knew them to be false when he made them, and though approached in confidence and put upon his honor to tell the truth in frankness, he made these false statements with the fraudulent intent that the plaintiff should, as he did, act upon them, and by this means he took money from his neighbor’s pocket and put it into his own. There is here no room left for discrimination between expressions that are material and those that are trivial and unimportant, or between mere opinions as to value and statements of facts; nor does the case permit us to consider what is allowable puffing, or the mere gratis dicta of a vendor upon which it is the folly of the vendee to rely. We are glad to find that no Court has ever decided, and no dictum to that effect has ever fallen from any Judge, that a fraud like this is not cognizable by the common law. It is well it should be known that for such frauds Courts of justice afford no protection, but will seize hold of them and give ample redress to the injured party.

These remarks are, of course addressed to the state of case as made by the pleadings; but we adopt generally the observations of Judge Stoby, in Doggett vs. Emerson, 3 Story’s Rep., 733, where he says: “ It is equally promotive of sound morals, fair dealing and public justice and policy, that every vendor should distinctly comprehend not only that good faith should reign over all his conduct in relation to the sale, but that there should be the most scriqoulous good faith, an exalted honesty, or as it is often felicitously expressed uberrima jides in every representation made by him as an inducement to the sale. He should literally in his ⁴⁵⁷ representation tell the truth, the whole truth and nothing but the truth. If his representation is false in any one substantial circumstance, going to the inducement or essence of the bargain and the vendee is thereby misled, the sale is voidable and it is usually immaterial whether the representation be wilfully and designedly false, or ignorantly and negligently untrue. The vendor acts at his peril, and is bound by every syllable he utters or proclaims, or knowingly impresses upon the vendee as a true or decisive motive for the bargain.” But it is argued the second count goes simply for a false representation of the value of real estate contracted to be sold, and hence falls within the exception as stated in Medbury vs. Watson, 6 Met., 259 , that “ in actions on the case for deceit, there has always existed the exception that naked assertions, though known to be false, are not the ground of action as between vendor and vendee; and in regard to affirmations and representations respecting real estate, the maxim of caveat emptor has ever been held to apply.

When, therefore, a vendor of real estate affirms to the vendee that his estate is worth so much, or that he gave so much for it, that he has been offered so much for it, or has refused so much for it, such assertions, though known by him to be false, and though uttered with a view to deceive, are not actionable.” A careful examination, however, of this count will show that it does not fall within the terms of the proposition thus broadly stated. The false repesentations it sets out as having been fraudulently made by the defendant, and relied on and acted upon by the plaintiff in making his purchase, are not merely the statement that he had actually paid $25,000 in money for an undivided fourth, but that he had likewise paid $10,000 in money for working capital for the mines. This latter is a statement of a substantial and most material fact in this case, and is quite sufficient to remove it from the scope of the authority and exception relied on. The fact that capital had been paid in or put up for the working of mines thus situated and owned by a concern like this, affording assurance that returns ⁴⁵⁸ for investments were likely to be soon realized, would naturally and unquestionably have great influence in inducing the purchase of shares, and if false and made fraudulently, and acted on with resulting damage, a case is presented which clearly comes under the reasoning and within the general principles on which actions for deceit have been maintained.

We need not stop, therefore, to inquire, though authorities on the point are not wanting, whether the law is in every respect correctly stated in Medbury vs. Watson. We will remark, however, that it would be carrying the exception respecting the sale of land to the utmost verge of the law, to apply it to the sale and purchase of shares in a mining concern of this sort. We cannot shut our eyes to the fact that projects and speculations like these have been the fruitful source of frauds, and have brought ruin to thousands. No more efficient means have ever been devised by the crafty and cunning to work out their selfish ends, and defraud the credulous and confiding.

In our opinion, the Courts should never regard with indulgence any false statements or representations made by the originators and promoters of such schemes for the purpose of inducing others to risk money in them. Another point raised by the demurrer is that the third count contains no averment of loss or damage. This count, after setting out the false representations and making the other necessary allegations, concludes thus: “And the plaintiff says that by means of said false and fraudulent representations, the defendant obtained from the plaintiff jhe sum of $2,000, and the plaintiff is entitled to recover the same from the defendant.” This, though not so in direct terms, is yet, we think, in substance an averment of loss and injury. If a man says another has by fraud obtained from him the sum of $2,000, and that he is entitled to recover it back from the party who thus obtained it, he must mean that he has been cheated and defrauded out of that sum; or, in