Gleason v. Proud

This is an action to enforce an alleged right of rescission of a contract and exchange of property between plaintiffs and defendant. The plaintiffs appeal from the judgment and from an order denying their motion for a new trial.

The alleged misrepresentations relate to bonds of the Bisbee Light & Power Company, an Arizona corporation, which were transferred by defendant to plaintiff I. W. Gleason as the principal part of the consideration given by Proud for the property conveyed to him by Gleason. The transaction took

■ In the original complaint filed in this action it was alleged that the defendant made certain representations of fact upon which the plaintiffs relied, and that such representations were false; also, that the defendant concealed certain material facts which, if they had been known to plaintiffs, would have caused the plaintiffs to refuse to enter into the contract. At the trial the evidence wholly failed to establish any intentional misrepresentations or concealments of fact made by the defendant or his agent. Without abandoning their claim that the representations complained of were known by the defendant and his agents to be false, the plaintiffs at the trial further amended their complaint by alleging that the defendant was not, nor were his agents, warranted in making said assertions or statements by the information they possessed when the same were made, although they may have believed them to be true. Presumably this amendment was made to bring the case within the terms of the definition of actual fraud contained in section 1572 of the Civil Code, whereby actual fraud consists of certain acts and circumstances, one of which is “the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true. ’ ’

The plaintiffs do not base their action upon any representations made personally by the defendant. Their claim is that Landwehr was. Proud’s agent, and that Landwehr made or caused to be made the representations upon which they relied. On this appeal it is contended that the court erred in sustaining objections to questions asked of the witness Landwehr designed to show the fact of his agency by proving declarations made by him as to the person for whom he was acting; also, that the court erred in holding that there was not sufficient evidence to show that Landwehr was the agent of Proud, and in refusing to permit evidence to be introduced relating to the untruthfulness of the representations which he made or caused to be made.

When respondent was negotiating the" exchange by which he acquired the Bisbee bonds, the parties with whom he was transacting that business furnished him two letters purporting to state facts concerning the Bisbee bonds and their value. These letters were dated August 27, 1908, were addressed to H. A. Landwehr, one of them was signed by A. W. McPherson, and the other by Bank of Santa Monica, per H. J. Englebrecht, cashier. In the course of the negotiations leading to the transaction involved in the present action, Landwehr delivered these letters to Mr. Gleason and Mr. Gleason, besides reading those letters, had personal interviews with Mr. Englebrecht and also with Mr. Nordholt. These letters contained all of the information that Landwehr or the defendant Proud had concerning the bonds, and it is upon the falsity of the statement of facts therein contained that the plaintiffs rely. To ascertain the circumstances under which these letters were received by Gleason, we will take his own testimony: “At the time when Mr. Landwehr gave those letters, he said that they were the letters that had been delivered to him in connection with this deal between Mr. Proud and McPherson and Nordholt, describing the bonds in that deal. He asked me to go down and have a talk with Mr. Englebrecht. . . . These letters were written to Mr. Landwehr in connection with that deal, less than a month before. The letters themselves show that that was the purpose.” Again he testified, referring to Landwehr, as follows: “I don’t think he said anything about knowing anything about the bonds himself. I don’t remember that he said that this was the information he had on it; he said this was the information he did have. I don’t think

It will be noted that Landwehr did not make any positive assertions with respect to the facts contained in those letters, and did not even vouch for the writers of the letters. He advised appellants to investigate the men who wrote the letters, and appellants acted upon that advice. Being acquainted with Mr. Bittinger, an officer in the First National Bank of Los Angeles, appellant I. W. Gleason inquired of Mr. Bittinger, asking if he knew Mr. Englebrecht and if he could rely upon a letter of that kind; to wdiich Mr. Bittinger replied that he did know Englebrecht and he was a good fellow, and Bittinger did not think he would write a letter of that kind unless he knew the facts contained in it to be true. It was after receiving that assurance that appellant went to see Mr. Englebrecht, and in conversation- with him obtained further statements favorable to the bonds. We entirely agree with counsel for appellants in their contention that a contracting party is entitled to rely on the express statement of an existing fact, the truth of which is known to the opposite party and unknown to him, as the basis of a mutual agreement; and that he is under no obligation to investigate and verify the statements to the truth of which the other party to the contract, with full means of knowledge, has deliberately pledged his faith. • (Spreckels v. Qorrill, 152 Cal. 383 , 395,

Without regard to other questions discussed in the briefs, it thus clearly appears upon the record that plaintiffs are not entitled to recover.

The judgment and order are affirmed.

James, J., and Shaw, J., concurred.

A petition for a rehearing of this causé was denied by the district court of appeal on August 21, 1916, and a petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on September 18, 1916.