p. 166Curtis, Chancellor, Pennewill, C. J., and Associate Judges Conrad, Woolley and Rice sitting.Ward, Gray and Neary for defendant below, plaintiff in error.
William S. THUes for plaintiff below, defendant in error.
Writ of Error to the Superior Court for New Castle County. Action of assumpsit brought by the Monad Engineering Company against Stewart and Donohue to recover damages for failure to perform a written contract. Judgment for plaintiff. (See
2 Boyce 35 , 78
Ail. 598). Affirmed.
This was an action of assumpsit brought by the Monad Engineering Company against Stewart and Donohue to recover damages for their failure to perform a written contract entered into with the Monad Engineering Company, the terms of which contract are set out in a letter, a copy of which is as follows:
The Monad Engineering Co.,
Confirming prices given your Mr. A. T. Prescott on rip-rap would say that we will furnish and deliver in car load lots f. o. b. cars B St. wharf, Wilmington, Del., in pieces ranging in weight from 150 to 250 lbs.,each for the sum of One Dollar (if 1.00) per ton of 2,000 lbs. subject to Railroad weights, delivery to be made as follows: three cars per day, subject to the weather. Terms, 30 days after delivery.
p. 169Argument of Counsel for Plaintiff- in Error.
In the consideration of the effect of fraudulent representations of collateral matters as inducements to the contract, the law is usually stated that the collateral matter must appear from the circumstances of the case to be material to the contract in its direct sense, or be such as has been made by the parties an essential preliminary to the making of the contract in question.Admitting that the right of disposal is an incident to the ownership of property, it follows that Stewart, in this case, had the absolute right, if he considered it good business policy, to refuse to sell stone to a purchaser who was at that time under contract to purchase stone from another quarry for the same work. Brett v. Cooney, 75 Conn. 338 , 53 Atl. 729 , 1124.The better rule for deciding whether fraud be material or not is this: If the fraud be such that had it not been practiced the contract would not have been made, or the transaction completed, then it is material to the contract. 2 Pars, on Cont. 937; Higbee v. Trumbauer, 112 Iowa 74 , 83 N. W. 812 ; Brown v. Search, 131 Wis. 109 , 111 N. W. 210 .“It may often be difficult to say when a representation is material, but it is probably safe to say that it is always material if had it been known to be false the contract would not have been entered into.” Clark on Contracts, 226; 1 Page on Cont. 208; McAleer v. Horsey, 35 Md. 439 ; Powers v. Fowler, 157 Mass. 318 , 32 N. E. 166 ; Holst, v. Stewart, 161 Mass. 516 , 37 N. E. 755 , 42 Am. St. Rep. 442 .“The misrepresentations must be material, that is it must have been an inducement to the contract; otherwise it will not be a ground for avoiding it.” 9 Cyc. 424; Taylor v. Scoville, 3 Hun. (N. Y.) 301; Stewart v. Lester, 49 Hun, 60 , 1 N. Y. Supp. 699 ; Smith v. Countryman, 30 N. Y. 670 ; Pulsford v. Richards, 17 Beaver, 87, at 96; 17 Jur. 865; 22 L. J. Ch. 559; 1 Weekly Rep. 295; Stone & Wellington v. Robie, 66 Vt. 245 , 29 Atl. 257 .A careful examination of the authorities will disclose, beyond question, that the misrepresentation of the fact known to the person making it to be untrue amounts to a fraud in law, if the
p. 171812 ; (False statements as to his debts and means, made by a purchaser to induce credit, are fraudulent): Johnson v. Peck, 1 Wood B. & M. 334; (False statements made to procure credit that a purchaser is solvent and able to pay his debts are fraudulent) : Ensign v. Hoffield & Geisaler (Pa.) 4 Atl. 189 . (A man’s statement, to obtain credit, that he is “doing a safe business” and that his note is sure to be paid, if false, constitutes fraud): Thompson v. Rose, 16 Conn. 71 , 41 Am. Dec. 121 ; (A false statement that a purchasing corporation was out of debt and had unincumbered property of a stated value was also held fraudulent): McClellan v. Scott, 24 Wis. 81 ; (A false statement of a specific fact as to the capital of a firm, made by one member in order to obtain credit is fraudulent although he expected that payment would be made and the vendor suffer no loss): Judd v. Weber, 55 Conn. 267 , 11 Atl. 40 . (A statement by a purchaser of that part only of his indebtedness which is connected with the business for which a purchase is made, without including his other indebtedness, is fraudulent when made in reply to an inquiry by his vendor as to his financial condition): Collins v. Coolley (N. J. Ch.), 14 Atl. 574 . (It is clear that if the purchaser makes false representations as to his ability to pay, the sale is void and no title passes): 2 Parsons on Contracts, (9th Ed.)- p. 940.The court below erred in refusing to instruct the jury that “It is not necessary that the false representation should be the only inducement. There may be other inducements co-operating. It is sufficient that such false representations were so material that the purchase would not have been made in their absence. If to that extent they operated as inducements to the contract, the contract would be void, however many other inducements there may have been.” Matthews v. Bliss, 22 Pick. (Mass.) 48 ; Saunders v. McClintock, 46 Mo. App. 216 ; McAleer v. McMurray, 58 Pa. 126 .Argument of Counsel for Defendant in Error.
The weight of authority, as well as the decisions in Delaware, clearly establish the proposition, at least so far as this state is
p. 173exist, and that they can all be reconciled upon this theory. See Smith on Fraud, § 126; 1 Story’s Eq. Jur. § 187; 2 Parsons on Contracts, 769; Pomeroy's Eq. Jur. 898; 20 Cyc. 8; Whitesides v. Taylor, 105 Ill. 496 ; Sieveking v. Litzler, 31 Ind. 13 ; Chamberlain v. Coal Co., 92 Tenn. 13 , 20 S. W. 345 .It being plain that a false representation of financial standing or credit will enable one to rescind the contract where there has been no actual injury, it is equally plain that if this stone had been purchased upon the statement of the Engineering Company that its secretary was abroad, or had a sprained leg, that the contract could not be rescinded.Fraud is never presumed to exist. Mears v. Waples, 3 Houst. 619 ; Freeman v. Topkis, 1 Marvel 174 , 179, 40 Atl. 948 .It is submitted that where the court gives the defendant the benefit of every inference that could have been fairly drawn from the evidence, and such was insufficient to authorize a verdict in his favor, a peremptory instruction for the plaintiff on the non-existence of legal fraud, such as would authorize him to rescind his contract, was proper.
Marshall v. Hubbard, 117 U. S. 415 , 6
Sup. Ct. 806 ,
29 L. Ed. 919 ;
Bigelow on Fraud, pp. 139, 140;
Wise v. Topkis, 1 Marvel 174 , 40
Atl. 948 .
delivering the opinion of the court:
The one question presented in this case by the assignments of error is whether the court below was justified in instructing the jury that there was no such evidence of fraud in the case as would warrant the defendant below in rescinding his contract of sale.
In Freeman v. Topkis, 1 Marvel 178 , 40 Atl. 949 , Chief Justice Lore states the law as follows: “What constitutes fraud is a question for the court, whether the fraud was actually committed is a question of fact for the jury.”
[1, 2] When fraud is set up as a defense, the fraud must be proved, and is not presumed, or to be established by slight proof
p. 174or trivial circumstances. Actual fraud is always a matter of fact, and must be proved and established as such in any case, but what will constitute an actual fraud as will vitiate and avoid a contract of this kind, is a question of law, and it is therefore the province of the court to say and instruct the jury whether the evidence was sufficient for that purpose.
In Pearce v. Carter, 3 Houst. 385 , Chief Justice Gilpin very aptly suggests that it is not every false representation, even when made with a full knowledge of its falsity, that will amount, in judgment of law, to such a fraud as will invalidate a contract and deprive a party of his right to enforce it, and Chancellor Bates in Reznor v. Maclary, 4 Houst. 254 , lays down the general principles of law governing contracts that are attacked on the grounds of fraud or misrepresentation in the following language: “In order to avoid a transaction on account of them (misrepresentations) three things are requisite—1st, the misrepresentations must relate to something material and substantial; 2d, the transaction sought to be avoided must appear to have been induced by it. The party aggrieved must have been actually misled by it; and 3rd, his confidence must have been a reasonable one. Except in these cases, even betrayed confidence is not a ground of relief.”
In the case before us the negotiations between the parties seem to have been open and fair. The defendant below and the authorized agent of plaintiff company came together personally and after a conference that necessarily occupied a considerable period of time, agreed upon a sale of one thousand tons of stone. The questions asked by defendant as to the use that was to be made of the stone, and as to the financial standing and responsibility of plaintiff company, seem to have been promptly and satisfactorily answered so that before the conference ended, a proposition as to price, etc., was made in writing by defendant and accepted at once by the agent of plaintiff company. No elements of concealment or unfairness are shown in the negotiations, they appear to have been open and aboveboard.
The defendant below defends his breach of the contract on three grounds,—that false statements were made by plaintiff
p. 175company, first, as to where the stones were to be used; second, as to the credit of plaintiff company, and, third, as to certain work being paid for that had been done theretofore for plaintiff company by another party.
[3] As regards the first contention, there is some conflict in the testimony as to whether representations were made that the stone bought by plaintiff company from defendant was to be used on the contract at Cross Ledge Light on which defendant was an unsuccessful bidder some months previous. Defendant in his testimony states very positively that he was not willing to furnish stone for that particular job, and he objected to so doing on the ground that to do so would violate a business principle, or policy, which he had established for himself, viz., not to furnish stone for any work to a principal contractor in cases where he, the vendor, had theretofore bid unsuccessfully in competition to supply stone to such principal contractor for the same work. It did not appear to the court below nor does it appear to this court that there was any element of fraud or misrepresentation in any statement made regarding the use of the stone that was vital or material to the contract in this case.
[4] The defendant evidently relied upon the second and third contentions but as regards both he signally failed to establish fraud of a material or substantial nature. No evidence was adduced that in the least undermined the credit of plaintiff company or that tended to show financial weakness; on the contrary plaintiff company showed by affirmative testimony that it paid its debts and was in good credit.
The evidence as to payments made on the Cross Ledge contract was not entirely clear but the fact was established that full settlement had been made for all work for which bills had been rendered up to the time of the making of the contract now in dispute, so the evidence on the third point likewise failed in establishing material and substantial fraud such as would avoid the contract.
These facts appearing from a careful reading of the testimony; and the law as laid down by the court below being in accord with previous decisions of the courts of this state, we find no error
p. 176in the rulings or charge of the court below and so order that the
Judgment below be affirmed.