Summary
In Deshatreaux v. Batson, 159 Miss. 236, 131 So. 346, 348, it was held that such statements are generally mere expressions of opinion, or judgments which will not excuse the other party's failure to make examination for himself for the purpose of ascertaining the real facts. The court there said that: "The general rule is that a person has no right to rely on representations as to value; he is required to exercise his own judgment as to value.
Summary of this case from Miss. Power Co. v. BennettOpinion
No. 29016.
December 15, 1930.
1. FRAUD. Generally, purchaser of property has no right to rely on representations as to value.
Such statements are generally mere expressions of opinion or judgment which will not excuse other party's failure to make examination for himself for purpose of ascertaining real facts.
2. FRAUD.
General rule that person has no right to rely on representations of value is especially applicable where relationship of parties is antagonistic.
3. FRAUD.
Mere expressions of opinion, however positive, will not support charge of fraud, where means of information are equally accessible.
4. FRAUD.
Where no confidential relationship existed, and representations of value did not preclude investigation, case was not within exceptions to general rule that representations of value could not constitute fraud.
5. FRAUD. Representations by party to exchange agreement concerning value of grocery stock and fixtures and amount of paving assessment and taxes held mere expressions of opinion.
Owner of grocery business and lot on which store was situated entered into contract for exchange of property with owner of other realty. Owner of store through his agent made representations concerning value of grocery stock in store, fixtures therein, and probable amount of paving charges and taxes against property. Parties were dealing at arm's length, and no relation of trust or confidence existed between them, nor did owner of grocery business or his agent do anything to prevent other parties from investigating and determining for themselves value of grocery stock and fixtures and amount of taxes and paving charges against property.
APPEAL from chancery court of Forrest county. HON. T.P. DALE, Chancellor.
Morris Wingo, of Hattiesburg, for appellant.
It is the general rule of law that a misrepresentation of value cannot constitute the basis of an action of fraud or deceit.
Corpus Juris, page 1215, par. 110.
As a general rule one has no right to rely upon representations as to value or cost, but is rather required to exercise his own judgment in the matter. It is deemed an act of folly on his part to credit the other party's assertion. Such statements are usually more or less assimilated to mere expressions of judgment which will not excuse the other party's failure to make an examination for himself for the purpose of ascertaining what the facts really are, especially where the relation of the parties is antagonistic such as buyer and seller.
12 R.C.L., page 381, par. 132; Anderson v. Burnett, 5 Howard, 165; Bell v. Henderson, 6 Howard, 311; Anderson v. Hill, 12 S. M. 697; Walker v. Mobile Ohio Railroad Co., 34 Miss. 245; Lake v. Security Loan Ass'n, 72 Ala. 207; Moore v. Carrick, 26 Colo. App. 97, 140 P. 485; Gustafson v. Rustmeyer, 70 Conn. 125, 39 L.R.A. 644; Williams v. McFadden, 23 Fla. 143, 1 So. 618; Standish v. Nicholls, 162 Ill. App. 131; Boltz v. O'Conner, 45 Ind. App. 178, 90 N.E. 496; Hoffman v. Wilheim, 68 Iowa, 510, 27 N.W. 483.
Under the general rule fraud cannot be predicated upon representations concerning the value of chattels such as stock of goods.
26 C.J., page 1221, par. 110; Patterson v. Barrie, 30 App. D.C. 531; Giles Co. v. Recomier Co., 12 N.Y. State, 169; Standish v. Nichols, 162 Ill. App. 131; Boston Consolidated Gas Co. v. Fullsom, 130 N.E. 197; Johnson v. Seymore, 79 Mich. 156, 44 N.W. 344; Cohn v. Broadhead, 51 Nebr., 834, 71 N.W. 747; Eagle Drug Co. v. White (Texas Civ. App.), 182 S.W. 373.
If a person knew that statements were false or could have ascertained that they were from the ordinary means of information at his command he was not justified in relying thereon.
Pilot Life Insurance Co. v. Wade, 153 Miss. 874, 121 So. 845; Watson v. Austin, 63 Miss. 469; Childs v. Hall, 128 Miss. 111, 90 So. 626.
Currie, Stevens Currie, of Hattiesburg, for appellees.
Even the expression of an opinion is held to be actionable, if shown to be knowingly false, made with the intention to deceive, and having been accepted and relied upon.
Wall v. Graham, 68 So. 298.
Misrepresentations of value may under certain circumstances be treated as actionable misrepresentations of fact, as where such misrepresentations are coupled with concealment of material facts or with artifice or misrepresentation used to prevent the hearer from learning the truth; where they are expressed and understood as statements of fact, especially if the speaker professes personal knowledge that his statements are correct, as where he warrants the truth of the statements made; or where the speaker obviously knows or intends that the hearer will rely upon his representations of value, because the hearer has expressly told him so, as where the truth of the speaker's statement was made a controlling element of the transaction, or because confidential relation obtain, and a false representation of value may be actionable as a misrepresentation of the speaker's opinion. If the parties deal upon unequal terms the rule that misrepresentations of value are nonactionable expressions of opinion does not apply and under such circumstances they will constitute remediable fraud, as where the facts are peculiarly within the knowledge of the speaker and difficult for the hearer to ascertain.
26 C.J., pages 1217, 1218, 1219, 1220 and 1221; 12 R.C.L., page 381, par. 132.
Since the gross valuation of the stock of goods, computed according to certain private price marks, depended upon quantity and price, a misrepresentation as to such gross valuation is not an expression of opinion, but an actionable misrepresentation of fact.
Elerick v. Reed, 54 Kans. 579, 38 P. 814; Knopfler v. Flinn, 135 Minn. 333, 160 N.W. 860, Ann. Cas. 1918C, 538.
It is generally held that fraud may be predicated of false representations or concealment, although the truth could have been ascertained by an examination of public records.
12 R.C.L. 377; Parham v. Randolph, 4 How. (Miss.), 435, 35 Am. Dec. 403.
It is declared that as between the original parties, one who has intentionally deceived the other to his prejudice is not to be heard to say, in defense of the charge of fraud, that the innocent party ought not to have trusted him, or was guilty of negligence in so doing.
12 R.C.L., pages 378-379, sec. 130.
Any intentional misrepresentation or concealment in relation to land, either as to quality or title, by which the purchaser is imposed on, is fraudulent; and it is immaterial whether the false representations are intentional or not. If the vendor undertake to make statements, he is responsible for them.
Parham v. Randolph, 4 How. 435.
A purchaser has a right to rely upon the representations of a seller as to facts within the latter's knowledge, and the seller cannot escape responsibility by showing that the purchaser upon inquiry, might have ascertained that such representations were not true. Contributory negligence is not a defense to an action based on fraud. If a false statement is made by one who may be fairly assumed to know what he is talking about, it may be accepted as true, without question and without inquiry, although the means of correct information are in reach.
Nash Mississippi Valley Motor Co. v. Childress, 125 So. 708; King v. Livingston Mfg. Co. (Ala.), 60 So. 145.
Where a vendor makes a false representation to his vendee as to the amount of taxes due on the premises, he is liable, though the vendee could have ascertained its falsity by inquiry.
Wright v. United States Mortgage Co. of Scotland, Limited et al., 42 S.W. 789; Woteshek v. Neumann, 138 N.W. 1000.
Appellees filed their bill against appellant in the chancery court of Forrest county, to recover damages claimed to have been suffered by them on account of deceit and fraud practiced upon them by appellant in the exchange between the parties of certain lands. Appellant being a non-resident, and owning land in Forrest county in this state, the action was begun by a foreign attachment in chancery. The cause was heard on original bill, answer, and documentary and oral proofs. A final decree was rendered in the cause, granting appellees the relief prayed for in their bill. From that decree appellant prosecutes this appeal.
Appellant owned a lot in the city of New Orleans, on which was a storehouse in which he conducted a grocery business. The lot on which the store is situated is triangular in form, bounded by South Robertson, Felicity, and Terpsichore streets.
Appellees owned land in Forrest county in this state. As the result of negotiations previously had between the parties on the 16th of October, 1929, they exchanged property, appellant conveying to appellees his storehouse and lot and stock of groceries and fixtures in the storehouse, in the city of New Orleans, and appellees conveying to appellant their lands in Forrest county. These conveyances were carried into effect, and consummated by two written contracts entered into between the parties on September 20, 1929, providing for such conveyances.
The two written contracts referred to were, in effect, only one contract; for the obligations undertaken in each were the consideration for the obligations undertaken in the other. In these preliminary contracts appellant's property in New Orleans, and appellees' property in Forrest county in this state, were each valued at eight thousand dollars. Appellant's property, without incumbrances, was valued at $13,600, but there was a mortgage against it of five thousand six hundred dollars, which left its value at eight thousand dollars. In the conveyance from appellant to appellees, the latter, in addition to the mortgage indebtedness, assumed the payment of all paving charges and taxes against the New Orleans property.
A real estate agent, one Ragura, in New Orleans, had appellant's property for sale or exchange, and advertised that fact in a New Orleans paper. Appellees saw the advertisement, and went to New Orleans, to the office of Ragura, where they met appellant — they were strangers — who, with Ragura, showed appellees the property. The latter examined the building, the stock of groceries, and the fixtures in the store; and saw, of course, the size of the lot, and what streets it abutted on. Appellees then returned to their home in Hattiesburg; and a few days thereafter, on Sunday, the 20th of September, 1929, appellant went to Hattiesburg and examined appellees' property, being a guest in their home while there. On that date the two preliminary contracts referred to were entered into. Appellees on the next day, which was Monday, September 21st, took charge of the stock of groceries in New Orleans, and proceeded to sell them.
Appellees charge in their bill that while in New Orleans, looking at appellant's property, appellant falsely and fraudulently made the following representations: That the stock of groceries in the store was worth from eight hundred to one thousand dollars, when in truth and in fact it was only worth three hundred ninety-one dollars and nineteen cents; that the paving charges against the property on Felicity and Terpsichore streets were not more than two thousand dollars, when in truth and in fact such charges were three thousand two hundred dollars; that the fixtures in the grocery store were worth not less than two thousand three hundred dollars, when in truth and in fact they were only worth one thousand two hundred dollars; that the taxes against the property would not be over two hundred dollars, when in truth and in fact they were two hundred sixty-four dollars. Appellees sued for the difference between these amounts, and the court so decreed.
Appellant contends that, conceding the chancellor was justified in his finding of facts, nevertheless, under the law, appellant was entitled to a decree dismissing the bill; in other words, that the chancellor misapplied the law to the facts proved.
Appellant and appellees were strangers; appellees made a trip to New Orleans to examine appellant's property; they did examine it; they went through the store, and looked at the stock of groceries, and the fixtures in the store. They did this, of course, to see what was there, and to ascertain, as near as they could, its value. But they were not willing to stand on their own judgment as to the value of the lot and building, nor on the judgment and representations of appellant as to its value; they employed an appraiser in New Orleans to value them. The appraiser did so. Appellees saw the size of the lot, and the three streets on which it abutted. Appellees, who were the only witnesses in their own behalf, testified to these facts.
And appellant was not willing to take appellees' representations as to the value of their property in Forrest county, and made a trip to examine it for himself, and relied on his own judgment as to its value.
Taking every material fact to be true which appellees' evidence either established or tended to establish, their case was simply this: The real estate agent, Ragura, who was doing the talking for the appellant, stated that the stock of groceries was worth from eight hundred to one thousand dollars; that the paving costs would not be over two thousand dollars; that the taxes against the property would not exceed two hundred dollars; and that the fixtures in the store were worth two thousand three hundred dollars. When the truth was that the stock of goods was worth only three hundred ninety-one dollars and nineteen cents, the paving charges were three thousand two hundred dollars, the taxes were two hundred sixty-four dollars, and the fixtures were only worth one thousand two hundred dollars; and Regura knew those representations to be false when he made them.
Appellees testified that they relied on these representations made by the real estate agent, Ragura, in the presence of appellant, who was dull of hearing, and seems not to have said much. They testified, further, that they had had no experience in the mercantile business, and knew nothing of the value of the stock of groceries, nor of the fixtures in the store. The question is whether those facts, undisputed, made a case for appellees under the law. We think the question must be answered in the negative.
The general rule is that a person has no right to rely on representations as to value; he is required to exercise his own judgment as to value. It is an act of folly on his part to accept the other person's statement in that respect. Such statements are usually mere expressions of opinion, or judgment, which will not excuse the other party's failure to make an examination for himself for the purpose of ascertaining the real facts. This is especially true where the relation of the parties are naturally antagonistic, such as buyer and seller. Where the means of information are equally accessible to both parties, expressions of opinion, however positive, by one of the parties, cannot be considered as a fraud upon the rights of the other. Anderson v. Burnett, 5 How. 165, 35 Am. Dec. 425; Bell v. Henderson, 6 How. 311; Anderson v. Hill, 12 Smedes M. 679, 51 Am. Dec. 130; Walker v. M. O.R. Co., 34 Miss. 245; 26 C.J., p. 1215, par. 110; 12 R.C.L., p. 381, par. 132. The Walker case is especially illuminating on this question. Walker subscribed for stock in the Mobile Ohio Railroad Company, to be paid for in installments; he failed to pay the installments, and the railroad company sued him on his subscription contract. Among other defenses, Walker interposed the following plea:
"That the agent who obtained the subscription, with the fraudulent design of obtaining the same, represented to the plaintiff in error that the Congress of the United States had donated to the company a large quantity of land, from the sales of which about three millions of dollars would be realized, which, together with other means, would enable them to complete the railroad within two years thereafter, from which the stockholders would receive large dividends. That the stockholders would not have to pay more than one-half the amount of stock, and that that would be received in provisions and labor at the highest prices. But the lands donated are of but little value, and all the means of the company are greatly insufficient to complete the road, and that it cannot be completed by the time stated. That these statements were relied upon by him when he made the subscription, and induced him to subscribe, but were known by the agent to be untrue. That, in order to induce persons to subscribe, the agent procured one Nelson, an influential man in the neighborhood, to subscribe, whom he represented to be well acquainted with the costs and expenses of such works, giving to him, at the same time, an obligation in writing, that he would release him from his subscription when requested to do so, which pretended subscription was presented to the plaintiff in error by the agent, who stated that it was a bona-fide subscription, when, in fact, the same was merely colorable, and that the subscription sued upon was obtained by these fraudulent means."
The railroad company demurred to the plea, the trial court sustained the demurrer, and the judgment was affirmed by the supreme court. In the opinion, addressing itself to that plea, the court said:
"First, as to the representations in relation to the value of the lands donated by Congress, they must, from the nature of the subject, have been mere expressions of opinion upon a matter of which the agent could not possibly have any precise knowledge, or anything more than a mere opinion. The means of information were equally accessible to both parties; and the expressions of opinion, however positive, by the agent, cannot, under such circumstances, be considered as a fraud.
"The same may be said with respect to the statements in relation to the means of the company to construct the road, the time of its completion, the profits to be derived from it, and the amount of the subscriptions which the stockholders would be required to pay. No reasonable man could ever become a stockholder in such a company, thereby subjecting himself to pay his subscription, according to its terms and the law which governs it, and according to the charter which he is bound to know, and rely upon such statements of opinion to modify his liability. Such things are to be regarded as reasons which induced him to embark in the enterprise, but are not grounds for avoiding his contract; and, as he has the means of correct information, he cannot complain that he has acted upon erroneous advice. . . .
"With respect to the subscription of Nelson, the averments are in substance, that the agent represented to the plaintiff in error that Nelson had become a subscriber. He does not allege that he was thereby induced to subscribe, but merely that Nelson was falsely held out to the community by the agent as a subscriber. This allegation, therefore, appears to be immaterial.
"Upon the whole, it appears that he became a subscriber, relying upon opinions expressed to him by the agent, in relation to the resources of the company, the time of completion of the road, and its productiveness as stock to the stockholders. It is not alleged that the company has, by any fraud or neglect, failed to do what it was bound to do, and what was within its power, to complete the road and to make it profitable to the stockholders, or that the plaintiff in error has been deceived in anything which he might reasonably have expected, from becoming a stockholder. He must be presumed to have invested his money in the enterprise subject to all the hazards incident to it, and which a prudent man must necessarily anticipate; and if he has done so upon erroneous or even deceptive opinions in relation to matters open to his inquiry, though expressed by an agent of the company, it is his own misfortune or fault, and he has no right to complain."
Appellees, however, contend that the facts of this case come under an exception to the general rule, one of the exceptions being representations as to the value, where such misrepresentations are coupled with concealment of material facts, or where made with artifice, to prevent the other party from learning the truth, especially if the speaker professes personal knowledge that his statements are correct; or where the speaker obviously knows or intends that his hearer will rely upon his representations of value because the hearer has expressly told him so; or where the parties deal upon unequal terms, where the facts are peculiarly within the knowledge of the speaker, and difficult for the hearer to ascertain. Appellees refer to 26 C.J., page 1217, where the exceptions to the general rule are laid down.
We do not think that the facts of this case bring it within any exception to the general rule. There was no relation of trust or confidence between these parties — they evidently were dealing at arm's length. There is nothing in the evidence tending to show that either appellant or the real estate agent, Ragura, said or did anything to prevent appellees from themselves investigating and ascertaining the value of the stock of groceries, and of the fixtures in the store, and of the amount of taxes and paving charges against the property. Appellees were in New Orleans at the time. All they had to do was to go and find out from the proper authorities the amount of taxes and paving charges; and, if they wished to be certain as to the value of the stock of goods and fixtures, they should have taken the necessary steps to ascertain the same, as they did with reference to the value of the storehouse and lot.
The representations made by appellant show on their face that they were expressions of opinion as to values. Appellees knew that naturally appellant would try to make the impression that his property was very valuable — would put as high a value on it as he could with any show of reason. And naturally and reasonably, appellees likewise represented the value of their property. All this was just trade talk, and not inconsistent with good faith.
It follows from these views that the chancellor erred in his application of the law to the facts.
Reversed and dismissed.