Summary
In Garapedian, Inc. v. Anderson, 92 N.H. 390, 31 A.2d 371 (1943), defendant gave misstatements regarding a rug buyer to a rug seller.
Summary of this case from Weiss-Lawrence, Inc. v. James Talcott, Inc.Opinion
No. 3391.
Decided April 6, 1943.
In the absence of evidence of the law of another state, the court of this state is warranted in applying the common law of the forum on the assumption that the common law of both states is the same. By the lex fori one may be held liable for a negligent misrepresentation resulting in financial loss if his misrepresentation and conduct violates some duty which the law attaches to the relation of the parties. A determination of the nature and extent of such duty in each case depends largely upon its own facts; and no hard and fast line can be drawn. In an action for such misrepresentation, where the defendant's misstatements were mere opinions respecting the credit of another, gratuitously and voluntarily given, not made to induce or inducing the plaintiff to enter into any transaction with the defendant and made "in good faith and with an honest belief . . . that they were true," no duty of preparatory care or subsequent investigation concerning their correctness rested upon the defendant. In such action the plaintiff has the burden of establishing his freedom from negligence. Certain evidence in such action was insufficient to justify a finding that the plaintiff exercised due care by checking up the accuracy of the defendant's statements and had no adequate basis for relying on the accuracy and completeness of the defendant's own knowledge.
CASE, to recover for a financial loss alleged to have been caused by certain false representations negligently made by the defendant regarding the "reliability and trustworthiness" of one George S. Dodge. Trial by the court and verdict for the plaintiff.
The representations in question were made to Vartan Garapedian, the plaintiff's president and treasurer. They were made at Englewood, New Jersey, where the plaintiff was engaged in the manufacture and sale of rugs. The defendant, a resident of Manchester in this state, was the general agent of a well-known life insurance company. He collected Oriental rugs as a hobby and had purchased some of the rugs in his collection from George S. Dodge, whose principal occupation was that of rug cleaning and the selling of rugs and radios.
In December, 1939, Dodge and the defendant went to New York together, each on his own business. Dodge had obtained from a rug dealer by the name of Megerdichian a letter of introduction to Garapedian, and on December 16 the defendant, at Dodge's invitation, accompanied Dodge to the plaintiff's salesrooms in Englewood. Dodge presented to Garapedian the letter of introduction, which contained the statement that the writer (Megerdichian) had done business with Dodge and found him very reliable.
Concerning subsequent events, Garapedian testified in part as follows: "Mr. Dodge introduced . . . Mr. Anderson to me as a very prominent citizen of Manchester, New Hampshire, a director of the Y.M.C.A., and general agent of a large life insurance company, and [said] that he was interested in his rug business, something like that. He wasn't in the rug business, but Mr. Anderson was financing Mr. Dodge or backing him up or something like that. I don't recall exactly in detail . . . Mr. Anderson in turn spoke to me about Mr. Dodge . . . and he told me that Mr. Dodge, who didn't have very much capital, was a reliable man in his community . . . and any kind of business I could do with Mr. Dodge he assured me would be all right, and of course Mr. Anderson's standing, especially as a Y.M.C.A. director and an insurance general agent, gave me full satisfaction that he wouldn't vouch for a rug washer unless it was so. . . . And then he told me they needed some antique orientals for a very good prospect, and also they needed some scatters, inexpensive domestic rugs for the Y.M.C.A., approximately fifty or sixty or seventy-five. They didn't know how many. They told me that because they saw I had piles of them, . . . and it came to their minds that they could sell some to the Y.M.C.A. in Manchester, New Hampshire. Mr. Dodge said, `I'm sure of this sale of rugs to the Y.M.C.A., because Mr. Anderson is a director and through his pull we can swing the sale without a doubt.' . . . Then we made an appointment to meet later in the afternoon in New York City. . . . I met them in New York in the afternoon with my car . . . . Then I think we went to one or two places, rug houses, but we didn't find anything at all that Mr. Dodge had in mind, but he did say he wanted to find [a] large Kirman and a few other rugs for a prospective customer who was remodeling his house. He said to keep my eye open for it and to let him know. Then we parted."
A few days later Dodge called again on Garapedian, and from then until January 22 he made frequent calls, taking bundles of rugs and returning those that did not suit him. On none of these occasions did the defendant accompany him. On January 16, 1940, he obtained from Garapedian sixty domestic rugs, fifty-five of which he later sold to the Manchester Y.M.C.A. Very soon after the delivery of these rugs Garapedian learned through Megerdichian that there was some question as to Dodge's reliability. He then requested Dodge to obtain credit references. Thereupon Dodge asked the defendant if he would write him a letter of recommendation. The defendant complied with this request, writing Garapedian on January 25, 1940. The material paragraphs of the letter follow.
"I have known him [Dodge] for over ten years and have always had favorable dealings with him. I have had occasion to trust him with considerable amounts and have always found his accounting to be correct.
"I can say unqualifiedly that you will be justified in relying on his word for any commitment he makes. His big trouble is lack of capital, but he lives within his means."
A deputy sheriff of Hillsborough County testified that in 1939 Dodge's reputation for honesty was not good. Dodge has never paid for the fifty-five rugs which he sold to the Y.M.C.A. Further facts are stated in the opinion.
The Presiding Justice found that the defendant on December 16, 1939, made statements similar to those contained in his letter of January 25, 1940, and that these statements were made "in good faith and with an honest belief on his part that they were true." The court further found, however., that "due care on the defendant's part would have disclosed to him that the statements were not true." The court ruled that the defendant, having volunteered information to the plaintiff, who did not have equal knowledge, with the intention that the plaintiff act upon it, and without exercising reasonable care to verify his statements before making them, was liable to the plaintiff, who reasonably relied upon those statements and acted upon them to his detriment.
The defendant excepted to the denial of his motion for a directed verdict. His bill of exceptions was allowed by Blandin, J.
J. Morton Rosenblum, for the plaintiff.
Wyman, Starr, Booth, Wadleigh Langdell (Mr. Booth orally), for the defendant.
In the absence of evidence of the New Jersey law, by which the rights of the parties are governed (Gray v. Gray, 87 N.H. 82, 83, and cases cited), the Presiding Justice was warranted in applying the law of the forum on the assumption that the common law of New Jersey is the same as that here in force. Trafton v. Garnsey, 78 N.H. 256, 257; Saloshin v. Houle, 85 N.H. 126, 134; Restatement, Conflict of Laws, s. 622.
In this jurisdiction the rule prevails that a defendant may be liable for a negligent misrepresentation which results merely in financial loss (Weston v. Brown, 82 N.H. 157) as well as for one which causes physical injury (Cunningham v. Company, 74 N.H. 435). In each case the defendant's conduct is said to be wrongful only when it contravenes some duty which the law attaches to the relation of the parties, and it is not unreasonable for the law, in recognition of comparative values, "to find a relationship and to impose a duty" (Dillon v. Company, 85 N.H. 449, 453) less readily in those cases where pecuniary loss alone results from the defendant's misrepresentation than in those cases where the negligent misstatement causes physical harm. See Edwards v. Lamb, 69 N.H. 599; Seavey, "Cardozo and the Law of Torts," 52 Harv. Law Rev. 372, 401. As in most actions for negligence, each case depends in large measure upon its own facts, and no hard and fast line may be drawn. International c. Co. v. Railroad, 244 N.Y. 331, 338.
The misstatements in the present instance were not made for the purpose of inducing the plaintiff to enter into any transaction in which the defendant had a financial interest. He "wasn't in the rug business" and he had no authority to purchase rugs for the Y.M.C.A. The evidence indicates unmistakably that Garapedian was not misled as to either of these facts. Indeed, Dodge's remarks on the subject made so little impression on him, or were so indefinite, that he could not recall them in detail. All his dealings were with Dodge alone, and the declaration contains no allegation that the plaintiff was led to believe that the defendant was a silent partner or otherwise interested in Dodge's affairs.
The defendant obtained nothing of value from the plaintiff, no credit was extended to Dodge on December 16, no goods were sold or consigned to him at that time, and Garapedian had some doubt about his ever returning. The statements which the defendant made to Garapedian concerning Dodge's integrity were voluntary and purely gratuitous.
Professor Bohlen finds in such representations a similarity to "the turning over to another of land or chattels for the other's use," and suggests that if the gratuitous lender of a chattel is not liable for an injury to the borrower caused by a defect in the chattel of which the lender is unaware (Gagnon v. Dana, 69 N.H. 264), no more should the individual be liable who in good faith, "either as a volunteer or by request, gratuitously gives" to another individual information concerning a business matter in which the informant has no financial interest. 42 Harv. Law Rev. 733, 741, 742.
It is unnecessary to decide whether this view can be completely reconciled with the views expressed in such cases as Conway National Bank v. Pease, 76 N.H. 319, 324, and Benoit v. Perkins, 79 N.H. 11, 13. But in each of those cases the negligent representation concerned a material fact, and whatever the rule may be in such a situation, we have no hesitancy in holding that where, as here, the representation relied on is a mere expression of opinion, given under such circumstances as those here disclosed, no duty of "preparatory care" (42 Harv. Law Rev. 733, 743) or subsequent investigation concerning its correctness devolves upon the defendant. See Trenton Banking Co. v. Howard, 187 Atl. Rep. (N.J.), 569, 574, affirmed 121 N.J. Eq. 85; Berman v. Corporation, 109 N.J. Eq. 256, 261. See also, Lord v. Colley, 6 N.H. 99, 102; Bedell v. Stevens, 28 N.H. 118, 124.
But even if such a duty were held to exist in the present case, the defendant would nevertheless be entitled to a directed verdict, since the plaintiff has failed to sustain the burden of proof on the issue of contributory negligence — a burden which it must assume, since section 13 of chapter 384 of the Revised Laws applies only to "actions on the case for personal injury or injury to personal property."
The defendant was an utter stranger to Garapedian, and he knew no more about him or about Dodge than each told him about the other. He testified, to be sure, that he believed that his secretary "asked the bank" for information concerning the defendant, but he did not state what, if any, information was obtained, nor when the inquiry was made. It does not appear that the secretary asked the bank about Dodge, and there is positive testimony to the effect that in 1939 Dodge's reputation for" honesty and dependability" was not good. Indeed, the trial court has found that at the time the misrepresentations were made Dodge "was not living within his means but was in financial difficulty, and that fact was well known throughout the community in which he lived."
Garapedian was not an illiterate Armenian unused to American business methods. On the contrary, he was a graduate of an American university of high standing and had been engaged in business for fifteen years. As the plaintiff's president and treasurer he operated a factory and maintained a sales floor in a metropolitan area. The evidence compels the conclusion that he was thoroughly familiar with credit reports and the conventional method of securing them, yet he failed "to utilize obvious means of checking up" the accuracy of the defendant's statements (42 Harv. Law Rev. 733, 740) and placed reliance on them merely because he understood from Dodge that the defendant was a "prominent citizen," the general agent of an insurance company, and a director of the Manchester Y.M.C.A., and because he was "dressed nice."
A finding that the plaintiff was free from fault contributing to its loss could not properly be made.
Judgment for the defendant.
All concurred.