McAleer v. Horsey, 35 Md. 439

Second Exception. — After the evidence and ruling in the preceding exception, made a part hereof, the plaintiff having given evidence in chief by himself as a witness, to show that the defendant had made to him the representations set forth in the declaration, and the defendant having testified as a witness in the cause to the effect that he did not, in the interview spoken of, make the statements so testified to by the plaintiff) the plaintiff then offered to prove by Samuel Ahalt, (the witness who had gone with him near to the office of the defendant, where the interview between the plaintiff and the defendant took place, said witness having been previously requested by defendant to procure plaintiff to take an interest in the mines mentioned in the declaration, and had gone with the plaintiff to Frederick, where plaintiff went to see defendant on that subject,) that immediately after the interview aforesaid, the plaintiff met the witness, Ahalt, and being out of the presence and hearing of the defendant, gave to said Ahalt an account of the statements made by the defendant at said interview, which were in all respects similar to those tesp. 442tiiied to in chief by the plaintiff — the witness giving in detail what the plaintiff told him had occurred in that interview as to the defendant’s representations — and thereupon the defendant’s counsel disclaiming, at the time of the plaintiff’s offer, and not before, all purpose of impeaching the integrity of the plaintiff in his understanding or version of the defendant’s representations as testified to by him, objected to said offered testimony, but the Court overruled the objection and allowed the evidence to be given to corroborate the testimony of the plaintiff so given in chief, and thereupon the defendant excepted.

On the question of waiver.— The appellee is estopped by every principle of good faith from ripping up alleged frauds which he had known of long ago, and not only slept on but knowingly waived. 1 Greenleaffs Evidence, secs. 207, 208 ; 10 Pick, 275; 5 Leigh, 391, 643; 10 Leigh, 431; 11 Leigh, p. 449349-351, 352; 6 Ad. & Ellis, 472, 474; 6 Johns. Ch. 11, 166 ; 2 Story’s Eq., secs. 385. 390, 391; 19 Johns., 473.

The real value of the property is not involved in this controversy, except in its relation to the questions of injury and damages. It has nothing to do with the misrepresentations charged. The materiality of these to the purchase is alone in p. 450question, not their materiality to the value of the thing purchased. Smith vs. Countryman, 30 N. Y., 669; 2 Parsons on Contracts, 769, 770; Ross vs. Estates Inv. Co., 3 Eq. Cases, (L. R.,) 136 ; Moens vs. Heyworth, 10 M. & W., 157; Pendergast vs. Reed, 29 Md., 398; Addison on Contracts, 907 : Henderson vs. Lacon, 5 Equity, (L. R.,) 257-260.

This is an action to recover damages alleged to have been sustained by the plaintiff by means of false and fraudulent p. 451representations 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.

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 p. 452a 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 p. 453from 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 p. 454of 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 p. 455rely 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.

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 p. 457representation 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 p. 458for 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 other words, that he has suffered loss to that extent. Substance and not form is what the Code (Art. 75, secs. 3, 7,) makes essential in p. 459pleadings. The demurrer cannot, therefore, stand on any ground, and was properly overruled.

Of the plaintiff’s prayers the second and third were granted and are open for review. His fourth prayer set out in the appellants’s brief is not in the record and therefore not before us. The second and third assume as their hypothesis that the defendant made to the plaintiff the representations stated in the declaration, knowing them, at the time to be false, with intent to induce the plaintiff to purchase, and that the latter, induced thereby and believing them to be true, did purchase and pay his money, and on the finding of these facts by the jury, they claim as damages such amount as the jury may find he lost as the direct result of such false representations, not exceeding, however, the sum paid for the two shares.with interest thereon. This makes a case of false representations fraudulently made, p. 460comprehended in the law on that subject as stated in the authorities already referred to. The qualification added to the third prayer, that it constitutes no defence to this action, that the defendant was not benefited or expected to be benefited by such false representations, is also supported by abundant authority, and indeed was one of the points expressly ruled in Pasley vs. Freeman.

The twelfth and thirteenth prayers and the first exception present questions of like character. But little was said at bar p. 461about these rulings and we considered them virtually abandoned by the appellant. They are however entirely correct. Where fraud is the gist of the action or subject of inquiry, great latitude of investigation is always allowed; fraudulent conduct, acts and declarations of the defendant of a similar character, at or about the same time, to or towards third.parties, are admissible to show the quo annimo of the particular transaction. These may be proved by third parties, (and a fortiori by the cross-examination of the defendant himself,) and from them the jury have the right to infer fraud in the transaction complained of.

The defendant’s fifth, seventh, eighth, eleventh, fifteenth, and sixteenth prayers were all granted, and in connection with the two granted at the instance of the plaintiff, the law of the case seems to have been fairly presented to the jury. It is clear that there has been no error committed in this respect to the prejudice of the defendant. We are of course not to be understood as intimating an opinion either way in respect to the proposition contained in the plaintiff’s fourth prayer, which only appears in the brief of counsel for the p. 462appellant. There was no agreement admitting it into the record, and we are not at liberty to consider it as affecting this case, nor have we considered it as an abstract proposition. It will be time enough to decide it when it is properly presented for review by this Court.

First. It is fair to infer from the terms of this exception and the evidence in the preceding one, which is made part of it, that the plaintiff as a witness had sworn to his understanding and recollection of what was said by the defendant in a certain interview between them, and that at the time of that conversation he understood the defendant to make the representations and statements set forth in the declaration, and that the defendant was then called to the stand and swore that he did not make the statements so testified to by the plaintiff, but others of a different import. This would present the not unusual occurrence of a misunderstanding at the time in reference to what was said in a conversation between two parties. If that was the state of the case then the disclaimer by the defendant’s counsel of all purpose of impeaching the integrity of the plaintiff in his understanding or version of the defendant’s representations as testified to, rendered the admission of Ahalt’s testimony entirely harmless. That disclaimer made in open Court was an endorsement by the defendant himself of the credibility of the plaintiff, and was equivalent to an admission that he had truthfully stated what his'understanding was of these statements at the time they were made. Ahalt’s testimony was then merely a corroboration of that understanding which, by this disclaimer and admission, needed no corroboration, and could not by possibility have worked harm to the defendant. After this admission the defendant’s counsel could not have argued such was not the understanding of the plaintiff in respect to these statements at the time of the interview, whether Ahalt’s testimony was in or not, and hence p. 463it is perfectly clear that though the ruling admitting it may have been erroneous, it affords no ground of reversal. This Court has frequently decided that where it appears the appellant has not been injured by the rulings of the Court below, the judgment will not be reversed though such rulings may be erroneous, and this is a most wise and salutary rule. If the record shows a case has been fairly tried and the law of it correctly stated to the jury by an inferior Court, it would be obstructing the course of justice, and trifling Avith the verdict and the rights of parties under it, if a reversal should follow from mere immaterial and harmless errors.

expedient or safe to extend or enlarge its application, yet it has been the uninterrupted practice of all Courts to receive their own decisions as of binding force, and on general principles of judicial propriety the solemn adjudications of an Appellate Court of last resort “ ought to be approached with caution, and perhaps they should never be disturbed except to settle some great rule of properly the public interest requires to be reviewed.” Hammond vs. Ridgely, 5 H. & J., 278; Hammond’s lessee, vs. Inloes, 4 Md., 138. No such considerations are here involved, and that case is, therefore, a binding authority on this Court, no matter what may be the law decided by Courts of other States or elsewhere, and whilst its doctrine is not to be expanded there ought to be no hesitation in applying it to a case falling directly within the rule and principle it establishes. That was done in 30 Md., 91, and must be adhered to* in the present case, for this is imperatively demanded by the importance of having the law fixed and certain. That the testimony of Ahalt was corroboratory of that of the plaintiff which had been thus substantially impeached appears to be plain. The fact that the plaintiff made the same statement of what the defendant had told him to Ahalt (who had been previously requested by the defendant to solicit the plaintiff to purchase an interest in these mines, and who at the time accompanied the plaintiff near to the office of the defendant, where the interview took place,) immediately after that interview, and not only before any lis mota or even distrust had arisen in the plaintiff’s mind, but before, or at the very time he made the purchase and paid part of his money therefor, and when, it may reasonably be presumed, he was pleased with his bargain and considered the investment safe and profitable, could not be otherwise regarded by the jury than as a corroboration of his testimony given on the stand and a vindication of his assailed veracity and credibility. It is no extension of Cooke vs. Curtis to hold it applicable to this case, because the impeached witness was a party to the suit. The law allowing parties to testify (Act of 1864, p. 465ch. 109,) says they “ shall be competent and compellable to give evidence in the same manner as other witnesses,” and the Legislature must interpose before the Courts can apply to them any other rule, with respect to the matter now undpr consideration, than is applicable to other witnesses.

But an examination of the authorities will show that Cooke vs. Curtis is not such a wide departure from principle or adjudged cases as has been asserted in argument. The authorities show it was at one time held allowable to prove in the first instance, as testimony in chief and before any impeachment, previous declarations to the same effect as the sworn testimony, because that, it was said, was merely in support of the oath of the witness, but this doctrine was overruled in England in the case of Rex vs. Parker, 3 Doug., 242, decided in. 1783, and mainly by Mr. Justice Bijller, and that ruling in no wise conflicts with Cooke vs. Curtis. But afterwards, in 1785, in the corrected edition of Bijllkr’.s Nisi Prius published in that year, (page 291,) the statement occurs without comment: “ But though hearsay be not allowed as direct evidence, yet it may be admitted in corroboration of a witness’ testimony, to show that he affirmed the same thing before on other occasions, and that he is still constant to himself.” This gave rise to the questio vexata so much discussed in subsequent cases, and by subsequent text-writers. Most of that discussion in this country at least, has been over the question whether, when a witness has been impeached by proving he had made different statements from those sworn to, (a mode of impeachment universally admitted,) he could be confirmed by showing he had made similar statements at other times, and the decisions in many instances have turned upon the further question, whether the confirmatory declarations were prior or subsequent to those by which he was impeached. They were subsequent in Ellicott vs. Pearl, 10 Pet., 412, and in Conrad, vs. Griffey, 11 How., 480, and in the latter case the circumstance was particularly adverted to, that being made subsequent to other statements of a different character, it was p. 466possible if not probable, the inducement to make them was for the very purpose of counteracting those first uttered. In the very able opinion of Bronson, J., in Robb vs. Hackley, 23 Wend., 50, it was admitted the confirmatory letter there offered in evidence was not proved to have been written when the transaction was recent, by any testimony save that of the impeached witness himself, and that letter might therefore have been prepared with a direct view to the litigation that ensued, and hence the case was “ not so strong as it would have been on proof by a third person that the witness had made similar declarations immediately after the business was transacted.” It was also conceded by Gibson, C. J., in Craig vs. Craig, 5 Rawle, 91, to be still a vexed question, whether .such statements, no matter when made, may not be used to rebut evidence of self-contradiction and thus show the witness to have been sometimes consistent, and their admissibility is cogently advocated in Henderson vs. Jones, 10 Sergt. & Rawle, 322, and Coffin vs. Anderson, 4 Blackf, 395.

As the question is an important one in the law of evidence, I take occasion to record my dissent from the views of a map. 468jority 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,