A Selection of Cases on the Law of Torts

by Unknown

Carpenter, J., in ALDRICH v. SCRIBNER
(1908) 154 Michigan, 23.

Holcomb v. Noble, 69 Mich. 396, 37 N. W. 497, is also in point. There defendant and plaintiff exchanged lands. In making this exchange plaintiff relied on certain representations of fact respecting the pine on the land transferred to him by defendant. These representations were based—and this was understood by plaintiff—upon the reports of a land looker, and defendant told plaintiff “that all he knew about the land was what he learned from the land looker.” Defendant believed these representations to be true. They were in fact false, and plaintiff sustained damages by his reliance thereon. An action of fraud was brought, and it was held that plaintiff could recover. There were two opinions in the case, one written by Justice Campbell and concurred in by Justice Champlin, one written by Justice Morse and concurred in by Chief Justice Sherwood. In the opinion of Justice Campbell it is said: “It is admitted that in equity an actual design to mislead is not necessary if a party is actually misled by another in a bargain. There was abundant evidence in this case to authorize the jury to find that defendant, whether honestly or dishonestly, expected plaintiff to act on his representations of the reliableness of the reports which he produced, and that plaintiff did rely on them. There is no reason for a difference in action, in such cases, between courts of law and courts of equity. Where an equitable cause of grievance exists, it in no way differs from a legal one, unless a different remedy is needed. A court of law cannot cancel a contract, and for such a purpose the equitable remedy must be sought. But where the relief desired is compensation for the wrong, the equitable remedy is much less appropriate, and an action in equity for mere damages will generally be denied, but denied only because the legal remedy is better. If there could be no legal remedy, there can be no doubt that equity would act. If the fraud is such that it creates a right of action anywhere, an action must lie on the case where a money judgment is needed.” I now quote from the opinion of Justice Morse, concurred in by Chief Justice Sherwood: “I was strongly impressed, upon the argument of this case, with the theory of the defendant, supported by abundant authority outside of our own state, that unless the jury found that the representations relied upon by the plaintiff as false were made by the defendant, Noble, knowing them to be false, or he made the statements as facts within his own knowledge, when he was ignorant of the truth or falsity of them, he could not be held liable in this action; that if he told plaintiff that he had never seen the lands, but that he had had the same examined by a competent land looker, who said that there were 5,000,000 feet of pine on the land, and made no representations as of his own knowledge, the plaintiff could not recover. A subsequent careful examination of the case and the authorities cited by defendant’s counsel has but confirmed me in the correctness and justness of his claim. I am satisfied that the law ought not to make a different contract for the seller than he sees fit to make for himself, and hold him in effect, for warranties that he never made. But an equally careful examination of the cases adjudicated in this state satisfies me that the doctrine is settled here, by a long line of cases, that if there was in fact a misrepresentation, though made innocently, and its deceptive influence was effective, the consequences to the plaintiff being as serious as though it had proceeded from a vicious purpose, he would have a right of action for the damages caused thereby either at law or in equity. Baughman v. Gould, 45 Mich. 483, 8 N. W. 73; Converse v. Blumrich, 14 Mich. 109, 90 Am. Dec. 230; Steinbach v. Hill, 25 Mich. 78; Webster v. Bailey, 31 Mich. 36; Starkweather v. Benjamin, 32 Mich. 305; Beebe v. Knapp, 28 Mich. 53.” I think these decisions are indistinguishable from the case at bar, and require us to say that the trial court erred in directing a verdict for the defendant. The Busch Case and the Holcomb Case cannot be distinguished from the case under consideration by saying that in them “the principal adopted the agent’s estimate as his own.” For in this case, as heretofore stated, defendant asserted to plaintiff “that those representations Barnard had made were true.” It might therefore be said in this case, then, the principal adopted the agent’s estimate as his own.

Our attention is called to Krause v. Cook, 144 Mich. 365, 108 N. W. 81. There defendant, acting for one Parker, sold mining stock to the plaintiff. Certain false representations were made, and an action to recover damages for fraud was brought. It was held that the trial court should have given the following instruction: “If a person received information from others, and believes it, repeats it, explaining that he has no personal knowledge, he is not guilty of fraud. Therefore, if you find that the defendant received information from others, and repeated that information to plaintiff, and explained to plaintiff the sources of his information, he is not guilty of any fraud, if he acts honestly and in good faith.” At first blush it would seem, that this principle is opposed to the decisions of Holcomb v. Noble and Busch v. Wilcox, supra. And it must be admitted, I think, that if this principle had been applied in those cases, a different conclusion would there have been reached. If there was no difference in the facts, it might be said that Krause v. Cook, supra, is opposed to the principle announced in the Busch and Holcomb Cases. But there is a difference in the cases, and, in my judgment, such a difference as to require a different rule of law. In the Holcomb and Busch Cases the defendant himself obtained what plaintiff lost by means of the false representations. In the Krause Case the defendant was an agent, who at most received only 10 per cent of the damages caused by the false representations. This difference, in my judgment, places the Krause Case outside the rule of the Holcomb and Busch Cases. That rule is peculiarly a Michigan rule. Elsewhere in order to create liability for deceit, it must be shown that “the person making the statement, or the person responsible for it, either knows it to be untrue, or is culpably ignorant (that is, recklessly and consciously ignorant) whether it be true or not.” See Webb’s Pollock on Torts, p. 355. In Michigan we have held (see cases cited in the opinion of Justice Morse in the Holcomb Case, supra) that in order to constitute a fraud it is not necessary that the person making the statement should either know that it is untrue or be recklessly and consciously ignorant whether it be true or not. It is sufficient if it be false in fact. It must be said, however, that in the cases in which this principle has been applied the defendant obtained what the false representations caused the plaintiff to lose. Applied in such cases, the principle is a just and salutary one. This may be illustrated by the Holcomb Case—which is a typical case. There, because plaintiff Holcomb credited a certain false statement of fact, he paid defendant Noble more for land purchased than otherwise he would have paid. The false statement of fact was an agency whereby the property of the plaintiff was transferred to defendant. The law would be justly subject to reproach if it afforded no redress in such case. In Michigan the law does give redress in such a case, and that redress may be obtained in an action for fraud. It may seem somewhat unjust to characterize such conduct as fraudulent, but the court was apparently placed in the dilemma of either so characterizing it or of altogether denying compensation, and it chose the least objectionable of these two alternatives. This principle, which is altogether just in its application to cases where the loss of the plaintiff has inured to the profit of the defendant, would be most unjust if applied to cases where the defendant has obtained no such profit. This may be illustrated by taking a concrete case, and I take a case even plainer in its facts than the Krause Case. Let us suppose that, with commendable motives and in the best of faith, one friend communicates to another with all amplitude of detail certain information he has received respecting a mine, which it is known that neither of them has ever visited. The object of this communication is to induce the one to whom it is made to purchase stock, but not from the one making the communication, but from a third person having no relation to him. The stock is purchased accordingly, without any profit resulting to the friend making the communication; the information proves to be false and the stock worthless. Did the friend who communicated the information which proved to be false commit a fraud? He did no moral wrong. Indeed, from a moral point of view his conduct was commendable, and, unless compelled to do so, the court should not announce a rule of law which penalizes commendable conduct. Are we compelled to declare that there exists a rule of law which makes such conduct fraudulent? Manifestly not unless we are bound to declare that the doctrine of the Holcomb and Busch Cases applies. Must we so declare? As already pointed out, the case differs materially from the Holcomb and Busch Cases, and this difference is such that the doctrine of those cases has no just application. That doctrine was designed to accomplish justice: as applied in the Holcomb and Busch Cases and in similar cases it does accomplish justice. As applied to cases where the loss of the plaintiff has not inured to the profit of the defendant it accomplishes an injustice, and it therefore has no application to such cases.

Lord Haldane, L. C., in NOCTON v. LORD ASHBURTON
(1914) Appeal Cases, 932, 945–946, 951–954.

I have read the evidence of the appellant, and, although it is obviously unreliable evidence, it leaves on my mind the same impression that it left on that of the learned judge who heard it, that the solicitor did not consciously intend to defraud his client, but, largely owing to a confused state of mind, believed that he was properly joining with him and guiding him in a good speculation.

I cannot, therefore, treat the case, so far as based on intention to deceive, as made out. But where I differ from the learned judges in the Courts below is as to their view that, if they did not regard deceit as proved, the only alternative was to treat the action as one of mere negligence at law unconnected with misconduct. This alternative they thought was precluded by the way the case had been conducted. I am not sure that, on the pleadings and on the facts proved, they were right even in this. The question might well have been treated as in their discretion and as properly one of costs only, having regard to the unsatisfactory evidence of the appellant. But I do not take the view that they were shut up within the dilemma they supposed. There is a third form of procedure to which the statement of claim approximated very closely, and that is the old bill in Chancery to enforce compensation for breach of a fiduciary obligation. There appears to have been an impression that the necessity which recent authorities have established of proving moral fraud in order to succeed in an action of deceit has narrowed the scope of this remedy. For the reasons which I am about to offer to your Lordships, I do not think that this is so....

My Lords, it is known that in cases of actual fraud the Courts of Chancery and of Common Law exercised a concurrent jurisdiction from the earliest times. For some of these cases the greater freedom which, in early days, the Court of Chancery exercised in admitting the testimony of parties to the proceedings made it a more suitable tribunal. Moreover, its remedies were more elastic. Operating in personam as a Court of conscience it could order the defendant, not, indeed, in those days, to pay damages as such, but to make restitution, or to compensate the plaintiff by putting him in as good a position pecuniarily as that in which he was before the injury.

But in addition to this concurrent jurisdiction, the Court of Chancery exercised an exclusive jurisdiction in cases which, although classified in that Court as cases of fraud, yet did not necessarily import the element of dolus malus. The Court took upon itself to prevent a man from acting against the dictates of conscience as defined by the Court, and to grant injunctions in anticipation of injury, as well as relief where injury had been done. Common instances of this exclusive jurisdiction are cases arising out of breach of duty by persons standing in a fiduciary relation, such as the solicitor to the client, illustrated by Lord Hardwicke’s judgment in Chesterfield v. Janssen, 2 Ves. Sen. 125. I can hardly imagine that those who took part in the decision of Derry v. Peek, 14 App. Cas. 337, imagined that they could be supposed to have cast doubt on the principle of any cases arising under the exclusive jurisdiction of the Court of Chancery. No such case was before the House, which was dealing only with a case of actual fraud as to which the jurisdiction in equity was concurrent....

So far as the equity jurisdiction in cases of what is called fraud is concurrent only and exercised in actions for mere deceit apart from breach of special duty, an actual intention to cheat has now to be proved. But there are cases of other classes to which, as I have already said, the Court of Chancery undoubtedly did apply the term fraud, although I think unfortunately.

Fraud in such cases is, as James, L. J., said in Torrance v. Bolton, L. R. 8 Ch. 118, at p. 124, “nomen generalissimum, and it must not be construed so as to mislead persons into the notion that contracts for the sale and purchase of lands are in any respect privileged, so as to be free from the ordinary jurisdiction of the Court to deal with them as it deals with any instrument, or any other transactions, in which the Court is of opinion that it is unconscientious for a person to avail himself of the legal advantage which he has obtained. Indeed, the books are full of cases in which the Court has dealt with contracts of that kind—contracts obtained by persons from others over whom they have dominion, contracts obtained by persons in a fiduciary position, contracts for the sale of shares obtained by directors through misrepresentation contained in the prospectus, in respect of which it was never necessary to allege or prove that the directors were wilfully guilty of moral fraud in what they had done.” In Chancery the term “fraud” thus came to be used to describe what fell short of deceit, but imported breach of a duty to which equity had attached its sanction. What was laid down by Lord Eldon in this House in Bulkely v. Wilford, 2 Cl. & F. 102, at p. 177, explains the nature of the duty.