Files v. Rankin , 153 F. 537 ( 1907 )

ADAMS, Circuit Judge,

after stating the case delivered the opinion of the court.

It is first contended by defendant that he and receiver Brown stood on an equal footing; that Brown knew, or by the exercise of ordinary care could have known, as much about the value of the judgment as he knew; and that in such circumstances the receiver had no right to rely upon any fraudulent representation or concealment which he (defendant) might have practiced. On the facts so assumed the proposition of law contended for cannot be disputed. It is well settled that where the means of knowledge are at hand and equally available to both parties, and where a party, instead of resorting to them, sees fit to confide in the statements of one whose interest it is to mislead him, the law will afford him no redress against his own imprudent confidence. Cooley on Torts, *p. 487; Slaughter’s Adm’r v. Gerson, 13 Wall. 379, 20 L. Ed. 627; Farnsworth v. Duffner, 142 U. S. 43, 12 Sup. Ct. 164, 35 L. Ed. 931; Yeates v. Pryor, 11 Ark. 58; Hill v. Bush, 19 Ark. 528. But in the fight of the pleadings and proof we are unable to view the facts as claimed. Defendant knew that the allowed claims of Kelso against the Allen estate stood pledged as collateral for the payment of the Kelso judgment, and he knew that they were of considerable value. Of those facts Brown knew nothing. • Neither did his immediate predecessor have any knowledge. What Cockrill, the first receiver, knew concerning them, is not disclosed; but it is a fact that, when he offered the assets of the bank at public auction in 1899, no one considered the judgment of any value. It was offered for sale, but no bid was received for it. If he then or subsequently had the assignments of Kelso’s allowances against the Allen estate in his possession, they doubtless were considered of no value. They certBuly disappeared, and neither they nor any memorandum of them were ever transmitted to his successors to evidence any claim of right on the part of the bank against the Allen estate. The testimony of both Bfown and his predecessor, Auten, to the effect that they had no knowledge of the existence of any such claim, stands uncontradicted. But it is said that Brown could have acquired accurate information by investigating the means at hand and available to him for that purpose. It is claimed that, if he had investigated the records of Houchens v. Allen & Co., and made inquiries of the receiver in charge of the estate of that company, he could and would have ascertained the truth.. We are unable to perceive, in the absence of anything in his own records, or in his own possession to suggest investigating the Houchens Case, what should have moved him to make an investigation of that any more than any other, case; but suppose reasonable diligence would have put him upon some inquiry in that case, and suppose he would have discovered that certain allowances had been made in favor of’ Kelso, we do not perceive how that fact would have given him ány knowledge or suggestion that Kelso had assigned the claim to the bank as security for the payment of his judgment. From all the evidence we are unable to find that any such opportunities for information -were open to Brown as would have put a reasonably prudent person upon inquiry concerning the facts which gave the Kelso judgment exceptional value.

This brings us to a consideration of the contents of the two letters of August 27th and October 6th, written to the receiver Brown by defendant and of their legal effect upon the transaction in question.

Defendant, with the knowledge possessed by him of the value of the judgment, was dealing with a person residing at a distance. He desired to buy the judgment. However full his information might be, he was under no obligation in law to impart that knowledge to the owner of the judgment. Files v. Brown, 124 Fed. 133, 59 C. C. A. 403. Standing in no fiduciary relation to him, and owing him no duty to make disclosure of his information, he might have observed strict silence on the subject and have reaped the full advantage which his diligence; in securing information gave him; but any activity on his part, which directly or indirectly tended to put the vendor off his guard or mislead him to his injury, would afford ground for the rescission of the sale.

In Laidlaw v. Organ, 2 Wheat. 178, 4 L. Ed. 214, Chief Justice Marshall stated the ca.se and delivered the opinion of the court, as follows:

“The question in this case is whether the intelligence of extrinsic circumstances, which might influence the price of the commodity, and which was exclusively within the knowledge of the vendee, ought to have been communicated by him to the vendor? The court is of opinion, that he was not hound to communicate it. It would be difficult to circumscribe the contrary doctrine within the proper limits, where the means of intelligence are equally accessible to both parties. But at the same time, each party must take care not to say oído anything tending to impose upon the other.”

Lord Eldon, in Turner v. Harvey, Jacob’s Reports, 178, after declaring the purchaser’s right in general to keep silence, said as follows :

“Very little is sufficient to affect the application of that principle. If a word, if a single word, be dropped which tends to mislead the vendor, that principle will not be allowed to operate.”

Pomeroy, in his work on Equity Jurisprudence (volume 2, § 901), after laying down the rule that in cases unaffected by fiduciary relations silence by one of the contracting parties having a peculiar' knowledge of the subject may be observed with impunity, makes the following statement:

“If, in addition to the party’s silence, there is any statement, even any word or act on his part, which tends affirmatively to suppression of the truth, to a covering up or disguising the truth or to a withdrawal or distraction of the party’s attention or observation from the real facts, then the line is overstepped, and the concealment becomes fraudulent.”

Story, in his work on Sales ([4th Ed.] §§ 175, 177), observes as follows:

“If a vendee have private information with regartd to any extrinsic fact or event, which materially affects the value of the subject-matter of sale, he would not be legally bound to divulge it, unless a special trust were either expressly or impliedly reposed in him. * * * Such cases are, however, closely scrutinized, and it behooves a person taking such an advantage to be careful lest he say anything which is calculated in the slightest degree to mislead, for the smallest fraud is sufficient to poison a contract. * * * If there be any studied efforts [on the part of either party to a contract of sale] to prevent the ■other from coming to any knowledge relating to the sale and, especially if there be any false suggestion or representation, however slight, the transaction will be fraudulent and void.”

Applying the foregoing well-established principles to the facts of this case, we cannot escape the conviction that defendant did not ■observe that indifferent attitude toward the transaction which was required of him. There seems to have been a covert attempt on :his part to attract the receiver’s attention to all the facts which minimized the value of the judgment and to turn his attention from those which magnified that value.

Defendant had some time in September, 1902, offered $25 for the judgment at private sale. The Comptroller declined to sanction the sale for that sum, and so advised the receiver, and directed him to dispose of the judgment at public auction at the termination of his receivership. It is in the light of all these facts that the letter of October 6th should be considered. Defendant wanted to buy the judgment, had made an offer for it which had been rejected, and negotiations had apparently closed. Upon the determination of the Comptroller to sell it at public auction, defendant volunteered his good services. In the letter of October 6th he gratuituosly suggests that the sale of the judgment at public auction at the time of the termination of the receivership would postpone it so long that the statute of limitations might bar recovery upon it. He ihcidently •alludes to Kelso’s death, insolvency, and bankruptcy, and says:

“Permit me to suggest that a sale now at public auction or otherwise would •give the purchaser the benefit of whatever value it might have. * * * If any value attaches now it would be lost by delay of two or three years. * * * If it could be handled at once, a small sum might be realized; but even that is very doubtful. Kindly submit the matter to the comptroller,” etc.

That letter, by its suggestive references to the death, insolvency, and bankruptcy of Kelso, to the worthlessness of the judgment and to the need of hasty action to realize even a small sum and prevent the bar of the statute of limitations, went far beyond that silence which the law under the circumstances permitted defendant to indulge. He had knowledge of the value of the judgment which he ■artfully concealed. His suggestions were well calculated to divert the mind of the vendor from inquiring concerning the value of the judgment, to forestall the public auction and secure acceptance of his once rejected offer. The receiver acted upon them, accepted the original offer, and closed the sale.

Counsel for appellant invokes the principle that mere expressions ■of opinion as ■ distinguished from statements of fact are not actionable. That proposition' may be conceded, but from what has already been said there is more in this case than that. There was such an artful concealment of facts by the purchaser as was calculated to .and did mislead the seller, throw him off his guard, and prevent his making an independent investigation as to the value of the subject of sale. Under the authorities cited, this, without more, is enough to warrant a rescission of the sale.

The case was tried below in harmony with the principles now announced, and the decree as rendered is affirmed.