Stewart v. Stearns

The finding of the referee is authorized by the facts appearing in the case. If the defendant made false and fraudulent representations upon material matters, calculated and intended to mislead and prevent examination and inquiry as to the quality and character of the stock of goods, to induce the plaintiff to make the trade, and the plaintiff, in the exercise of ordinary prudence, relying upon such representations as true, was induced to enter into the contract and was thereby defrauded, he is entitled to damages.

Upon competent evidence the referee has found that the defendant, knowing that the plaintiff was unacquainted with such goods as made up the stock in his store, both before the making of the written agreement and during the taking of the inventory, represented and stated to the plaintiff, in substance, that his stock was clean and desirable, and that the goods were of good styles and salable; that the plaintiff, relying upon the defendant's representations, did not make a careful examination of the goods, and did not avail himself of the means provided in the written agreement for fixing the prices of the goods; that the stock contained remnants of carpets, and both carpets and papers of old patterns and styles, which were not salable at the prices put upon them in the inventory, and nothing was said by the defendant to the plaintiff about this; and that the plaintiff relied upon the representations made by the defendant, and was deceived by them and by the suppression of facts relating to the stock. It is also to be assumed, from the finding of the referee for the plaintiff, that the defendant knew the representations were false, that they were made as statements of material facts to deceive the plaintiff and were not mere expressions of opinion, and that the plaintiff was justified in relying upon them. These questions of fact are included in the general finding. Noyes v. Patrick, 58 N.H. 618. If the representations were false, the defendant knew them to be so, and the conclusion is almost irresistible that they were made with intent to deceive and defraud. Benj. Sales, s. 460.

It is objected that the plaintiff was not justified in relying upon the representations of the defendant, and that the referee erred in holding that the rule caveat emptor did not apply to this case. If the rule was of universal application, an action of deceit for false representations in a sale could never be maintained by the purchaser. It may be difficult to draw the line which separates cases within the rule from those to which it does not apply, as each case depends to some extent upon its peculiar circumstances; but it applies generally to cases free from actual fraud, where the parties deal upon an equal footing and with equal means of knowledge; and it is not applicable, as a general rule, where false and fraudulent representations of material facts are made by the vendor, and the parties have not equal facilities for ascertaining the truth. In such cases the purchaser has the right to rely upon the statements of the vendor; and when the purchaser is justified in relying upon the representations of the vendor, the rule caveat emptor does not apply.

Where the statements are of material facts, essentially connected with the substance of the transaction, and not mere general commendations or expressions of opinion, and are concerning matters which from their nature or situation are peculiarly within the knowledge of the vendor, the purchaser is justified in relying on them; and in the absence of any knowledge of his own, or of any facts which should excite suspicion, he is not bound to make inquiries and examine for himself. Under such circumstances it does not lie in the mouth of the vendor to complain that the vendee took him at his word. On the other hand, where the representations consist of general commendations or mere expressions of opinion, or where they relate to matters not peculiarly within the knowledge of the vendor, the purchaser is not justified in relying upon them, but is bound to examine for himself so as to ascertain the truth. 2 Pom. Eq. Juris., ss. 891, 892. In this case the parties were not on an equal footing, and had not equal means of knowledge. The defendant had an experience of fifteen years in trade, and knew the exact condition of his stock. The plaintiff had no acquaintance with such goods, and could learn nothing of their style and quality from an examination. The defects in the goods were to him undiscoverable defects. The representations made by the defendant related to material matters of fact, and the plaintiff was justified in relying on them. He was not guilty of negligence in assuming them to be true, nor was it his duty to employ a competent person to examine the goods.

In Poland v. Brownell, 131 Mass. 138, cited by the defendant in argument as a case strongly resembling the case at bar, it is stated in the opinion of the court "that the evidence showed that the plaintiff relied on his own examination and the advice of a friend, and for all that appeared both buyer and seller had equal means of information, and were equally well qualified to judge of the value of the property."

The evidence that the plaintiff's vigilance was disarmed by the defendant's representations was admissible under the declaration. It is a necessary consequence of such representations to lull suspicion and prevent inquiry and examination, which is not required to be specially alleged. It is not necessary to make a special claim for damages which result naturally and necessarily from the fraud. 1 Ch. Pl. 395; 3 Suth. Dam. 426; Hoitt v. Holcomb, 23 N.H. 535, 552; Hoitt v. Holcomb, 32 N.H. 185, 205; Page v. Parker, 40 N.H. 47, 71. Poland v. Brownell, 131 Mass. 138, and Parker v. Moulton, 114 Mass. 99, cited by the defendant, are to the effect that where the representations are not in themselves actionable, and the fact that the plaintiff was fraudulently induced to forego making inquiries which he would have otherwise made is relied on as a distinct ground of action, the means by which he was induced to forbear inquiry must be specifically set forth in the declaration, and it is not sufficient to charge in general terms that the plaintiff was fraudulently prevented by the defendant's artifice from making inquiry.

There was no error of law in allowing the plaintiff to testify as an expert as to what was a fair price for the goods at the time of the trade. Whether he possessed the requisite qualifications was a question of fact to be determined by the referee. Jones v. Tucker, 41 N.H. 546; Dole v. Johnson, 50 N.H. 452. The plaintiff went into business as soon as he bought the goods. There is no evidence or legal presumption of a material fall in the price of such goods after January, 1880. During the spring and summer of 1880, the plaintiff, in the course of his business, learned that the prices he paid the defendant exceeded the value of the goods in January, 1880, and he made complaint to the defendant in June, 1880. The plaintiff's means of information as to their value began in January, 1880. The knowledge gained by him in business within six months after he bought the goods of the defendant came from sources which the referee found were not too remote in time to be considered. The objection, that the plaintiff's knowledge of the prices of goods in January, 1880, must have been mere hearsay, is not sustained.

It is objected that the plaintiff's sole remedy was provided by the contract, by the stipulation for a reference of all prices named on the stock by the defendant to the judgment of certain persons designated in the written agreement. That was one remedy, — but the contract did not exclude the plaintiff from the remedy of this action; and the same fraud that induced him to buy the goods, induced him to refrain from the remedy provided by the contract.

Judgment for the plaintiff on the report.

ALLEN and BLODGETT, JJ., did not sit; the others concurred.