Gainesville National Bank v. Bamberger, Bloom & Co.

HOBBY, Judge.

—Two well defined issues were submitted and litigated in this action of the trial of the right of property.

The appellees Bamberger, Bloom & Co., who were claimants of the property attached by appellants, contend, first, that in the spring of 1887 Goldstein & Melasky, who were the defendants in attachment, purchased the goods in controversy from them, and that the sale was made by them upon the faith of the representations of said- Goldstein & Melasky as to their financial standing and solvency communicated to Dun’s Mercantile Agency, of Hew York, in August, 1886. That appellees were subscribers to said agency and relied upon said representations, and save for them they would not have sold the goods. That the representations were false, and so known to be when made. It was contended in the second place that the goods were purchased at a time when the purchasers knew that they were insolvent and unable to pay for the same, and that they did not intend at the time of the purchase to pay for them.

To this it is urged in reply by appellants that if a statement made to said agency can be construed to be a representation to a subscriber, it should be shown that the party making such statement knew of the subscriber, and made the representations with a view of influencing such .subscriber. And, further, that the representations referred to were but matters of opinion and not the statement of facts, and that they should be made during the negotiation regarding the trade or so connected therewith as to constitute a part of the transaction.

The facts upon which the appellees rely in this case as establishing the existence of fraud are: That in July, 1885, the firm of Goldstein & Melasky, then engaged in business in Gainesville, Texas, made a statement- through Melasky, a member of the firm, to Dun’s Commercial Agency to the effect that he brought into the firm $17,000. That there was stock on'hand to the amount of $20,000, and $11,000 in accounts. The indebtedness of the firm was represented to be about $17,000, which included a private debt of $2000. Their assets above liabilities showing by this statement $31,000. About a year subsequentto the above, in August, 1886, another statement is made by Melasky to said agency, in which he represented that there was then $45,530 in stock, and $29,670 in notes and open accounts which were good, two dwellings in Gainesville worth $10,000, and 113 acres of improved land, valued at $10,000, constituting the assets. Their liabilities were represented to be about $28,973, leaving an excess-of assets amounting to $66,227. Statements, it seems, were made annually to this agency, purporting to show the financial status of Goldstein & Melasky.

It further appears from the testimony that in August, 1886, Melasky called at the commercial agency of Dun, in Mew York, to explain a discrepancy in the former statement. This explanation is that the statement made by him in July, 1885, did not embrace his “personal real estate”' of $20,000 and the net profits of the business of the preceding year, amounting to $15,000, which items, added to the $31,000 shown by his July, 1885, statement as the assets of the firm, would make the present surplus of $66,000 above -their liabilities.

.Such were the representations made as to the financial status and the solvency of the firm of Goldstein & Melasky, upon which the proof shows the appellees relied in making the sale of the goods involved in this trial, and without which they would not have sold them. The testimony of Melasky is to the effect that he made these statements to the commercial agency of Dun for the purpose of obtaining credit, and that he knew at the time that these facts would be communicated to the subscribers of said agency; and appellees were subscribers to this agency, from which they derived to a great extent their information of the financial standing of the former.

It is not necessary to reproduce in detail the estimates and calculations in evidence which authorized the conclusion by the court of the falsity of the representations above mentioned.

Melasky’s evidence discloses the fact that when he was in Mew York in the spring and summer of 1887 his firm was so pressed for money that he resorted to the process of “ kiting,” and which is not considered fair financial dealing among merchants. It consisted of his drawing drafts on his-Texas house for money to pay drafts in Mew York, and his Texas house would pay the drafts by drawing on him in Mew York, he having no money in Mew York, and his house in Texas being similarly situated. It was shown that about the time of the purchase of the goods the liabilities of Goldstein & Melasky were about $78,000 and their assets about $72,000. The dwelling houses included in the statements made to the agency were not subject to execution.

In the year 1887 it was proved that the firm was largely indebted to appellants, and rendered a statement showing their liabilities to be about $30,000 less than their assets, upon the faith of which the bank loaned them money. This was eight or nine months subsequent to their report to the agency showing a surplus of $66,000. This statement to the bank, it was testified by the president, was untrue. In the preceding fall, 1886, a statement by Melasky to a Baltimore commercial agency showed their assets to be between $20,000 and $30,000. In the summer of 1887 the stock of the firm was found to be $20,000 short, but no explanation was made of how that occurred.

The evidence plainly shows that but for the representations made by Melasky the contract of sale would not have been consummated, and there is nothing in the proof which would justify the inference that the sale of the goods would have been made by appellees without these representations upon which they relied. It follows therefore necessarily that such being the effect of the statements made to the agency, they were material. McAlier v. Horsey, 35 Md., 439-52. The law governing the sale of personal property is well established to the effect that the mere expression of an opinion as to values, which proves to be incorrect or false, does not come within the rule applicable to the fraudulent representation of a material fact. But the status of the debtor is a fact, and a representation as to that status is the declaration of a fact. Benj. on Sales, 562, note. In Bradley v. Love, 99 Illinois, 234, worthless stock was represented as worth a large sum, and mortgages for $12,000 on land worth $2000 were represented as good. These statements were held clearly fraudulent

No inflexible rule can with accuracy define all of the circumstances in which the representations of fact or of matters of opinion may become iraudulent. Benj. on Sales, 562, note.

But representations of the financial status and solvency of Goldstein & Melasky, under the circumstances in this case, were clearly statements of iact and not mere expressions of opinion.

It is not essential that the misrepresentations should have been directly ■made to the appellees by Goldstein & Melasky, and during the negotiations regarding the contract of sale, for them to avail in canceling such contract.

As a general proposition it may be correct, as contended by appellants, •that a misrepresentation made to one person, not with a view of reaching •another, can not be available to another who may have acted on it to cancel a contract entered into by reason of it; but it is sound doctrine that a third person to whom they were not directly made can maintain an action of deceit and seek the cancellation of a contract made by him, if it •appear that the defendant’s false representations were made with a direct intent that he should act upon them in the manner which occasioned the injury. Eaton v. Avery, 83 N. Y., 31.

If the false representations be made with a view of reaching the third person to whom it is repeated, and for the purpose of influencing him, they will afford a cause of action. 1 Pome. Eq., sec. 879.

An illustration identical Avith this phase of the case will be found in the ■case of Eaton v. Avery, 83 New York, 31. The representations charged in the case cited, as in this case, were not made to the appellee directly, but to the Dun Commercial Agency, and by it communicated to appellees, who sold the goods, relying upon the statements so made.

It was in that case contended, as in this, that assuming the representations to have been false, they were not sufficiently connected with the contract of sale.

It was there held that it was not essential that the representations should, be addressed to the party directly who seeks a remedy for having been deceived and defrauded by means thereof; that if they were false and so-known to be by the party making them, and were made with the intent that they should be communicated to and believed by persons interested in ascertaining the pecuniary responsibility of the firm, and with the intent to procure credit and defraud such persons thereby, and they were-relied on by the seller and the sale procured thereby, the plaintiff was entitled to recover.

In the case last cited it was said: “A person furnishing information to such agency in relation to his own circumstances, means, and pecuniary responsibility can have no other motive in so doing than to enable the-agency to'communicate such information to persons who may be interested in obtaining it for their guidance in giving credit to the party; and. if a merchant furnishes such an agency a willfully false statement of his. circumstances or pecuniary ability, with the intent to obtain a standing- and credit to which he knows he is not justly entitled, and thus to defraud whoever may resort to the agency and in reliance upon the false-information there lodged extend a credit to him, there is no reason why his liability to any party defrauded by those means should not be the same as if he had made the false representation directly to the party injured.”

Upon the other,branch of the case—the known insolvency of Goldstein. & Melasky at the time of the purchase of the goods and their alleged intention not to pay for them—it is only necessary to say of it that it is a question of fact to be found from all the circumstances developed by the proof—which proof in this case we are not prepared' to say was not sufficient to support the decree, if the sufficiency of the proof upon either of the issues we have discussed is contested by appellant, which we do not-understand to be done in this case.

“The mere insolvency of the purchaser, where no fraudulent purpose-exists, as also the mere fact that the purchaser has knowledge that his debts exceed his assets, though the fact be unknown and uncommunicated to the vendor, will not vitiate the purchase,” is certainly true.

So on the other hand, “ an intention on the part of the purchaser not-to pay for the goods, existing at the time of the purchase and concealed from the vendor, is such a fraud as will vitiate the contract.” Talcott v. Henderson, 31 Ohio St., 164.

There is no error in the judgment, and we think it should be affirmed-

Affirmed.

Adopted April 22, 1890.