Gates v. Moldstad

The opinion of the court was delivered by

Hoyt, C. J.

By this action plaintiff sought to recover for damages alleged to have been sustained by reason of certain false and fraudulent representations made by respondents with reference to the solvency of ■the makers of two certain promissory notes, which induced appellant to accept said notes in part payment for certain real estate which at the time was conveyed ■to respondents. The complaint, after setting forth "these facts, alleged that, for the purpose of further inducing and causing appellant to accept said notes, respondents falsely and fraudulently represented that ■they would indorse them and become responsible for their payment; that, instead of doing so, they indorsed them without recourse. The superior court held that the complaint did not state facts sufficient to constitute a cause of action, and the plaintiff electing to stand upon the complaint, judgment of dismissal was entered to reverse which this appeal has been prosecuted.

In what respect the superior court found the complaint to be insufficient does not appear from the record, but the principal reason therefor suggested in. the brief of respondents is that the representations as to the solvency of the makers of the notes could not have induced the appellant to accept them, for the reason that what was said upon that subject was merged in the promise to indorse the notes, and that, what was said as to the indorsement was merged in the contract, which was made when the notes were indorsed without recourse. If the solvency of the makers of the note would have been a matter of no concern to the appellant had the agreement to indorse stated by her been complied with by the respondents, there might be force in the contention that the complaint failed to state a cause of action, for the reason that all of the negotiations leading up to the making of the indorsement might beheld to have been merged therein. But, in our opinion, the solvency of the makers might have had a. material influence upon the appellant, irrespective of the question as to whether or not the indorsement of the notes was to be such as to make the respondents-liable if they were not paid by the makers.

If the indorsement was such as to make the indors-ers liable in case of non-payment, the responsibility of the makers could not materially have influenced the appellant, if she was content to rely solely upon, the responsibility of the indorsers. But there is nothing in the complaint to show that she was content to rely upon their responsibility alone. For all that appears, such indorsers may have been of doubtful responsibility, and even though the notes had been indorsed by them so as to make them liable in case of non-payment, appellant’s principal reliance may still have been upon the responsibility of the makers of the notes. If the makers were responsible and the indorsement was such as to make the indorsers liable, appellant had two sources to which to look to make the money due on the notes, and these sources were entirely independent of each other, and could be resorted to jointly or severally until the full amount due upon the notes had been paid. Hence, representations in reference to the indorsement had no connection whatever with representations as to the solvency of the makers. The one was a representation which might have induced her to presume that she could recover the money due upon the notes from the makers; the other that she could recover it of the respondents; and the fact that one was made under such circumstances as to show that she did not rely upon it could in no manner negative the claim that she relied upon the other. •

The representations as to the solvency of the makers, alleged in the complaint to have been made by the respondents were as to existing facts material to the question of their solvency, and not mere matters of opinion as to such facts; and it was sufficiently alleged therein that the appellant relied upon such representations and by reason of them took the notes in part payment of the money due from the respondents. And it was also sufficiently alleged that such representations were untrue and that the respondents knew they were untrue at the time they made them, and that the makers were in fact insolvent and the notes valueless so far as their value depended upon the ability to collect a judgment rendered thereon against the makers.

That the making of material representations of this kind, when known to be false, constitutes such fraudulent misrepresentation as to render the one who makes them liable in damages, is beyond question. Hence, the complaint stated a cause of action, unless the representations as to the solvency of the makers were merged in those as to the agreement to indorse, and those in turn merged in the contract of indorsement evidenced by the indorsement itself. But, as we have seen, the agreement in reference to the indorsement was entirely independent of the representations as to the solvency of the makers, and could have had no influence upon such representations.

The reasons given by the appellant in her brief for including the representations as to the indorsement in the complaint were that the fact that the respondents were willing to indorse the notes tended to show that they had made the representations alleged as to the solvency, of the makers. But, in our opinion, this claim furnished no good reason for such representations having been included in the complaint. If these representations were, as claimed by the respondents, inerged in the contract evidenced by the indorsement, they were without value to the appellant. The fact that the respondents were willing to indorse could have no tendency to prove that they represented the makers to be solvent. They might have been willing to indorse the notes and deliver them.instead of paying the cash, even if the makers were known to be insolvent. On the other hand, they might have been unwilling to indorse them if they had known the makers were perfectly solvent. But the fact that these representations as to the indorsement did not aid the complaint could take nothing from the force of the allegations as to the representations in réference to the solvency of the makers, and. as in our opinion those, if true, were such as to make the respondents liable in damages, the complaint stated a cause of action.

The judgment will be reversed and the cause remanded with instructions to proceed in accordance with this opinion.

ANders, Scott and Dunbar, JJ., concur.