Turner v. Houpt.

The facts of that foreclosure are that on the 6th of June, 1892, Mrs. Taylor, who was the mortgagee of the first mortgage on the Maryland property, assigned the same to a Mr. Milliken, who lived in Maryland, and that he advertised the same for sale on the 5th of July, by virtue of a power contained in the mortgage; and at that time he put it up for sale, first in parcels, and it was so bid off, the whole aggregating $10,925. He then put it up as a whole, and it was sold to Mrs. Taylor, the mortgagee, for $12,055. An order to show cause why this sale should not be confirmed was made by the district court sitting as a court of equity, and duly published, and the sale was confirmed on the 28th of December, 1892.

Neither Mr. nor Mrs. Turner, nor Mr. and Mrs. Houpt were made parties to that proceeding, or had any other notice of it except that of publication in the newspaper, the only parties mentioned being the mortgagors, Mr. and Mrs. Adams, and the mortgagees, Mr. and Mrs. Taylor. The defendants, however, did have actual notice and knowledge of the sale (as shown by their answer filed August 23d, 1893) before it had been confirmed by the court.

Let us now inquire as to the merits of the case between the parties hereto. And, first, my conclusion from the evidence is that the descriptive statements, written and oral, made by Houpt to Dr. Turner as to the acreage, condition and value of this property were essentially and materially untrue.

Dr. Turner lost not only the whole property conveyed to Houpt, but the amount which he paid and became liable to pay on the second mortgage. The doctor's property at Avon was fairly worth $12,000 to $15,000 over the incumbrance of $9,000.

I further conclude that the representations were fraudulently made; that is to say, that they were made for the purpose of misleading Dr. Turner so far as it was practicable under the circumstances to mislead him. I can conceive of no other purpose or motive for which they could have been made, and such object and purpose rendered them fraudulent.

It seems too clear for argument that if the exchange had been made on the strength of these statements without any inspection

Turner v. Houpt.

of the premises, it would not stand in equity, but would be set aside.

This brings us to the serious question in this cause, viz., how is the case varied by the fact that not only was the contract made subject to inspection and subsequent approval, but that such inspection did actually take place, and after it was made an approval in writing was signed?

In considering this question it is to be observed that the untrue representations in this case cannot be classed as mere commendations, or as the ordinary praise which the seller bestows upon his wares; nor, again, were they mere expressions of opinion or judgment, or of hope or expectation. On the contrary, they were precise statements of alleged facts within the actual knowledge of the defendant.

Now I think that certain principles governing transactions of this kind are clearly deducible from the numerous judicial utterances and decisions on the subject. No man is justified, either in morals or in law, in knowingly making a false descriptive statement about the subject-matter of a proposed contract which may influence the mind of the other party in the transaction. No party has any right, either in law or in morals, to rely upon either the ability or the opportunity of the other party to discover the falsehood of his representations and thus avoid injury from it. And in actual practice no party does make such false statements in the expectation that they will certainly be discovered and will have no influence. For, with such certain discovery in prospect, why make them? In short, nobody has the right to set a trap for his neighbor even in a place where it is so exposed to view as to render it highly improbable he shall step into it; and if, peradventure, he does step into it, the trap-setter has no right to say to him, you ought not to have been so careless and negligent as to step into a trap exposed to full view. The willful wrongdoer is not entitled to the benefit of the defence of contributory negligence.

Hence the practical rule seems thoroughly established that where false representations of the character here in question have been made previous to a sale, the presumption is that they

Turner v. Houpt.

did influence the mind of the other party and helped to produce the sale, and the burden is on the fraud-doer to prove clearly that they did not influence the sale.

Says Mr. Kerr, in his book on Fraud and Mistake (Am. ed.) p. 75: .

"If any one of several statements, all in their nature more or less capable of leading the party to whom they are addressed to adopt a particular line of conduct, be untrue, the whole transaction is considered as having been fraudulently obtained, for it is impossible to say that the untrue statement may not have been precisely that which turned the scale in the mind of the party to whom it was addressed. A man who has made a false representation in respect of a material matter must, in order to be able to rely on the defence that the transaction was not entered into on the faith of the representation, be able to prove to demonstration that it was not relied on. It is not enough for him to say that there were other representations by which the transaction may have been induced; nor can he be heard to say what the other party would have done, had no misrepresentation been made."

And again (on p. 79):

"A man who, by misrepresentation or concealment, has misled another, cannot be heard to say that he might have known the truth by proper inquiry; but must, in order to be able to rely on the defence that he knew the representation to be untrue, be able to establish the fact upon incontestable evidence, and beyond the possibility of a doubt."

And again (at p. 81):

"No man can complain that another has relied too implicitly on the truth of what he himself stated. If a vendor has stated in his proposals the value of the property, he cannot, except under special circumstances, complain that a purchaser has taken the value of the property to be such as he represented it to be."

Lord Cranworth, in Reynell v. Sprye, 1 De G., M. & G. 660 (at p. 710), says: "In such a case it is no answer to the charge of imputed fraud to say, that the party alleged to be guilty of it recommended the other to take advice, or even put into his hands the means of discovering the truth. However negligent the party may have been to whom the incorrect statement has been made, yet that is a matter affording no ground of defence to the other. No man can complain that another has too implicitly relied on the truth of what he has himself stated."

Turner v. Houpt.

Lord-Justice Knight Bruce, in Price v. Macauley, 2 De G., M. & G. 339 (at p. 346), says: "Supposing, however, that the defendant had actually known, at the time of the purchase, what were the real state and condition of the subject-matter of the contract, it may be that he would not be entitled to complain. But in order to enable a vendor to avail himself of that defence in such a case, he must show very clearly that the purchaser knew that to be untrue which was represented to him as true; for no man can be heard to say that he is to be assumed not to have spoken the truth. It is said that subsequently he had such notice as might have led him to ascertain how the facts stood. That, however, is not sufficient in a case of misrepresentation; he must be shown clearly to have had information of the real state of the facts communicated to his mind."

* * *

Lord-Justice Turner, in Kisch v. Railway, 3 De G., J. & S. 122 (at p. 134), says: "When persons undertake to make statements as to the contents of documents, they cannot, in my opinion, be heard to say that the statements which they have made were known to be untrue, unless indeed they can show by incontestable evidence that this was the case, and that the business in hand proceeded on that footing. It is not, in my opinion, competent to them to say to the persons to whom the statements have been made, 'You had notice of the documents and might have seen them, and ascertained whether the statements were true or not.""

Sir George Jessel, in the later case of Redgrave v. Hurd, L. R. 20 Ch. Div. 1 (1881) (at pp. 13, 14), says: "If a man is induced to enter into a contract by false representation it is not a sufficient answer to him to say, 'If you had used due diligence you would have found out that the statement was untrue. You had the means afforded you of discovering its falsity, and did not choose to avail yourself of them.' I take it to be a settled doctrine of equity, not only as regards specific performance but also as regards rescission, that this is not an answer unless there. is such delay as constitutes a defence under the statute of limitation. * * * Nothing can be plainer, I take it, on the authorities in equity, than that the effect of false representation

Turner v. Houpt.

is not got rid of on the ground that the person to whom it was made has been guilty of negligence. * * * It is not suffi

cient, therefore, to say that the purchaser had the opportunity of investigating the real state of the case, but did not avail himself of that opportunity."

Further on in his judgment he proceeds to make a critical examination of the judgments of the house of lords in the great case of Attwood v. Small, Younge 407; 6 Cl. & Fin. 232, and concludes (at p. 17) as follows: "In no way, as it appears to me, does the decision, or any of the grounds of decision, in Attwood v. Small, support the proposition that it is a good defence to an action for rescission of a contract on the ground of fraud that the man who comes to set aside the contract inquired to a certain extent, but did it carelessly and inefficiently, and would, if he had used reasonable diligence, have discovered the fraud."

Lord-Justice Baggallay, in the same case, says (at p. 22): "The mere fact that a party has the opportunity of investi gating and ascertaining whether a representation is true or false is not sufficient to deprive him of his right to rely on a misrepresentation as a defence to an action for specific performance. The person who has made the misrepresentation cannot be heard to say to the party to whom he has made that representation, 'You chose to believe me when you might have doubted me, and gone further.' The representation once made relieves the party from an investigation, even if the opportunity is afforded." And adds (at p. 23): "It is true that in the present case there was some investigation, but it was an investigation of a most cursory character, which could not have enabled the defendant to ascertain the truth or the falsity of the representation that had been made."

Professor Pomeroy, in a note to section 895 in the second edition of his treatise on Equity Jurisprudence p. 1261, after citing from the opinion in Redgrave v. Hurd, says:

"The question is, did the party rely on the representation, or on his own knowledge? To obviate the effect of the representation, it must be clearly and conclusively shown that he relied on his own knowledge. This the general doctrine and the qualification both demand."