Opinion
(Filed 29 April, 1908.)
Contracts — Sales — Vendor and Vendee — False Representations — Quality — Caveat Emptor.
Representations made by the seller of the capacity of an ice plant known by the purchaser to be second-hand, and who had knowledge that it had been unsuccessfully operated and also of other facts and circumstances indicative of its actual condition, and to whom, being a mechanic, full opportunity for investigation had been given before purchasing, are not available as a defense by way of counterclaim because of their being false, in an action to recover the amount of a bond given for the purchase price. In such instances the doctrine of caveat emptor applies.
APPEAL from Councill, J., and a jury, at September Term, 1907, of ALAMANCE.
Z. V. Taylor and Parker Parker for plaintiff.
W. H. Carroll and Long Long for defendant.
This is an action to recover $1,050, the amount of a bond given by the defendant on 29 February, 1904, for an ice plant. Defendant in his answer admitted the execution of the bond, but denied any liability upon it, and set up a counterclaim on the ground that it was obtained by false and fraudulent representations as to the condition and capacity of the plant.
(519) When the evidence was closed, the court, on motion of the plaintiff's counsel, gave judgment for the amount of the note, and the defendant appealed.
The evidence in the record is quite voluminous, but fortunately it is not necessary to state even the substance of it in order to a correct understanding of the case. At the time of the sale of the plant the plaintiff stated to the defendant that if lie would make sonic repairs it would turn out about 4,400 pounds of ice a day. There was also evidence that the plant hind produced as much as that before the sale. The defendant lived in Burlington, where the ice plant was. Before lie and Nicholson purchased it they made two visits to the ice factory for the purpose of making an examination of the plant. The evidence of the defendant himself shows that lie was a machinist and the plaintiff a grocer, and that lie and Nicholson were permitted both times to make a free and full investigation for themselves of the condition of the plant, and, besides, that he knew it was second-hand when it was brought to Burlington, it having been in use for some time. As a machinist he had furnished new valves and other parts for it when it was originally installed. That the plant was not in good condition at the time lie and Nicholson bought it had come to his knowledge before the time of the purchase. The few extracts selected at random from the evidence as contained in the record and set out in our statement of the case will serve to show more definitely whether or not the defendant was influenced by any fraudulent representation of the plaintiff to make the purchase. There was evidence to the effect that the defendant and Nicholson sold the plant to the Burlington Ice Company at $2,500, which was the price they gave for it, and received in payment of the (520) purchase money stock of that company, the par value of which was equal to that amount, and which they took at that valuation; that the Burlington Ice Company was afterwards placed in the hands of a receiver, at the instance of the defendant, and that the plant was sold, and bought by Nicholson.
In the view we take of this case it falls directly within the decision of the Court in Cash Register Co. v. Townsend, 137 N.C. 652. In that case Justice Brown, for the Court (at p. 655), says: "All the authorities are to the effect that where the false representation is an expression of commendation or is simply a matter of opinion, the courts will not interfere to correct errors of judgment. Walsh v. Hall, 66 N.C. 236. The law will not give relief unless the misrepresentation he of a subsisting fact. Hill v. Gettys, 135 N.C. 375. What has been called `promissory representations,' looking to the future as to what the vendee can do with the property, how much lie can make on it and, in this case, how much he can save by the use of it, are on a par with false affirmations and opinions as to the value of property, and do not generally constitute legal fraud. Benjamin on Sales (7 Ed.), 483 et seq.; Gordon v. Parmelee, 2 Allen (Mass.), 212; Long v. Woodman, 58 Me. 52, and cases cited. Mr. Clark, in his work on Contracts, states in substance that commendatory expressions or exaggerated statements as to value or prospects, or the like, as where the seller puffs up the value and quality of his goods or holds out flattering prospects of gain, are not regarded as fraudulent in law. (Pages 332-334.) It is the duty of the purchaser to investigate the value of such expressions of commendation. He cannot safely rely upon them. If he does he cannot treat it as fraud, either for the purpose of maintaining an action of deceit or for the purpose of rescinding a contract at law or in equity. Saunders v. Hatterman, 24 N.C. 32; 14 A. and E. Enc., (2 Ed.), 34, and cases cited. Mr. Kerr, in his work on Fraud and (521) Mistakes (at p. 83), says misrepresentation, to be material, should be in respect of an ascertainable fact as distinguished from a mere matter of opinion. A representation which merely amounts to a statement of opinion goes for nothing, though it may be true, for a man is not justified in placing reliance on it.' Again, `A man who relies on such affirmation made by a person whose interest might so readily prompt him to invest the property with exaggerated value does so at his peril and must take the consequences of his own imprudence.'" There the alleged false or fraudulent representation consisted in a statement by the plaintiff's agent to the defendant that the use of a cash register would save the expense of employing a bookkeeper, and it was held not to be such a fraudulent representation as would avoid the contract of sale, it being nothing more than "dealer's talk" when puffing his wares.
It is difficult to see how the defendant was deceived by the plaintiff into buying the ice plant, when he at the time had full knowledge of facts in regard to the condition of the plant, which should at least have put him on his guard and stimulated greater inquiry. He was himself a machinist, and employed Hyatt, who was an expert, to operate the plant. He had free access to the premises for the purpose of making any desired investigation, and if he was not satisfied with his own ability to discover defects, if there were any, he might easily have enlisted the sentences of Hyatt or some one else having greater knowledge of the matter than he bad for that purpose. It does seem from the evidence that the means were at hand by which lie could have ascertained the exact condition of the plant, if he had wished to be better informed, before making the purchase. He knew that the plant had been "given up" because it would not make ice or that its output had not been equal to its full capacity. The statement of the plaintiff was evidently intended to be the expression of an opinion as to how much ice the plant would make if put in good condition, and the evidence shows that it was so understood by defendant at the time. It is said in Benjamin on Sales (7 Ed.), (522) at p. 483: "Fraudulent promises as to the future, as to what the vendee could do with the property, how much he could make on it etc., do not constitute legal fraud." The same idea is expressed more fully in Cordon v. Parmelee, 84 Mass. (2 Allen), 213, where the Court says: "The alleged false statements concerning the productiveness of the land and its capacity to furnish support for cattle constituted no defense to the notes. They fall within that class of affirmations which, although known by the party making them to be false, do not, as between vendor and vendee, afford any ground for a claim of. damages, either in an action on the case for deceit or by way of recoupment in a suit to recover the purchase money. They fall within the principle embodied in the maxim of the civil law, Simplex commendatio non obligat. Assertions concerning the value of property which is the subject of a contract of sale, or in regard to its qualities and characteristics, are the usual and ordinary means adopted by sellers to obtain a high price, and are always understood as affording to buyers no ground for omitting to make inquiries for the purpose of ascertaining the real condition of the property. Affirmations concerning the value of land or its adaptation to a particular mode of culture or the capacity of the soil to produce crops or support cattle are, after all, only expressions of opinion or estimates founded on judgment, about which honest men might well differ materially. Although they might turn out to be erroneous or false, they furnish no evidence of any fraudulent intent. They relate to matters which are not peculiarly within the knowledge of the vendor and do not involve any inquiry into facts which third persons might be unwilling to disclose. They are, strictly speaking, gratis dicta. The vendee cannot safely place any confidence in them, and if he does he cannot make use of his own want of vigilance and care in omitting to ascertain whether they were true or false as the basis of his claim for damages in reduction of the amount which he agreed to pay for the property." Long v. (523) Woodman, supra, furnishes another equally strong statement of the rule: "To entitle a party to maintain an action for deceit by means of false representations he must, among other things, show that the defendant made false and fraudulent assertions in regard to some fact or facts material to the transaction in which be was defrauded, by means of which he was induced to enter into it. The misrepresentation must relate to alleged facts or to the condition of things as then existent. It is not every misrepresentation relating to the subject-matter of the contract which will render it void or enable the aggrieved party to maintain his action for deceit. It must be as to matters of fact substantially affecting his interest, not as to matters of opinion, judgment, probability, or expectation. Hazard v. Irwin, 18 Pick., 95. An assertion respecting them is not an assertion as to any existent fact. The opinion may be erroneous; the judgment may be unsound; the expected contingency may never happen; the expectation may fail. An action of tort for deceit in the sale of property does not lie for false and fraudulent representations concerning profits that may be made from it in the future." The following cases also sustain the doctrine: Halton v. Noble, 83 Cal. 7; So. Dev. Co. v. Silva, 125 U.S. 247; Mooney v. Miller, 102 Mass. 217; Pedrick v. Porter, 87 Mass. (5 Allen), 324. The test of whether there has been merely an expression of opinion or the positive statement of a fact depends not so much upon the absence or presence of an express assertion based on personal knowledge as upon the character of the statements alleged to be true. 14 A. and E. Enc. (2 Ed.), p. 36. A statement taking the form of an expression of opinion may sometimes constitute actionable fraud, while one more positive and implying knowledge of the facts may not have that effect in law. 14 A. and E. Enc. (2 Ed.), p. 33 et seq.
We do not decide, therefore, that a party cannot be liable for a false representation because it is promissory in form, though in substance (524) the assertion of a fact as existing. If lie makes a statement which is calculated to deceive the other party, and which he knows to be false, and thereby intentionally misleads the latter, to his prejudice, it may amount to such an affirmation of a fact as to constitute actionable fraud or deceit, although the statement may be seemingly a mere expression of opinion, or what is sometimes called a promissory representation. 14 A. and E. Enc. (2 Ed.), 36, and note 5.
The case of May v. Loomis, 140 N.C. 350, cited by the appellant in support of his contention, is not in point, and therefore not an authority in his favor. In that case there was the representation of a fact, false within the knowledge of the party who made it, which was calculated and intended to deceive, and not the mere expression of an opinion.
In our case the evidence does not disclose any taint of fraud in the negotiations between the parties for the sale by the plaintiff and the purchase by the defendant of the ice plant. The doctrine of caveat emptor applies, for the defendant bad been put upon inquiry by his knowledge of the facts, and lie was given full opportunity to investigate for himself, which he undertook to do. In Cash Register Co. v. Townsend, 137 N.C. 658, it is said: "When the purchaser undertakes to make an investigation of his own, and the seller does nothing to prevent this investigation from being as full as he chooses to make it, the purchaser cannot afterwards allege that the vendor made misrepresentations," citing Jennings v. Broughton, 5 De Gex M. and G., 126; Development Co. v. Silva, 125 U.S. 259.
We conclude from what has been said that the court was right in giving judgment for the plaintiff.
No error.
Cited: County v. Construction Co., 152 N.C. 30; Bank v. Brown, 160 N.C. 25.
(525)