BA.RNES V. UNION PA.C. RY. 00.
quent administration. The pending suit has a difterent object,-the collection of a debt,--and is only incidentally interrupted by a suit which, like bankruptcy or insolvency proceedings, absorbs, rather than circumvents,the object of the original suit. The Fisk Oase is the only case which has been cited, or which I can find, which seems to sustain the injunction. I think that case inapplicable, and that, upon the doctrines of law, independent of that case, the creditors, who are complainants, upon the ground set forth in the bill, have no more right after an attachment suit has been com· menced than they had before to enjoin a dissolution. The attaching creditors, by a dissolution of a defendant corporation, may lose all priority over the other creditors, but their right in equity to en· force their claim to their ratable portion to the corporation's assets by suitable proceedings, which is all that a court of equity can recognize with reference to a dissolution of the defendant corporation, would be lett to them. 'The injunction is therefore refused.
BARNESv. UNION PAO. BY. 00. (Circuit Oourt of Appeals, Eighth Circuit.
January 27, 1893.)
,In ll,n action to recover damages for a faIse representation as to the ownersWp of land, whereby the vendee, having no knowledge of the title, was induced to .purchase, the complaint need not allege tbat, at the time of making such statement, defendant knew it was not owner, nor that the representation was fraudulently made to Induce the purchase. SAME. . An action for damages for false representations tis to title, made in a sale of lands, may be maintained, although the deed contained no covenants.
WRIT OF ERROR-REVIEW-DEMURRER.
DECErr-JrALSE RBPRESENTATIONS IN SALE OPO LANDS-WHEN AC'l'ION TAINABLE.
On writ of error from a judgment SIlStain1ng a demurrer to an amended complaint, suggestions made by the defendant in error, based upon the answer to the original complaint, cannot be considered.
LUUTATION OF ACTIONS-PLEADING-DEMURRER.
Under the Colorado Code and practice, a general demurrer on the ground that the complaint falls to state a cause of action does not raise the question of the effect of the statute of limitations.
In Error to the Oircuit Oourt of the United States for the District of Oolorado. At Law. Action by Thomas H. Barnes against the Union Pacific Railway Oompany to recover for false representations as to the ownersJPp of land purchased by plaintiff. Judgment sustaining demurrer to amended complaint. Plaintiff brings error. Reversed. Statement by SANBORN, Oircuit Judge:
'rhis writ of error was sued. out to reverse a judgment SIlStainlng a general demurrer to the plaintiff's amended complaint. In tWs complalnt the plaintiff thE' UnitE'd States of a railallegt·d: .That the defendant.was the road land grant. .. That about September, 1881, the defendant represented to him that a certain tract of land in Boulder county, Colo., was a part of its railroad·'.land grant, and that it was the sole owner tht'l'oot. That he trusted
on these .1Il1«1 In reliance thereon.·.purchased .lando!. the defendant, paid it '2,87MO therefor, and took its deed ther¢ot, Without covenants. That the 1a.Ud. was never in fact granted to the defendant. .. It was never in possession of it, and it never had any title to or right1nlt. But the plalntl1r did not know this fact until 1890, because the defend,ant . to assert that the land had been granted to it, and in a contest before the local land office obtnlned a decision favorable to its contention, In 1883, in a cause which was not 'finally settlpd advel'l!lely to it by the decisionot the secretary of the interior' until 1890. That the plalntitI has been compellE:d to· and has 'bought the land of the United States, by exercising his right as lI.·homesteader, under Its laws, lind has entirely lost the amount he paid the de;fendant. That he demanded the repayment of this amount before the coI1W1¢ncement this action, aud that it was refused.
Charlellf M. Campbell, for plaintiff in error. Willard Teller, (Jobn M. Thurston, H. M. Orahood, and E. B. Morgan, on the brief,) for defendant in error. BeforeOALDWELL and SANBORN, Circuit "Judges, and SHIRAS, District Judge. ., ' SANBORN, Circuit Judge, (after stating the facts.) A vendor who makes a false statexnen.t regarding a fact material to the sale, either :wi1#: knowledge of its falsity, or in ignorance. of its falsity, when from 'his special means of infoi'.tJ1ation he ought to have known it, and thereby induces his veJideetQ purchase, to his damage, is liable, in..an action at law, for the damage the purchaser sustains through the misrepresentation, or to have the sale rescinded in a suit in equity, at the option of the purchaser. The description, and title of the, subject-matter of a saJe peculiarly within of the vendor's knowledge, or means of knowledge; and the purcbi;tserhas the right to presume that the positive statements regarding them, made by the vendor to induce the sale, are knowingly. made, and to rely upon these represenUlitions. If such statemen:taare false, and result in damage to the purchaser who acts on them, they are fraudulent, in the eye of the law, .andactionable. This complaint states, in substance, that the defendant had a grant of land from the United States; that it represented to the plaintiff that the tract it gave him a deed of was a part of that grant, and that it was the 1'101e owner of it; that plaintiff .knew nothing about this title, but relied upon statement, and was thereby induced to' pay the defendant $2,376.60 for its deed of the tract,
not in possession of it,and the deed it delivered conveyed no right whatever. Here was a misrepresentation of a fact, which was peculiarly within the defendant's knowledge. It was made with the intention to induce the purchase. It was acted on by the plaintiff, and the misrepresentation caused him serious damage. In the eye of the law the complaint alleges fraud on- the part of the defendant, and damage directly caused by that fraud. That there is ,no express allegation that the defendant knew the land was not· within its grant, and' that it was .ilpt the owner thereof, when it made this false rep1esentation, and no express allegation 'that it made the same. fraudulently tQ induce the plaintiff to' purchase, is not material. The misrepreaentation was made
BARNES V. UNION PAC. RY. CO.
in apt time to the purchase, and did· induce it. The inference is irresistible that this was its PUfpose; Every one is presumed to intend the natural consequence of his acts. The fact misrepresented was one that the defendant ought to have known, one that it had extraordinary facilities for knowing, one that a purchaser would naturally assume,and have the right to assume, the defendant did know, when it made positive statements concerning it; and the presumption is, from· ilie allegations of this complaint, that it did have full knowledge that its statement was false at the time it was made. Even if it could be assumed that the defendant had no actual knowledge of the fact this would not relieve it from liability. It represented the fact to be, as of its own knowledge, that this land was withiu its grant, and that it was the owner of it. If it knew this to be false, that was fraud of the most positive kind. If it did not know whether its statement was true or not, the positive statement, of its own knowledge, that it was so, was a false and fraudulent statement that it did know this to be ilie fact; and, as this statement caused the same damage to the plaintiff, the defendant is equally liable in either event. In Cooper v. Schlesinger, 111 U. S. 148, 155, 4 Sup. Ct. Rep. 360, Mr. Justice BlatcbJord, delivering the opinion of the supreme court, deelared that a statement recklessly made, without knowledge of its truth, was a false statement, knowingly made, within the settled rule. In Kiefer v. Rogers, 19 Minn. 32, 36, (Gil. 14,) where the defendant, in ignorance of the existence of a mortgage of $2,250 on his property, had stated that no such incumbrance existed, and had thereby induced the purchaser to buy, ilie supreme court of that state said, speaking of the time when the representa.tion was made:
"Although the defendant was then Ignorant of the existence of the incumbrance thereon of the mortgage for $2,250, there is no doubt but th:lt. under the circumstances, hls representation must be treated as fraudulent; 119 much so as If he had told a willful falsehood."
In Slim v. Croucher, IDe Gex, F. & J. 518, where one sought to borrow money upon a lease for 98 years and a half, which the borrower represented he was entitled to, the lender required an intimation from the proposed lessor that he would grant such a lease. The lessor knowingly gave it for this purpose. The loan was made upon it. The lease was afterwards made, and mortgaged by the lessee to the lender. It turned out that the lessor had some time before made a lease of the same premises to the same lessee for the same term, and that the latter had, since the loan was made, assigned this lease for value; bUt, at the time the lessor gave the intimation, he did so innocently, because he had forgotten the former lease. The high court of chancery held that, although he did not know his intimation was false when he made it, it was a fraud, in ilie eye of the law, and he must repay to the lender the amount of his loan. In that case it was urged that the complainant had a complete remedy at law, and hence that the court of chancery had no jurisdiction. Lord Chancellor Campbell said:
tnthis 811I.t Is tbat ,t;here WIl.Il a 1'eJlledy at law, and that oJ1.l1- remedy, co:qlPetent to, plaintitf. that there was a 'r ,think ,1sqUlte ,Ifere was a' made by the',,4efeI1dant'<it a tact which !>Ughtto have been witliin his knowledge. It was made With theintentioll ofbe1D.g acted upon., It was acted Ulpon. and loSS flOCVUed tlttbe platnwr, and there is no doubt, in my mind, that llDlletion'rould ,lie, that it would be tor a jury to assess the damages.'" ' , '
In,'1.dtchfteld v. Hutchinson, 117, Mass. 195, 198, which was an action at law for damages for inducing one to purchase a horse by a false statement that the supreme colirt of that state thus'1aid do'wn, the law on this subject:
"It' one states, as of his owuknowledge, material tacts susceptible of knowledge, which are false" it is a' fraud which renders him liable to the paJ;ty Wllo, relies ,and actsupon;the statement as true, and !tis no defense that he " believed the ,facts to be true." ' <:
l . . ,
T<1thesame efl'eet are Hazard v. Irwin, 18 Pick. 96; Savage Y. steven&, 126 Mass. 207,208; Frost v. Angier, 127 Mass. 212, 218; Jewett;Y.Carter. 132'Mass. 335, 337; Oole v. Cassidy, 138 Mass. 437, 438;'M''lisson:V. Bovet, 1 Denio, 69,73; Lockbridge v. Foster, 4 Scam. 569, 578; Joicev. Taylor, 6 Gill & 58; McFerranv. Taylor, 3 Orancb, 270 ; Doggett v.Emerson, 3 Story, 700,732, 733; Burrows v. 470, 475; Ayr&'i:! OaSe, 25 Beav. 522; Rawlins v. Wickham,S De Gex& J. 304,313; Sears y.Hicklin, 13 0010. 143, 152, 21 Pac. Rep. 1022; Hai?;ht v; Hayt,19 N. Y. 464l 470 l 471. Noris it a valid objection to the maintenance of this action that the misrepresentations related to the title to landl and the defen<Jant used a deed without COvenants as a means of perpetrating its fraud. That deed was worthless from its execution. It tooknothing from the defendant. It vested nothing in the plaintifl'. Its only effect was to assist the defendant in wrongfully obtaining plaintifl"s money by false representations, and no principle of law or equity occurs: to us that requires this court to give it the further efl'ect of perpetuating the wrong, or preventing its redress. Why should a fraudulent misrepresentation of. the soundness of a horse, or of his ownership, be ground for an action at law after the bill of sale has been: delivered; Why should a fraudulent misrepresentation as to boundaries, location. the, timberupo:q., or any other material fact, relating to the description of land, be actionable at law after ;tb,e deed. has passed, although, the damages are often small and partial,t-and a fraudulent' ;mil!lrepresentation of title, where the purchaser has lost the entire consideration, as in this case, be remediless? When a sale of land is consummated by a deed, the parol agreements made by thepaities during the negotiations are presumed 'to be merged in the deed. The deed is conclusive evidence of their contracts relative to the subjects there treated. ,Their parol contracts spoken of in the negotiations, even their repnesentations made in ,good faith may be conceded to be merged in the deed, and no action can thereafter be maintained upon them., But while their parol contracts',and their representations made in good faith may be so merged, and not actionable, their fraudulent misrepresentations, their torts, are not. The obligations of honesty and good
BAkNES 'II. VIUON' PAC. ,BY .. CO.,
faith, the obligations not knoWingly or recklessly tQfalsely represent thingsmaterialt6the sale, to practice no fraud or deceit, which rested upo'n both'partiesduring the negotiations, and the right of action for the tort that results from the breach of these obligations,-these are neither abrogated, merged, nor affected by the deed. They remain in full force, and may be enforced at law or in equity, regardless qf it. In Haight v. Hayt, 19.N. Y. 464, 474, the. plaintiff brought and maintained an. action at .law to recover damages for the false statement made by the vendor at the l!lale that one Delevan had no mortgage on the land.. He was then asked if he would guaranty that Delevan had no mortgage, and he replied that he would not, and the purchaser accepted a deed without covenants. . At. the trial the judge was requested to charge that if Hayt refused to give covenants of title the action could not be sustained, and his refusal to give this request was asl!ligned as error. The New York court of appeals sustained the ruling, and Judge Denio, in delivering the opinion of the court, cited Doggett v. Emerson,3 Story, 700,733, and Masson v. Bovet, 1 Denio, 72, and said:
"If thp purohaser consents to waIve the usual covenants he is none the less enijlled to the exercise of good faith and honesty on the part ot the vendor,"
In Wardell v. Fosdick, 13 Johns. 325, 327, (decided in 1816,) the who had a deed, with full covenants, describing 450 acres of land that had no existence, made by one Corlies, sold and pretended to convey the same land to the plaintiff by a deed with covenants that they had done no acts to impeach the title, only, and at the same time assigned him the deed from Corlies. The plaintiff brought an action on the case for the deceit, and the court said:
"'The evidence Is sutIlcient to BUpport the allegation ot fraud against both the' defendants, and there appears no legal objection to this form of action. 'Where the party has been induced by such a fraudUlent representation to pay hIs money and accept a deed, it Is immaterial whether any, or what, covenants are contained in the deed. The purchaser so defrauded has a right to treat the deed as a,nullity, and may maintain an action on the case tor the deceit."
In Ward v. Wiman, 17 Wend. 193, 196, (decided in 1837,) an action on the case for deceit was maintained against the vendor for making the false statement that the lands sold were free from incumbrances, although he had given a warranty deed with full covenants. Mr. Justice Nelson, subsequently of the supreme court, then chief justice of the supreme court of New York, delivered the opinion of the court. and said:
"'.rhe only question presented upon the pleadings in this case is whether an action on the case will lie against the defendant for a false and fraudulent representation made in respect to an incumbrance upon a lot of land sold and conveyed by him by a warranty deed to the plaintiff. * * * The principII' ot the ease of Wardell v. Fosdick, 13 Johns. 325, appears to me to be decisive in favor, ot maintaining the action; and that, too, whether the deed contains a covenant or not. * · · It wus attempted upon the. argument to dtstinguish that case trom the present upon the ground before mentloned,that there·was no such land in existence as the deed purported to collvey; but It can in ,no . wise be important to the declslon how or in what way the 'title
falls ,00.: 11' embarrasBetL ,The defect of UtJ.e Is the material point. Besides, the only reason that, (lan be urged against sustaining this action, is, that the grRuteeshould be coropelled to ,look to Wa covenants. That reason applies With as much force In the case of a fallure of title on account of the nonexistenCle of the land described as where the falls by reason of some other defect,"
Ill. CtIlverv. Avery, 7, 38Q,an action on the case for deceit was' maintained, based on the false affirmation that the premises were clear of any other iriClunbrances than the mortgage under which the sale was effectE;!d,and that the purchaser would require a perfect title. Ill. Whitney v. Allaire, 1 N. Y. 305, (decided in 1848,) delivering the opinion of the court, reviews some of the decisions, and declares: , '
"F'or more than thirty years it has been the settled doctrine of the courts of this' state that fraudulent representations in reference to' the title of real estate, accompanied with damage, is a good ground of and that it Is immaterL'll whether any, or what, covenants are contained in the deed of conveyance." .
To the same effect are Slim v. Croucher, 1 De Gex, F. & J. 518, 523; Clark v.Baird, 9 N. Y. 183, 197; Monell v. Colden, 13 Johns. 402, 403. To the efl'eat that a suit in equity for the recission of the sale or for a repayment of the money wrongfully obtained by false representa:tions f),s to title may be maintained, notwithstanding that a deed has ,b,e,en delivered and accepted, Quesnel v. Woodlief, 2 Hen. Darling v, Osborne, 51 Vt: 148; Paine v, Upton, 87 N. ,i,:',IP,,c,k,bri,dge v.Fost,er,,4 scam.,' 569,' 573; Pro,nt, v. Roberts, 32. Vi 16 Ga..432;' Kiefer v. Rogers, f9 Minn. JO,lce ,v., Taylor, 6 Gill & J. 54, 58. Thus In 4 SC:;tm.. 569, 573, a bill in chancery was filed to set asid.e a deed with covenants of warranty, for the false representation that the vendor had good title to 240 acres of land describedm, when he had no title to four elevenths of 58 acreE/of,it,'and 'the court re/used to set aside the deed, and decreed an allowance .to. the complainant of the difference in the value of the and as it was in fact. 'rhelike relief was granted'!in Qnesnel v. Woodlief, Darling v. Osborne, and Paine v. Uptol;l, supra. .,'. Fiiially, !fr. Justice Field, in delivering the opinion of the suo ,preme couJ.:t.in Andrus v. Refining Co., 130 U. S. 643, 648, 9 Sup. Ct. Rep. 645, cit¢8, with approvulWardell y. Fosdick, 13 Johns. 325, and lays down the ruIe as to false representations of title thlls:
"Such representations by the ..vendor, as to his having title to the premises sold, may also be the ground of action where he is not in possession, and he has neither color nor claim of tl.tle under any instrument purporting to con· vey the premises, or any judgment establishing his right to them."
Such, acMrding to this complaint, was the situation of this vendor. It was not in possession. It had neither claim nor color of title under any instrument purporting to convey the land to it, or any judgment establishing its right. To induce the plaintiff to buy, it falsely, and, in the v.iewof the law, fraudulently, represented that it had a grant of land from the government, and was the sole owner of it. The plaintiff acted on that representation.
WAPLES-PLATTER CO. tI. LOW.
and was thereby damaged. This is the statement of a good caue of action, and the demulTer should have been overruled. The answer filed to the original complaint is not before this court, and the suggestions made by counsel for defendant in elTOr, based upon it, cannot be considered. The amended complaint, subsequently flled, to which no answer has been interposed, and the demurrer to frame the only issue that can be considered on this writ of error. The demurrer is upon the sole ground that the complaint does not state facts sufficient to constitute a cause of action. This general demurrer does not raise the question of the effect of the statute of limitations upon this action under the Code and practice in Colorado, and that Question has not been considered. Rev. St. U. S. § 914; Hexter v. Clifford, 5 Colo. 168, 172; Chivington v. Springs Co., 9 Colo. 597, 603, 14 Pac. Rep. 212; Hunt v. Hayt, 10 Colo. 278, 281, 15 Pac. Rep. 410 ; Jenning's v. Rickard, 10 Colo. 395, 401, 15 Pac. Rep. 677; Cross v. Moffat, 11 Colo 210, 212, 17 Pac. Rep. 771. The judgment below is reversed, with costs, and with directions to allow the defendant to answer.
WAJ;>I$8-PLATTER CO. v. LOW, (HA.NOOCK, Intervener.) (CI.rcu1t Court of Appeals, Eighth Ciroult. January 27, 1893.)
No. 139. 1.
FOB :BENEFIT OF ,CREDITORS-FBAUD ATTACHMENT·
RIGHTS OF CBEDlTOBS-
.PWntii! sued a merchant in the Indian Territory for a debt, (in which suit he; IJIibsequently had judgment,) and on the same day sued out an order of 'attachment, and placed it in the hands of the deputy marshal. Whereby" under of Arkansas in force in the Indian Territory, (Mansf. Dig. § 325,) it became a lien on all defendant's property which had not then been assigned. On the same day the defendant made a gener8l assig'nmen1l, preferring certain creditors, and joined Issue with the plaintltt on the allegations of the affidavit for attachment,-a mode of procedure allowed by the statutes of Arkansas. The assignee filed an interpleader, claiming the property under the assignment, and the two Issues were tried together before a single jury. Held, that proof that defendant at the commencement of the action was about to sell or dispose of the property with the fraudulent intent to cheat, hinder, or delay his creditors wassufficlent to justify a verdict against him. But to justify a verdict against the assignee plaintur must also prove either that the order of was delivered to the deputy marshal before the delivery and acceptance of the assignment, or that the assignee had knowledge of and took part in. the defendant's fraud.
In wch a ease the better practice Is to ftrst and separately try tothecourt the Issue between plaintur and the assignor, arising under the attachment afiidavit, and thereafter try the issue between plaintiff and the assignee. Sanger v. Flow, 48 Fed. Rep. 152, 1 C. C. A. 56, followed.
An instruction that the jury, before rendering a verdict for plaintiff, mMt find that the assignee was aware of or participated in defendant'.
fraud, was erroneous, in that such proof was not necessary to a verdict for plalntitt against the assignor only, nor even against the assignee, if the order of attachment was delivered to the marshal before the delivery and acceptance' of the assignment; fQr in that event ttle assignee took the property subject to the lien of the attachment.