Riley v. Bell, 120 Iowa 618 (Iowa 1903)

Bishop, C. J.

It appears from the record that the defendant was for many years a business man at Corning, the seat of Adams county, and well known to plaintiff; that the latter is an aged farmer, having little or no education, and who resides near Corning; that defendant, acting as the agent of Frank, negotiated the sale of the land in question to plaintiff, and at the time thereof such land was incumbered by the lien of the Loomis mortgage; andthat at the time of making the contract, and of his payments thereunder, plaintiff had no actual knowledge of the existence of such mortgage. We think it further appears —and the jury found such to be the fact — that, to induce plaintiff to enter into the contract, defendant asserted that he had personal knowledge of the condition of the title to the lands, and that such title was perfect in all respects. The representations made by defendant, as testified to by plaintiff and other witnesses in his behalf, were, in substance, as follows: Bending the negotiations for the sale, plaintiff said: “Mr. Bell, I will buy the land if it is clear of everything. 1 don’t want to buy anything unless it is. clear, and I want to buy of you.” To which defendant responded: “All right. It is clear of everything. I have looked up the record, and it is clear of everything.”

Again, at' the time the contract was signed, defendant said that he had examined the records, and that the land was clear and free of all incumbrances. This he repeated several times. • Being asked about an abstract of title, defendant answered that, if an abstract was furnished, plaintiff would have to pay for the same, whereupon plaintiff said: “All right. I will pay for the abstract, if thatisall.” To this defendant replied: “Look here. There is no use of your paying for an abstract, because the land is clear, and you are just throwing away that money.” Plaintiff says, and the jury accepted his statement as true, that he believed and relied upon the statements so made by defendant, and accordingly did not cause an examination of the title records to be made. As a wit-ríess on his own behalf, the defendant denied having knowledge of the existence of the mortgage at the time the contract was made, and denied making the statements attributed to him.'

The court, upon its own motion, gave to the jury an instruction as follows: “(5) It .is not sufficient to. show that the representation was made, and made to induce the sale, and that said statement was in fact untrue. It must further appear that the defendant Jcnew said statement was untrue when he made it, or he must have asserted that he had actual knowledge, or intended to convey the impression that he had actual knowledge, of the truth of the statement made, although conscious that he had no such knowledge. It is admitted that defendant was the agent of Frank, and so acted in the transaction. It is also admitted that plaintiff knew that defendant was acting for Frank, and not for himself. Dnder these circumstances, a mere assertion or representation concerning the said land would be presumed to be made for and on behalf of the principal, and the agent would not be liable for any such assertion or representation, concerning said land unless, such agent in making such statement, knew at the time he

was making it that the statement was false and untrue, or •that he made such representation assuming and asserting that he had personal knowledge, when in fact he had not." •{The italics are ours.)

To the giving of such'instruction the defendant saved an exception, and he now assigns error based thereon. The particular grounds of complaint have reference to the ^ saieofiand: agent?m°-f structions. italicized portions of the instruction. It is contended in the first place that the instruction is erroneous in that the representations a]Jeged, conceding the same to have' been made, were the representations of the principal, and, under the circumstances presented, he alone became bound thereby. In support of this proposition, counsel invoke the general rule to the effect that where an’ agent has acted in good faith, and within the limits of his auth•ority, his principal alone is bound by his representations, however false the same may prove to be in point of fact. The force of such rule, as applied to a state, of facts coming within the field of its operation, is not to be denied. But it will be observed that the element of good faith is •essential to the rule, and it follows, of necessity, that, in a case dominated by bad faith or fraud on the part of the agent himself, the rule can have no application. The rule thus invoked by counsel is confined in its application to such representations, and such only, as may be made by an agent, speaking as such, for and on behalf of his principal. Thus it is that an agent is not chargeable with personal responsibility where it appears that he has acted in good faith within the general scope of his authority, and in making representations has acted simply as the mouthpiece of his principal, and has spoken, therefore, as his principal might have spoken, had he been personally present and acting in the premises. The thought of'the instruction under consideration is that bad faith and fraud — that is, a conscious and willful misrepresentation

of a fact — are essential to a recovery as against the agent in any event. In effect, therefore, the jury is told that,, unless bad faith is made to appear, the plaintiff must fail in his action, and a verdict should accordingly be returned in favor of defendant. Now, that a personal liability may be charged as against an agent where fraud or bad faith, on his part is alleged and proven, is well-settled doctrine. Lyon v. Tevis, 8 Iowa, 79; Paton v. Lancaster, 88 Iowa, 494.

This doctrine is bottomed upon the principle that any person who by himself perpetrates a fraud, or who makes himself a party with others to the commission of a fraud, may be held personally liable for the natural consequences- or proximate results flowing therefrom. It follows that one who sustains the relation of agent cannot escape liability for his fraudulent acts, willfully committed while in pursuit of the master’s business, by .merely pointing out the fact of his agency. Norris v. Kipp, 74 Iowa, 444; Delaney v. Rochereau, 44 Am. Rep. 456; Berghoff v. McDonald, 87 Ind. 549; Hedden v. Griffin, 186 Mass. 229 (49 Am. Rep. 25); Campbell v. Hillman, 61 Am. Dec. 195; Mechem on Agency, section 571. Here bad faith and fraud are charged against the agent personally, and there is evidence in the record tending to support such allegation. The criticism of the instruction thus made is therefore without merit.

A further attack is made upon the instruction for that no reference is made therein to the necessity of proof of scienter. It may be conceded that, in an ordinary 2. fraudulent tions:Siia-a bility of agent estoppel. action for deceit by means of false and fraudulent representations, proof of seienter is essential. This is the general rule, and has been adhered to by this court in a line of cases beginning with Holmes v. Clark, 10 Iowa, 423, and ending with Boddy v. Henry, 113 Iowa, 462. But we think such rule cannot be accepted as controlling in a case such as we now have before us. Where the wrong complained of is that

the defendant has induced the plaintiff to act by falsely and fraudulently representing that a certain material fact is true, within his personal knowledge, and injury and-damage result therefrom, both reason and authority unite in dictating the wholesome doctrine that he shall' not be heard thereafter to assert that in fact he had no knowledge upon-the subject concerning which the representation was made by him. Such was directly our holding in McKown v. Furgason, 47 Iowa, 636. The principle finds support, also, in the following authorities: Bondurant v. Crawford, 22 Iowa, 40; Gardner v. Trenary, 65 Iowa, 646; Claflin v. Assur. Co., 110 U. S. 81 (3 Sup. Ct. Rep. 507, 28-L. Ed. 76); 14 Am. & Eng. Ency. (2d Ed.) 120; Cooley on Torts, 498. The rule announced in Boddy v. Henry, supra, is not antagonistic to the doctrine of the McKown Case. In writing his opinion, McClain, J., had the McKown Case before him, and finds in what is there said a qualifications of the general rule, rather than the announcemént of a doctrine in opposition thereto. In the Boddy Case it is said that ‘‘intentional fraud, as distinguished from amere breach of duty or the omission to use due care, is an essential factor in an action for deceit.” And this may be accepted as correct doctrine. It is the purpose to commit a fraud that gives rise to the rule authorizing damage to be recovered for a deceit, and hence the necessity for proof of the scienter', that is, knowledge of the falsity of the statement on the part of the person making the same. Were it not that, to be actionable, the fraud must be born of intention, then it would be that prosecutions for deceit could be predicated upon any misrepresentation designed to influence the conduct of another, however the mistake may have arisen, or however honestly the representation may have been made. But where the statement complained of is accompanied by a direct, but false, assurance that the truth thereof is personally known to the person

making the same, the reason for the general rule, in so far as it .requires proof of actual knowledge, can have no application. In such case the person making the representation at least knows that his statement of personal knowledge is false, and therefrom an intentional fraul is easily to be presumed. There can be no variance in the principle upon which one is held liable for damage who asserts the existence of a fact, knowing that in truth it does not exist, and that upon which a like responsibility is visited upon one who, conscious that he is ignorant concerning the subject-matter of which he speaks, still falsely asserts that, within his own personal knowledge, a fact stated by him does in truth exist. In each instance an intentional fraud is manifest, and it is of this that the law takes note, and for this it affords a remedy.

' . But appellant says that, conceding even the making of the representation alleged, the instruction was erroneous, in that no recovery should be allowed, inasmuch as 3. PALSErepre-reliance upon, plaintiff had no legal right to rely upon such representation, and so make no further effort to ascertain the real condition of the title to the lands. In this we do not agree. If defendant in fact knew the condition of the title, it was his duty to truthfully represent the same, if he essayed to speak at all upon the subject. If he did not know the condition of the title, it was his duty to frankly avow that fact, if he essayed to speak at all. Here the charge is that he claimed to have personal knowledge to the effect that the title was perfect. Now, if plaintiff acted upon such representation in good faith, and to his damage, both reason and authority unite in authorizing a recovery for- the damage thus sustained. Under the circumstances here presented, we think it does not lie in the mouth of one charged with such a fraud to say that an examination of the county records would have disclosed his untruth and laid bare his attempted fraud. Where one is shown to have made statements of the char

acter here in question, the law presumes that he intends that the same shall be relied upon. If the party to whom they are made does in good faith rely thereon, he may recover, notwithstanding it may appear that opportunities were open to him to ascertain the truth by investigation and examination. As applied to a case such as we have before us, it is well settled that one who, to advance his own interests, falsely.asserts the existence of a state of facts, knowing the other party to be ignorant, cannot complain if he is believed.

II. Complaint is made of the sixth instruction as given by the court. Therein the jury is told that, in any event, it must be made to satisfactorily appear that the 4 FR«jDof Ifyfrealon-' able care. plaintiff believed and relied upon the representations alleged to have been made. The instruction then calls attention to the1 fact that the mortgage in question was a matter of record in said county, and concludes as follows: “Under ordinary circumstances, the record imparts and presumes notice, and a person is supposed to know- what he might with reasonable diligence have discovered. Under ordinary circumstances, it is likewise the duty of the person-who is about to purchase land to examine the records, and if he. neglects to use the means which are thus placed at his disposal for his protection, and a loss occurs, he is not allowed to.set up his own negligence and want of diligence to reimburse him for such loss. But in cases such as the plaintiff asserts in the case at bar, where such examina - tion is not made by reason of aMmative allegations regarding the condition of the title, such ordinary rules do not apply, providivg it appears that such statements are believed and relied upon, and the other elements necessary to warrant recovery are established.’''1 That it is the duty of every person to use ordinary care and prudence in the transaction of his business affairs is.undoubtedly true, and, generally speaking, if he neglects to make use oí

such means as are at his disposal, and a loss occurs, he is to be held remediless. To say otherwise would be to hold out an inducement or reward for negligence and want of diligence. Gee v. Moss, 68 Iowa, 818; Longshore v. Jack, 30 Iowa, 298; Ladner v. Balsley, 103 Iowa, 674.

It is the contention of counsel for appellant that it was incumbent upon plaintiff to prove not only that the representations were made as alleged, and that they were' believed and relied upon, but that he must go farther, and show to the satisfaction of the jury that under all the circumstances, and as a matter of fact, he acted as a reasonably prudent and careful man in thus believing and relying. And if is said that the instruction is erroneous in that negligence or want of care and diligence on the part of plaintiff, as a question of fact, material and proper to be submitted to the jury, was thereby ignored, and, in effect, determined upon by the court as a proposition of law. The instruction, as a whole, tells the jury that it is. incumbent upon plaintiff to prove the making of the false representations alleged, and that they were made with intent that they should be believed and relied upon; that he (plaintiff) did in fact believe and rely upon the same, and acted in accordance therewith. As applied to this case, the contention of appellant accordingly narrows down to this: Where one is charged with making false representations, intending that such should be believed and relied upon, and which were believed and relied upon, may he demand proof, as a condition precedent to fixing upon him a liability for resulting damages, to the effect that the person whom he has thus deceived and damaged acted as a reasonably prudent man in taking him at his word, and acting upon faith of his truthfulness? The mere statement of the question, as it seems to us, is sufficient to clearly indicate the appropriate answer. It would be absurd — nay more, a travesty — to say' that one who, to accomplish his own ends, by willful' fraud has induced

another to act to bis damage, may demand that tKe question of his liability shall be made to depend upon whether or not his victim would have gotten tangled in the net purposely spread for him, had he acted as an ordinarily prudent man. One who induces another to walk in the way of a pitfall, ought not to be absolved from liability for a resulting injury, even though he might, if permitted to do so, convince a jury that his scheme would not have been successful, had his victim displayed ordinary business judgment.

III. The jury was instructed that, if the plaintiff was found entitled to. recover, the verdict in his favor should be for the sum of $2,424.80. This sum, it will be noticed, 5. practice; review of error. corresponds with the sum paid by plaintiff to satisfy the judgment in the foreclosure suit, including costs and attorney’s fee. The giving of such instruction is assigned as error. The specific complaint made is that the costs of the foreclosure. suit, including attorney’s fee, were improperly included in the sum named in the instruction. Appellee now calls attention to the fact that, as shown by the record, the point here contended for is presented for the first time in this court. It is a rule of the statute — and we have repeatedly held in conformity therewith — that a judgment may not be reversed for an error which could have been corrected on motion in the trial court, until such motion has been there made and overruled. Code, section 4105; Garvin v. Cannon, 53 Iowa, 716; Richman v. Board, etc, 70 Iowa, 627; Ketchum v. Larkin, 88 Iowa, 215. Should we concede that plaintiff, as a matter of right, ought not to be permitted to recover in this action the amount of the costs in .the foreclosure suit paid by him, and that the instruction was erroneous to that extent, still it is clear that relief cannot be had in this court, as the error, if such there was, might have been corrected, on motion, in the trial court, i’he incorrect amount, if such it be, may have been in

serted by accident or oversight, or under a mistaken apprehension of the law or the facts. In any event, it was the duty of defendant to call attention thereto by way of motion for new trial, or otherwise, and thus afford opportunity for correction. The mere taking of an exception is not sufficient, where the specific point contended for is not called to the attention of the court, and a ruling had directly thereon.

In this connection we may dispose of another assignment of error, and much that has been said above has application thereto. As one of his defenses, the defend-6. Same. ant pleads the bar of the statute of limitations; it being alleged that plaintiff's cause of action accrued more than five years prior to the time the action was commenced. No request was made for an instruction to the jury having relation to such ground of defense, and no reference was made thereto in the state-inent of the issues, or in the instructions given the jury by the court on its own motion. The failure of the court to submit the issue so tendered, under proper instructions, is assigned as error. As an abstract proposition of law, it may be cpnceded that it was the duty of the court, without req.uest, to submit to the jury, under proper instructions, each of the several defenses tendered concerning which any dispute of fact was presented by the record. The failure to request is material only in the sense presently to be noticed. The record before us further discloses that no objection was made, or exception taken, based upon the error or omission now complained of; nor was the subject-matter presented to the trial court after verdict by motion for new trial or otherwise. The omission is complained of for the first time by way of assignment of errol in this court. In view of the statutory provision and our previous holdings, to which we have already called attention, it is manifest that we cannot consider the same. Had a request for instruction been presented and refused;

bad the motion for new trial made reference to the omission; had objection been made in any form, and the same ruled upon — the record might have presented a question for our determination. As the record presented contains no reference to an adverse ruling, nor to an • exception saved, and as both are essential as a basis for an assignment of error, we cannot consider the question thus made.

IY. In the petition it is alleged that defendant is a nonresident of the state of Iowa, and a writ of attachment is prayed for. With his answer the defendant presented *7* exclusion error cured" by verdict. a counterclaim, in which it is alleged that at the time of the commencement of plaintiff’s acyon a b0nd for attachment was filed, a copy of which is set forth, and that, based thereon, a writ of attachment was issued, and'-levied upon his property. Defendant admits the fact of nonresidence alleged, but he says that the attachment was wrongful, in that he was not in any manner indebted to plaintiff at the time. The character and extent of the damages sustained by him are set forth, and judgment on the bond demanded. By way of reply to such counterclaim, the plaintiff pleaded a general denial. As a witness on his own behalf, the defendant was asked the following questions: “Q. What do you know about losing ’any sales, or any damages that have arisen to you, by reason of this attachment?” “Q. .State whether or not it was necessary for you to. come here to defend against this action?” “Q. How far did you have to come to attend this trial?” “Q. What were your expenses in coming here to defend" against these attachment proceedings?” Each of the foregoing questions was objected to as incompetent, irrelevant, and immaterial, and the objections were sustained. Such was the only evidence offered by defendant in support of the averments of his counterclaim. The objections thereto may properly have been sustained for the following, if for no other reason: The reply put in issue every lact alleged in the counter

claim, and defendant thereby became bound to make proof of all material facts alleged. In view of the entire absence of preliminary proof concerning the issuance and levy of the attachment, it is manifest that evidence [as to the character or extent of damage might well be.regarded as improperly offered. JBut if this were not so, and conceding, for the purposes of this case, that the matters of damage sought to be proven were proper in character, still, in view of the verdict found by the jury, the defendant is in no position to complain. The attachment was grounded simply upon an allegation. of nonresidence, and this was confessed. At best, therefore, defendant could recover damages only in the event that plaintiff should fail of a recovery upon the cause of action alleged by him. It follows that the error, if any there was, was cured by the verdict returned by the jury.

V. Complaint is made of misconduct on the part of the jury. We have read the record carefully, and, in our opinion', no sufficient showing of misconduct, resulting in prejudice, appears. We have also examined the several assignments of error based on rulings connected with the introduction of the evidence in the case, and find no prejudicial error.

We think the judgment was warranted by the evidence, and finding no error it is aefirmed.