Frederick v. Sherman

BENSON, J. —

There are a number of assignments of error, but the conclusions reached by us render it unnecessary to consider any of them except the action of the trial court in denying defendants’ motion for a judgment of nonsuit, made at the conclusion of the hearing of plaintiffs’ testimony and after plaintiffs had rested. Plaintiffs ’ right to rescind the contract and recover the purchase money paid by them, is based, by *190 the complaint, upon two grounds: (1) that defendants had nothing to sell, because, at the time of the transaction, the contract between the manufacturing company and the owner of the patent right had been canceled: (2) that defendants had knowledge of the fact that the manufacturing company was then in such a shaky financial condition that they would not be able to supply tires in sufficient quantities, and that they fraudulently concealed this information from plaintiffs who were ignorant of the facts.

1. Upon the first of these grounds it may be said that a careful inspection of the evidence discloses a complete failure of proof. The evidence upon this subject is to the effect that inMay of the same year, the president of the corporation owning the patent right, served a written notice of cancellation upon the manufacturing company, which declined to concede the right of the former to annul the contract in that manner, and demanded an arbitration of the issue, as provided in the contract itself, and thereafter, following the terms of the contract, both parties appointed arbitrators, but nothing further was done in the matter, and the manufacturing company continued to make and sell tires and pay the required royalty to the owner of the patent, until December, in which month the manufacturing company went into bankruptcy, and from the date of their purchase, in August, until December, plaintiffs received tires from them and sold them to customers. The evidence therefore discloses affirmatively that the contract had not been canceled when plaintiffs entered into their contract with defendants.

2. We are then called upon to say whether the allegations of the complaint in regard to fraudulent concealment of facts, states a case of actionable fraud. Story *191 on Contracts (5 ed.), Section 517, in discussing this subject says:

“The law never undertakes to refine upon nice ethical distinctions; and although it lends no countenance to injustice, and will not support immorality, yet it often stops short of enforcing a merely honorary obligation. Questions of law must be determined upon general principles, which, although they may reach the aggregate of cases, may often fail to extract the sting of injustice and immorality from the individual case. Thus, it is the general policy of the law, in order to induce vigilance and caution, and thereby to prevent those opportunities of deceit which lead to litigation, to throw upon every man the responsibilities of his own contracts, and to burden him with the consequences of his careless mistakes.”

Fry on Specific Performance (5 ed.), page 353, quotes the foregoing expression of Story with approval, and says:

“But it has never, it is believed, been held by our Courts, that there is any general obligation to disclosure on the part of a vendor or purchaser of chattels or realty, though the person maintaining silence may know that the other party is acting under an erroneous impression. ’ ’

Bigelow on Fraud, page 590, has this to say:

“Now silence alone, it may be declared as a general rule, is not unlawful in transactions between men at arm’s-length, however great the advantage gained thereby; a man’s unpublished thought is surely his own. But it must be understood at the outset, that by silence we mean entire silence as distinguished from that sort which merely keeps back part of the truth told or suggested. This latter is nothing else than misrepresentation, and has already been referred to. But speaking of pure silence, the general rule stated is very strong. It governs, even though the silence was meditated, and with knowledge that the opposite party was laboring *192 under mistake or ignorance. Thus, neither the seller nor the buyer of goods is bound to communicate intelligence of external circumstances, exclusively within his own knowledge, which might influence the market value of the commodity.”

It is needless to multiply citations. This general rule is applicable except in certain excepted cases, wherein there is a fiduciary relation existing between the parties, or some special state of facts wherein silence becomes in effect an active misrepresentation. It would take too much space to enumerate these, for here the parties dealt at arm’s-length, and none of those exceptional facts are recited. We conclude therefore that the alleged concealment of facts does not constitute actionable fraud, and the trial court erred in denying a judgment of nonsuit. The judgment is reversed and the cause will be remanded with directions to enter a judgment of nonsuit.

Reversed and Remanded With Directions.

Rehearing Denied.

McBride, C. J., Burnett and Harris, JJ., concur.