Davison-Paxon Co. v. Caldwell

SIBLEY, Circuit Judge

(dissenting).

The amending of the suit on account in the State court into one for damages for deceitful obtaining of goods was regular. Ga.Laws of 1913, p. 164, § 37(c). Though done to meet a bankruptcy, it was upheld in Levy v. Kiser Co., 31 Ga.App. 113 , 120 S.E. 34 . The resulting judgment is entirely valid, and ought to be accepted as establishing that a value of $320.00 of goods was obtained as alleged. In the District Court neither side sought to show what the evidence before the State court was, or the real truth of the case, if that were permissible. The District Judge ought not to have speculated about it. The majority opinion concedes this.

The liability adjudged is not one for a debt for goods purchased, but for damages by a deceit in obtaining goods that would otherwise not have been delivered. It arises under the familiar principle that one deceived into making a contract has the option either to rescind the contract and recover what he parted with — the very goods —, or to let the contract stand and recover the damage done him by the deceit. Hartsfield Co. v. Newlin, 49 Ga.App. 546 , 176 S.E. 516 ; Louisville Dry Goods Co. v. Lanman, 135 Ky. 163 , 121 S.W. 1042 , 28 L.R.A..N.S., 363, 135 Am.St.Rep. 451 . See also Bacon & Co. v. Moody, 117 Ga. 207 , 43 S.E. 482 . The measure of the damage is not the price agreed to be paid, but is the loss really suffered by making the contract — the true value of the goods which may or may not equal the price charged. The case is not proven by showing merely a purchase by an insolvent who does not disclose his insolvency, although he after-wards goes into bankruptcy. Brooks v. Pitts, 24 Ga.App. 386 , 100 S.E. 776 . It must be shown that in offering to buy he had no intention of paying, knew he could not be made to pay, and intended to get the goods without paying; in -short, that he. pretended to be a purchaser but was in truth a deadbeat and a.cheat. It is not a case of mere failure to mention a fact where there is no confidential relationship to require it. By the act of offering to buy in the place of trade he presents himself as a purchaser at least of good intentions. Many instances occur, even in criminal law, where such conduct, coupled with a morally fraudulent purpose, is esteemed a false representation and punished, though no express falsehood is told. If a purchaser without means knows he is supposed by the storekeeper to be .some other person of wealth, and by silence on the point obtains credit, no one would doubt there was a false pretence. He was pretending to be another person. So one who presents an order for money which is payable to another impliedly represents himself to be that other. Rex v. Story, R. R. 60. One who sells property knowing it is not his, to the lose of the buyer, by offering to sell has impliedly represented that it was his. Reg. v. Samson, 52 L.T.Rep.,N.S., 772. One who gives a check which he knows is bad to obtain goods, though he says not a word about it, has obtained the goods on a false pretence, because by universal practice a check is drawn only against a bank which is bound to pay. If he in like manner gets one to endorse such check to the indorser’s damage, there is an implied false pretence. Guernsey-Newton Co. v. Napier, 151 Wash. 318 , 275 P. 724 . When a little girl bought goods to the amount of twenty-five cents and tendered in payment a twenty dollar gold piece which she thought was a dollar, and the merchant, perceiving the mis-: take, gave her change for a dollar, saying nothing, he was a cheat and a swindler. Jones v. State, 97 Ga. 430 , 25 S.E. 319 , 54 Am.St.Rep. 433 . So in Crawford v. State, 117 Ga. 247 , 43 S.E. 762 , opinion by Judge Lamar, afterwards Justice Lamar, the indictments charged cheating and swindling because the defendants “did falsely and fraudulently represent” that the boundaries of land on which they were selling the timber were otherwise than they knew the truth to be. The evidence was that months previously the defendants had in good faith so stated the boundaries, but afterwards had become aware that- a large portion of the timber included was not theirs. In a new negotiation, without saying anything, they signed a conveyance written by the purchaser which showed he still thought the boundaries were as previously represented. The failure to correct the mistake, *193 and the act of taking the money paid under mistake was held cheating and swindling. Though not a legal authority, the most celebrated deceit case in history is instructive here, that of Ananias; Acts of the Apostles, Chap. 5, Verses 1 to 5. By the preceding verses it appears that by selling all their property and putting :the entire proceeds into a common relief fund the contributors were acquiring a high repute and a right to future support. In order to acquire both, Ananias sold his property and without any express statement paid in a part only of the proceeds, intending that it be understood to be all. Peter emphatically pronounced his conduct a lie, though only an implied false representation. Sapphira’s case, which follows, rested upon an express false representation. No difference was recognized in their punishment.

We have here to do, not with criminal statutes, their strict construction and their refined distinctions, but with a bankruptcy statute which intends to discharge honest debtors from their honest debts but to reprove commercial dishonesty, and expressly denies discharge from a “liability for obtaining money or property by false pretences or false representations.” In deliberately chosen words the Congress indicates a difference between false pretences and false representations. The latter may appropriately mean express misrepresentations. “False pretences” more appropriately refer- to implied representations, or conduct intended to create and foster a false impression. In both cases of course an intended deceit is essential. In either a discharge is made ineffectual. *

In applying this provision of the Bank•ruptcy Act, Judge Russell, later the Chief Justice of the State, says for the court on the exact point now before us: “A false representation may consist in the purchasing of goods with no present purpose of paying for them, and in contemplation of a fraudulent insolvency. To buy goods without a present intention to pay is a false representation of one’s intention. Therefore to buy goods without a present intention to pay will avoid a discharge. Of course, ordinarily, promises to perform some act in the future will not amount to fraud in legal acceptation, although subsequently broken without excuse. This is especially true of a promise to pay money. Otherwise any breach of contract would amount to fraud.” Atlanta Skirt Mfg. Co. v. Jacobs, 8 Ga.App. 299 , 68 S.E. 1077, 1078 . This ruling has since been consistently adhered to in the Court of Appeals. The Supreme Court of Georgia in Wells v. Blitch, 182 Ga. 826 , 187 S.E. 86, 90 , along the same line of thought, held that a discharge in bankruptcy did not relieve the bankrupt from a liability to his sister which arose by his selling incumbered land to her for cash, leading her to understand that he would discharge the incumbrance with the money but intending at the time not to do so. The court said: “To accept money as one’s agent, without a present intention of using the money * * * for the benefit of the bailor, is a false representation of one’s intention, and will avoid a discharge.”

The Georgia court does not stand alone. The case of Guernsey-Newton Co. v. Napier, 151 Wash. 318 , 275 P. 724 , above cited, in which the endorser without express misrepresentation was induced to put his name on a bad check, holds that discharge in bankruptcy did not relieve from the liability to the endorser who had the check to pay. In Boerner v. Cicero Smith Lumber Co., Tex.Civ.App., 293 S.W. 632 , it was held that lumber bought with no intention to pay for it creates a liability for property obtained by false pretences which is not discharged in bankruptcy." In Higginbotham-Bartlett Co. v. Powell, Tex. Civ. App., 270 S.W. 193 , the same law was recognized, though the case ended otherwise because fraudulent intent not to pay was not proven. In Louisville Dry Goods Co. v. Lanman, 135 Ky. 163 , 121 S.W. 1042 , 28 L.R.A.,N.S., 363, 135 Am.St.Rep. 451 , the purchase of goods with intent not to pay, with an election to sue for deceit, was held to create a liability not discharged in bankruptcy. Zimmern v. Blount, 5 Cir., 238 F. 740 , cited in the majority opinion, in no way resembles a case of the fraudulent buying of goods. I do not regard it as *194 holding that an express false representation is always necessary to avoid the effect of a discharge. The other federal case relied on In re Nuttall, 201 F. 557 , is from a District Court. The Judge in his discussion did express discontent with the ruling of the Georgia Court of Appeals, but his decision went no farther than to hold the question doubtful enough to justify enjoining the suit in the State court until the discharge should be granted and the matter be more deliberately examined. I think it clear that one who offers to buy goods and "promises to pay, expressly or impliedly, and at the time has no purpose of paying, but intends to obtain the goods for nothing, does obtain them by a false pretence and is not entitled to a discharge from his liability in tort.

United States v. Fox, 95 U.S. 670 , 24 L.Ed. 538 , dealt -with a statute which punished anyone who within three months before bankruptcy “under the false color and pretence of carrying on business, and dealing in the ordinary course of trade, obtains on credit from any person any goods or chattels with intent to defraud.” Rev.St.U.S. § 5132. The statute was held void as ex post facto and inváding the States’ police power; but one can hardly doubt that a false pretence of carrying on business, as Congress used the words, might be made by other than an express declaration.