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Graham & Co. versus Hollinger

Supreme Court of Pennsylvania1863
46 Pa. 55

Summary

Holding. The judgment is reversed and a new trial is awarded because the trial court improperly admitted evidence regarding the defendant's statements to other merchants, Eahnstock's declarations to third parties, and hearsay evidence about a judgment, all of which was irrelevant to the core question of whether the defendant made false representations to the plaintiffs with knowledge of their falsity.

Graham & Co. brought a fraud action against Hollinger, alleging that Hollinger had made false and fraudulent statements about Alexander T. Eahnstock's creditworthiness, causing the plaintiffs to extend credit to Eahnstock and suffer loss. The plaintiffs relied on these misrepresentations when deciding to sell goods on credit. At trial, the defendant introduced evidence that he had not made similar representations to other Philadelphia merchants and had even discouraged others from extending credit to Eahnstock. The defendant also presented testimony about statements Eahnstock made to third parties and hearsay evidence that someone had heard the defendant held a judgment against Eahnstock.

The court found that this evidence was improperly admitted because it had no bearing on whether the defendant made false representations to the plaintiffs or whether he acted with knowledge of their falsity. Evidence that the defendant remained silent toward other merchants or discouraged them from dealing with Eahnstock could not prove he had not deceived the plaintiffs. Similarly, evidence of what Eahnstock told third parties about his debts and the judgment bond, as well as hearsay about the judgment's existence, was irrelevant to whether the plaintiffs were actually deceived by the defendant's specific statements to them.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Admissibility of evidence regarding defendant's silence or discouragement toward other merchants in a fraud action
  • Whether statements by a third party (Eahnstock) to third persons are relevant to proving fraud by the defendant
  • Whether hearsay evidence of a judgment's existence can establish that plaintiffs knew the representations were false
  • Whether guilty knowledge and intent to deceive are essential elements that must be proven to a jury in a fraud case

Procedural posture

The plaintiffs appealed from a judgment rendered after trial in an action for deceit based on allegedly fraudulent misrepresentations about Eahnstock's creditworthiness.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

The opinion of the court was delivered by

Strong, J.

This was an action on the case for deceit. The declaration contained but one count, and that averred, in substance, that the defendant had falsely and fraudulently represented to the plaintiffs that one Alexander T. Eahnstock was a person of responsibility, to whom they might safely sell goods on credit, knowing when he made the representations that they were untrue. The declaration also averred that, relying on the defendant’s statements to them, they had made credit sales to Eahnstock, and had thereby sustained injury.

After evidence had been given in support of the averments of the declaration, the defendant was permitted to prove that he did not make similar representations to Iungrich & Smith, other merchants in the city of Philadelphia, and that they refused to sell to Eahnstock unless for cash. He was further permitted to prove that long after the representations were alleged to have been made to the plaintiffs, he had advised another merchant not to sell goods to Eahnstock.

We are unable to perceive any satisfactory reason for the admission of this evidence. It was manifestly irrelevant to the issue between the parties. It tended in no degree to disprove the specific fraud charged in the declaration, to excuse, or lessen the defendant’s responsibility for damages. Let it be that he was silent to others, or that he dissuaded others from giving credit to Eahnstock, no inference could be drawn from that fact that he had not made false representations to the plaintiffs, or that he had not made them with a guilty knowledge of their untruthfulness. Generally, indeed, to establish an allegation of fraud, and perhaps to repel it, large latitude is allowed to the admission of evidence, but the evidence must have some bearing upon the matter in controversy. We think therefore the defendant’s declaration made to Henry Welsh was inadmissible, as was also proof of the fact that he had not made false representations to other merchants than the plaintiffs. Such proofs were calculated to lead the minds of the jury from the consideration of the single question which they had to try.

Eor similar reasons the declarations of Eahnstock made to third persons, stating the amount of his debts, and communicating to them the fact that he had given a judgment-bond to the defendant, were improperly received in evidence. They could have been admitted only under a misapprehension of the issue raised by the declaration and plea.

The sixth assignment of error is that the court permitted a witness to testify that he had heard one of Eahnstock’s customers say he had heard the defendant held a judgment against Eahnstock. The error is plain. Undoubtedly, if the plaintiffs were not deceived, if they knew that the representations made to them by the defendant were untrue, that Eahnstock was insolvent, and that the defendant held a large judgment against him, it was their folly to make credit sales, and there could be no recovery in this action. But such knowledge is not-to be -inferred from the fact that a stranger knew of the existence of the judgment, and had spoken of it in their absence.

The exceptions taken to the charge of -the court would not justify us in reversing the judgment. In the points propounded by the plaintiffs, the court was requested to instruct the jury repecting the liability arising out of -false representations and fraudulent concealment. Now if the-representations made were false, and yet were honestly believed to be true, and if the existence of the judgment-bond was not mentioned from thoughtlessness, and without intention to deceive,, the liability of the defendant for damages was not made out. Guilty knowledge and an intent to deceive were essential to the plaintiffs’ recovery, and they were charged in the declaration. ‘ To warrant a verdict for the plaintiffs, they must have been found by the jury. And it was not for the court to withdraw the question from the jury, as they would have done had they affirmed the plaintiffs’ second point without more. It may be that the.defendant could hardly have been mistaken, but whether he was or not was for the jury. We cannot lose sight of the fact that the declaration complained that the defendant represented Eahnstock as worthy of credit. It did not charge the representations as having been made in the words detailed by the witness Snyder. But for the admission of the evidence referred to in the first five .assignments, the judgment must be reversed.

Judgment reversed, and a venire de novo awarded.