CASES ADJUDGED

IN THE

UNITED STATES CIRCUIT COURT OF APPEALS

FOR THE

EIGHTH CIRCUIT,

AT

DECEMBER TERM, 1892.

BARNES v. UNION PACIFIC RAILWAY COMPANY.

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF COLORADO.

No. 155. Argued December 12, 1892. - Decided January 27, 1893.

A vendor who makes a false statement regarding a fact material to the sale, either with knowledge of its falsity, or in ignorance of its falsity when from his special means of information he ought to have known it, and thereby induces his vendee to 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is liable in an action at law for the damage the purchaser sustains through the misrepresentation, or to have the sale rescinded in a suit in equity, at the option of the purchaser.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 boundaries, description and title of the subject-matter of a sale of land are peculiarly within the range of the vendor's knowledge or means of knowledge; the purchaser has 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 representations; and if such statements are false and result in damage to the purchaser who acts on them, they are fraudulent in the eyes of the law and actionable. In an action brought to recover from a railway company holding lands VOL. XII-1

1

Statement of the Case.

under a grant from the United States the amount paid for certain land on the ground of fraud in its sale it is not necessary that the complaint should allege expressly that the defendant knew that the land was not within its grant, and that it was not the owner thereof when it made this false representation, and that it made the representation fraudulently to induce the plaintiff to purchase, where the presumption can fairly be drawn from the allegations in the complaint that the defendant did have full knowledge that its statements were false at the time when they were made.

The obligations of honesty and good faith, and the obligations not knowingly or recklessly to represent falsely things material to the sale of land, and to practise no fraud or deceit, and the right of action for the tort that results from the breach of these obligations are neither abrogated, merged nor affected by a subsequent deed either with or without covenants, and may be enforced at law or in equity regardless of it. A complaint which shows that a vendor of land, a railway company, was not in possession and had no color or claim of title under any instrument purporting to convey the land to it, nor any judgment establishing its right to it, but that, to induce the plaintiff to buy, it falsely and, in view of the law, fraudulently represented that it had a grant of land from the Government and was the sole owner of it, and that the plaintiff acted on the representation and was thereby damaged, contains a good cause of action.

A Circuit Court of Appeals will not consider suggestions based upon a pleading which is not before it.

Under the code and practice in Colorado a general demurrer does not raise the question of the effect of the statute of limitations.

Before CALDWELL and SANBORN, Circuit Judges, and SHIRAS, District Judge.

This writ of error was sued out to reverse a judgment sustaining a general demurrer to the plaintiff's amended complaint. In this complaint Thomas H. Barnes, the plaintiff, alleged that the Union Pacific Railway Company, the defendant, was the grantee from the United States of a railroad land grant; that about September, 1881, the defendant represented to him that a certain tract of land in Boulder County, Colorado, was a part of its railroad land grant, and that it was the sole owner thereof; that he trusted to and relied on these representations, and in reliance thereon purchased the land of the defendant, paid it two thousand three hundred and seventy-six dollars and sixty cents therefor, and took its deed thereof without covenants; that the land had

Opinion of the Court.

never in fact been granted to the defendant, that it had never been in possession of it and that it had never had any title to or right in it, but that the plaintiff did not know this fact until 1890, because the defendant continued to assert that the land had been granted to it, and in a contest before the local land office had obtained a decision favorable to its contention in 1885 in a cause which was not finally settled adversely to it by the decision of the Secretary of the Interior until 1890; that the plaintiff had been compelled to buy and had bought the land of the United States by exercising his right as a homesteader under its laws, and had entirely lost the amount that he paid to the defendant; that he demanded the repayment of this amount before the commencement of this action, and that it was refused.

Mr. Charles M. Campbell for plaintiff in error.

Mr. Willard Teller, (Mr. John M. Thurston, Mr. H. M. Orahood and Mr. E. B. Morgan were also on the brief,) for defendant in error.

SANBORN, Circuit Judge, after stating the case as above, delivered the opinion of the court.

A vendor who makes a false statement regarding a fact material to the sale, either with knowledge of its falsity, or in ignorance of its falsity when from his special means of information he ought to have known it, and thereby induces his vendee to 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 boundaries, description and title of the subject-matter of a sale of land are peculiarly within the range of the vendor's knowledge or means of knowledge, and the purchaser has 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 representations. If such statements are false and result in damage to the purchaser who acts on them, they are

Opinion of the Court.

fraudulent in the eye of the law and actionable. 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 which it gave him a deed of was a part of that grant and that it was the sole owner of it; that the plaintiff knew nothing about this title, but relied upon this statement, and was thereby induced to pay the defendant two thousand three hundred and seventy-six dollars and sixty cents for its deed of the tract, when in fact it had no title nor color of title to the land, was not in possession of it, and the deed it delivered conveyed no right whatever. Here was a misrepresentation of a material 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 that the land was not within its grant and that it was not the owner thereof when it made this false representation, and no express allegation that it made the same fradulently to induce the plaintiff to purchase, is not material. The misrepresentation was made in apt time to induce the purchase, and did induce it. The inference is irresistible that this was its purpose. 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 that the defendant did know when it made positive statements concerning it, and the presumption is from the allegations of this complaint that it did have full knowledge that its statements were false at the time when they were made. Even if it could be assumed that the defendant had no actual knowledge of the fact misrepresented, this would not relieve it from liability. It represented the fact to be as of its own knowledge that this land was within its grant and that it was the owner of it. If it knew this to be false, that was fraud of the most positive