Story Case

Zeke Gilpin tried to sell his standing lumber to the Willis Mills. He intentionally represented that there were 500 acres of walnut timber, knowing all the time that there were only 375 acres. The Willis Mills were unable to accept the offer but they told the Wayneld Lumber Company of the proposition, and repeated that there were 500 acres of walnut.

On the next day the Wayneld Lumber Company approached Gilpin and, on the strength of his representation to the Willis Mills, offered him a price which was estimated on the belief that there were 500 acres of walnut. A contract was closed, but before paying the price, the Wayfield Lumber Company learned that the land and timber were not as represented, and they refused to pay the purchase price, alleging fraud on the part of Gilpin.

Gilpin defended, on the ground that the representation which he made to the Willis Mills was not one upon which the Wayfield Company had any right to rely. Is this true?

Ruling Court Case. Stevens Vs. Ludlum, Volume 46 Minnesota Reports, Page 417; Volume 13 Lawyers' Reports, Annotated, Page 270

John Ludlum was investigated by various commercial agencies as to his property, so that the agencies could make some estimate of his credit. To all of these agencies he stated that he was the sole proprietor of the New York Pie Company. This information was conveyed by one of these commercial agencies to J. W. Stevens, who, in reliance thereon, extended credit to John Ludlum. Ludlum never paid the accounts. It developed, as a matter of fact, that he was not the owner of the New York Pie Company, as he had represented. It seems that he had no interest whatsoever in it. Suit was brought against him for damages, caused by the false representations as to the property which he claimed to own.

His defense consisted in the fact that he had never made these representations to Stevens, and, therefore, Stevens had no right to rely upon them.

Decision

A person who makes representation falsely is liable only to those to whom they were made, and to such persons as might reasonably suppose that they had the right to rely upon the representations. It is not necessary that the statements should be made directly to the person who relies upon them. If they are made to one person who is to communicate them to others, the person who causes them to be made is as liable as if he had made them directly to the person injured. In this case, Ludlum made the misrepresentations to commercial agencies, knowing that they would be communicated to various persons in various parts of the country. He is liable, therefore, to any such person.

Mr. Justice Gilfillan said: "Representations need not be made directly to the party acting on them. It is enough if they were made to another and intended or expected to be communicated by the representatives of the party making them to the party acting on them, for him to rely and act on. The representative may be intended for a particular individual alone, or several, or for the public, or for any one of a particular class, or it may be made to A to be communicated to B. Anyone, so intended by the party making the representation, will be entitled to redress against him by acting upon the representation to his damage. If one acts on a representation, not made to, or intended for, him, he will do so at his risk".

Judgment was given for Stevens in this action.

Ruling Law. Story Case Answer

There must be an intention upon the part of the person making the false statement of fact that it shall be relied upon by a given person or a given class of persons. If another person relies upon the statement and is injured, he cannot recover for the fraud.

In the Story Case, the statement was not made to Wayfield Lumber Company; and so far as appears, Gilpin did not intend that Willis Mills should repeat his statements to the "Wayfield Lumber Company. Such being the case, the lumber company had no right to rely upon the statements and they may be held for the purchase price.