
    ADDISON MACULLAR, et al., Appellants, v. JOHN W. McKINLEY, Respondent.
    
      False representations.—Statements to commercial agencies, effect of.—Evidence.
    
    The courts will take judicial notice of the business and office of commercial agencies established for the purpose of furnishing information as to the credit and standing of business men.
    To hold a defendant liable for an alleged false representation as to his financial standing made to such an agency, the evidence must show that he was the responsible cause of the plaintiff’s relying on the statement, and ordinarily this will be shown by the fact of the making of the representation.
    But such representation will hold against defendant only as to sales made within such time as, according to the custom of the agency, would elapse before another application is made to him, and another statement procured.
    Accordingly, where defendant, in February, made statements to a commercial agency tending to show his financial responsibility at the time, but also showing that his credit was not strong, which facts upon application were communicated to plaintiffs, and on the faith of which they sold to defendant goods at divers times, all of which were paid for up to the ensuing June, when defendant, being again applied to by said agency, declined to make any statement, which fact was put upon the records of the agency, with other information tending to show that defendant’s standing and credit were not good, the evidence showing that it was the custom of the agency to supply its information only upon application therefor.
    
      Held, that as to sales made to defendant by plaintiffs after such second interview in behalf of the agency, plaintiffs were not induced by him to rely upon the statement of February by itself, but upon it and such further statement as would be made in the usual course of business; that from the two statements, it appeared that the defendant did not claim credit upon any implied assertion that his first statement held good. Further held, that the complaint was properly dismissed. Bussell, J., dissented.
    Before Sedgwick, Ch. J., Freedman and Russell, JJ.
    
      Decided December 30, 1882.
    Appeal from a judgment in favor of the defendant for costs, iipon dismissal of the complaint at trial term.
    The action was for damages for false representations alleged to have been made by the defendant in purchasing goods upon credit from the plaintiffs.
    The defendant was a merchant tailor in the city of New York. The plaintiffs were merchants in Boston. The plaintiffs began to sell goods to the defendant in May, 1881, ■through their traveling agent. Before extending credit to the defendant they made inquiries as to the defendant’s financial standing, of the Bradstreet Company, a mercantile agency to which the plaintiffs were subscribers, a part of whose business it is to furnish information to such of their subscribers as inquire. The report was as follows: “McKinley, J. W., Tailor, New York City.
    “John W., 127 Nassau street, states, ‘Have a stock on hand of $2,500 and no liabilities, as I pay cash for all my purchases.’
    “ He has been in the above business for the past forty years, during which time said failed twice, the last- time some three or four years ago, and effected a compromise at fifty cents; was formerly at 506 Broadway, afterwards at 264 Broadway, and moved to present location last May, which he is obliged to vacate next May, as the building is to be taken down.
    “ His wife is said to own property, the income of which supports the family. Parties who have known him many years speak of him as an honest, industrious man ; though doing a small, close business, and not doing much, if anything, more than making á living for himself. Is not known to be asking any credit, as he became so very slow in his payments, that those who have sold him for years decline selling him except for cash.
    “21 .... F.....Feb. 25, 1881.
    “Nov. 22, 1881. To Macullar, Parker & Co.: The correctness of this report is not guaranteed, but having been obtained by us in good faith—from authorities deemed reliable—it is transmitted to you in strict confidence for your exclusive use and benefit, and in accordance with the terms of the contract existing between us.
    Respectfully, The Beadsteeet Company.”
    
      A witness in the employ of the Bradstreet Company testified that the statement “Have a stock on hand of $2,500 and no liabilities, as I pay cash for all my purchases,” was made to him by the defendant on or about February 25,1881, and that, at the time, he informed the defendant that he came there as an employee of the Bradstreet Company for the purpose of getting a statement of his financial condition.
    One of the plaintiffs testified that he sold the goods in question relying on the truthfulness of this statement which, upon his inquiry, was furnished him by the Bradstreet Company.
    The defendant purchased several bills of goods in May and June from the plaintiffs, for which he paid. The sales and credits,, on account of which this action was brought, were made in August, September and October. In November, the defendant made a general assignment, preferring certain members of his own family, among others his wife, to whom he recited an indebtedness of nearly $1,800, all borrowed before September, 1880, and $850 borrowed from other persons before February, 1881. His inventory showed an indebtedness of $4,097.63, with assets of the nominal value of $2,526.80, and actual value of '$1,553.80.
    The defendant did not deny that he made the statement in February attributed to him, but said he did not recollect it. It was proved on behalf of the defendant, that on or about June 20, another reporter of the Bradstreets called upon the defendant to get a report of his financial condition for the use of the Bradstreet Company. The reporter’s testimony was as follows: “I asked him if he felt inclined to give me some figures regarding his condition, as we had some inquiry at the time, and I desired to represent him properly; we had quite a long-conversation ; I can’t remember the exact words in the matter, but he did not feel inclined to give any statement; he seemed to be under the impression the agencies had done him harm ; did not think well of them; that they did not represent him properly, and a statement would not do him any good ; a statement would not do him any good if made ; he seemed to think he was all right.”
    Q. ‘1 Can you refresh your recollection from any data in your possession, or by the report you made to the company about that?”
    A. “Yes, sir; I have a memorandum in my pocket; it was: ‘ J. W. McKinley, tailor, New York City, 418 Sixth avenue, formerly 127 Nassau street, near John ; for several years he was located at Broadway and Prince streets, then 264 Broadway, and one year, 127 Nassau ; moved to present location last May; he declines giving any information; he is believed to be working with his wife’s "money; is stated to have failed two or three times; regarded as of little responsibility, and jobbing houses in the city say they would sell him only for cash.’ That report was spread upon the books of the Bradstreet Company June 20, 1881; it was put on file and distributed to those who inquired.”
    Q. “Did you, after that.date, call upon Mr. McKinley and have other conversation about a report ?”
    A. “Yes sir; after his failure.”
    The court below dismissed the complaint, on the ground that “Bradstreet & Company were, for the purposes of the trial, the plaintiffs’ agents. The information which they communicated to the plaintiffs required the plaintiffs subsequently to ascertain whether they had received further information which qualified the former representations.” The latter information, spread upon the books of Bradstreet & Company on June 20, before any of these bills were contracted, was that the defendant was doing business with his wife’s money, and was of little or no responsibility. The plaintiffs were bound to ascertain whether there had been any change in the report to the agency or otherwise. In law, the plaintiffs are chargeable with the knowledge of that further report made to their agents. The complaint must be dismissed.”
    
      C. C. & S. F. Prentiss, for appellants.
    
      R. W. Todd, for respondent.
   By the Court.—Sedgwick, Ch. J.

—The alleged false representations Were not made by the defendant directly to the plaintiff, but were made through the Bradstreet Mercantile Agency, as a channel of communication. Eaton C. & B. Co. v. Avery (83 N. Y. 31), says of the responsibility of a defendant in such a case: “A person furnishing information to such an agency in relation to his own circumstances, means and pecuniary responsibility, can have no other motive in so doing than to enable the agency to communicate such information to persons who may be interested in obtaining it, for their guidance in giving credit to the party.” “ But the defendant knew that they were a mercantile agency, whose business it was to give information as to the standing and means of dealers, and that it was resorted to by merchants to obtain such information^ By making a statement of the financial condition of his firm to such an agency, he virtually instructed it what to say if inquired of.” To make a defendant liable (p. 33), the testimony should show that the statements “were made with the intent that they should be communicated to and believed by persons interested in ascertaining the pecuniary responsibility of the firm, and with intent to procure credit and defraud such persons thereby, and such statements were communicated to the plaintiff and relied upon by it, and the alleged sale was procured thereby.” I wish here specifically to notice that in this declaration of what the law is, it is implied that the evidence must show that the defendant was the responsible cause of the plaintiff’s relying on the statement. Of course this would be shown, in most cases, by the mere fact of the making of the representations when the defendant was proceeding to buy the goods. There might, however, be cases in which the representations were made to induce one' sale only, and yet the seller would be induced by the statements to make another sale, at a future time, when the buyer would not be responsible for the operation of the seller’s mind.

As the responsibility of the defendant in such cases depends upon the character'of the agency as a usual means of communication, it is shaped and limited by the peculiarities of the methods of business of the agency. And on the other hand, the plaintiff in relying upon the communications from the agency, must himself take into account both those peculiarities and the fact that the defendant made the statement in view of them.

, In the present case, there was some testimony as to the methods of business of the agency, and agencies of this kind are so well known that the courts can take judicial notice of their business and office (Eaton v. Avery, supra, 31). By the testimony, the agency carried on the usual business of a mercantile agency—to report to business firms the credit and standing of business men. The plaintiffs were subscribers to the agency. It was not shown how often, as a habit, the agency applied to business men for information as to their means. As a fact in this case, the agency applied to the defendant for a statement of his financial condition in February, 1881, and .again in June, 1881. Both statements were spread upon the books of the agency. What was done in this case, it may be assumed was done in general as t0‘ all business men. Indeed, the methods of business require that applications be made from season to season repeatedly. The profit or loss of each business season must cause a change of the financial condition at the beginning of the season, or the fact, that nothing has been made or nothing lost, is an important piece of information.

A just conclusion in my judgment is, that when the plaintiffs received the statement of February, they could not be justified in assuming that it was made by the defendant, as something which he meant they should sell goods upon for all future time, but only for that space of time that, according to the custom of the agency, would elapse, before another application be made, and another statement procured. The defendant could assume that after the application in June, the plaintiffs would act upon the custom of the agency, and giving no further operation to the first statement than it should properly have, would not act upon it, except in connection with the June statement. The defendant would.be bound to know that the statement he made in February would be communicated to the plaintiffs, and would also have the right to believe that they would learn of the statement in June.

It was observed in the course of-the argument at the bar, that the agency did not furnish the information it. received to its subscribers always and uniformly, but gave it only to such of them as inquired for information, nevertheless, it is true, that the defendant would be liable for the February statement, on the ground that when he proposed to buy goods he would have convincing reason to believe that the plaintiffs, if subscribers to the agency, would apply to it. He must have the benefit of the consideration that his mind would work in a like manner upon proposing to buy goods after the second statement.

A more particular view of the facts will corroborate, I believe, these propositions. In February, 1881, the defendant said to the agency, “I have a stock on hand of $2,500, and no liabilities, as I pay cash for all my purchases.” In its report to the plaintiffs, the agency added that the defendant had been in business for forty years, had twice failed—the last time three or four years before, and effected a compromise at fifty per cent.; that his wife is said to own property, the income of which supports the family; that parties who have known him, speak of him as honest and industrious, doing a small, close business, and not doing much more than making a living for himself ; that he is not known to be asking any, credit, as he became so slow in his payments, that those who have sold him for years decline selling him except for cash.

In May, 1881, the plaintiffs’ salesman sold the defendant certain goods. The testimony for plaintiffs is, that before selling, they obtained from the agency a report that contained the matter that has been given. On the trial, the witness who swore to this produced a report of the -agency as the one he acted oh in May. This, however, was dated in November. Probably, the witness meant to say that the report dated November, was a duplicate of the report he received in May. If it be otherwise, the plaintiffs’ case failed, for the goods in action were all sold before November. At any rate, the goods sold from May 11, to June 21, on five occasions, in amounts from $112 to $26, were all paid for. The aggregate was $286.

In August, 1881, the plaintiff sold the defendant, and in September and October four parcels, in amounts from $557 to $62, amounting in ail to $950.

Before August and in June, the agency had applied to the defendant and he had made a declaration which was, as has already been said, placed upon the books of the agency. It was as follows: “He declines giving any information; he is believed to be working with his wife’s money; is stated to have failed two or three times ; regarded as of little responsibility, and jobbing houses in the city say they would sell him only for cash.”

It is extremely doubtful whether the testimony shows that the plaintiffs did not learn of this statement, as I call it, of June, and indeed, this would have demanded attention, if in the disposition of the case on - the trial, counsel had not assumed that the plaintiffs had not learned of it.

In connection with the reflections that come from the general nature of the business of the agency, as calling for repeated application to persons likely to ask credit, an illustration of the reason and probability of it is found in the February statement. It is manifest from this, that the defendant had a very, debilitated credit. A breath of disaster would destroy it. A few men not paying their bills, would make him insolvent, for he was a tailor doing a small, close business. The plaintiffs must have known that the agency would make an additional investigation after February and before August 16. The defendant must have thought that the facts obtained in June would be learned by the plaintiffs before they would sell to him in August.

I therefore, am of the opinion that it appeared by the undisputed testimony, that the plaintiffs were not induced by the defendant to rely upon the statement of February by itself, but' upon it in connection with such further statement, as in the usual course of the business would be made before August. The plaintiffs would learn from the two coupled together, that the defendant refused to reassert the facts stated by him in February, and therefore did not claim any credit upon an implied assertion by him,

‘ that his first statement still held good. The defendant had reason to believe that the plaintiffs had learned of the second statement, and were not about to rely upon the first statement. On either proposition, the defendant was not liable, and the court made a correct disposition of the case.

In my opinioft, the judgment should be affirmed, with costs.

Freedman, J., concurred.

Horace Russell, J.—Dissenting.

—[After stating the facts as above.]—The question presented to us is raised by the plaintiffs’ objection to the admission of the testimony in regard to the second statement in the books of Bradstreet & Company, entered on June 20, and by their exception to the dismissal of the complaint on the strength of that entry.

It was settled in Eaton, Cole & Burnham Co. v. Avery (83 N. Y. 31), if indeed there remained any doubt on the subject before that case was determined, that false statements as to financial condition made to a commercial agency, with the intent that they should be communicated to persons seeking to ascertain financial responsibility, and with intent to procure credit, and defraud, constitute a sufficient foundation for an action of deceit by persons defrauded by such means. The proof in the case before us, sufficiently established the making of representations, their falsity, the defendant’s knowledge of their falsity, and that the plaintiffs relied upon them, to demand the submission of the case to the jury, unless the judge below was right in taking the case from them, because of the effect to be given to the statement of June 20. The rightfulness of the decision below depends upon the answer to two questions: (1) Were the plaintiffs chargeable in law with the information received by the Bradstreet'Company % and (2) Was the statement entered in the books of the Bradstreet Company on June 20, such a one as, so far as the defendant was concerned, retracted the statement of February 25, so that the plaintiffs were no longer entitled to rely and act upon th¿ faith of that statement \

It is not open to question, that a principal is chargeable in law with information communicated to his general agent or to his special agent in the course of negotiations relating to a particular business. This rule of law has been adopted, because in such transactions, the agent takes the place of the principal, and in all things substantially acts and decides as the principal might if he were personally present, is, in short, his alter ego.

Had the defendant communicated to the plaintiffs directly, a recall of the statement of February 25, he certainly could not be held in this action. Had he communicated it to that person, whether one of the plaintiffs or their business manager, who is known as the “credit man” of commercial houses, he could not be held. So, had he communicated a retraction of the statement to the traveling salesman, who apparently conducted the. transaction, the plaintiffs would be chargeable with knowledge of such retraction, and could not recover in this action. But I cannot understand on what theory Bradstreet & Company can be regarded either as the general agents of the plaintiffs, or as their special agents with reference to • the business transactions between the plaintiffs and their customers, so that information communicated to them can be held, in law, to have been communicated to the plaintiffs themselves. True, Bradstreet & Co. were, in a certain sense, the agents of the plaintiffs ; but, so far as this error book discloses and our general knowledge on the subject goes, the extent of their agency was that they agreed to furnish, upon inquiry, such information as they had in regard to the financial condition of persons in relation to whom their subscribers might desire to inquire.

In the cases of this character in the books, the commercial agencies are held to have been the agents of the purchaser so far as the communication of the information derived by him was concerned. Except that the plaintiffs paid, it is presumed, for their information, there seems to be no better reason for holding the Bradstreets the agent of one party than of the other; in ’which case, before the plaintiffs’ action could be defeated, actual knowledge must be brought home to them.

The cases cited by the counsel, on the argument, in support of the theory on which this case was disposed of below (Holden v. N. Y. & Erie Bank, 72 N. Y 286; Bennett v. Buchan, 76 Id. 386; Whitney v. Groot, 24 Wend. 82; Rogers v. Warner, 8 Johns. 92), fall far short of sustaining that theory.

In Holden v. N. Y. & Erie Bank, it was held that the bank was chargeable with the knowledge possessed by its president and chief financial officer in regard to a transaction conducted by him as such president.

In Bennett v. Buchan, it was held that the principal was chargeable with the knowledge of the agent who “negotiated the whole business.”

It -would certainly be an extension of the doctrine of those cases to impute to a principal, information which persons whom they sometimes consulted, had acquired.

Whitney v. Groot, and Rogers v. Warner, were actions against sureties, in which the agreement of the surety was construed to relate only to the first sale to be made to the persons whose purchases they guaranteed.

Mercantile agencies are actual, not constructive agents ; that is, they act within actual, not constructive limitations ; and as persons can be held liable for statements made to them, only by showing that such statements were communicated to other persons as a basis for credit, so, in my judgment, can they only be relieved by showing that subsequent statements modifying the first, were actually communicated to the same persons. That they made subsequent and different statements, is, of course, admissible in evidence on the question of intent, but that is a different question from the one I am considering.

But even if it should be held that information of a ■ retraction of a former statement made to the commercial agency, should, as a matter of law, be imputed to a subscriber to the agency, the mere declination in June to make a new statement after having .made one in February, cannot properly be regarded as a retraction of the statement made in February. It might perhaps, excite some uneasiness on the part of a creditor, that a debtor should be unwilling to reiterate a statement made five months previously, but the creditor might very well attribute that unwillingness to the natural disposition of mankind, to resent frequent and impertinent inquiry. At any rate, such mere refusal was not of such a character as forbade his continuing to rely upon a positive and definite statement made a few months previous. The rumors referred to in the second statement, were merely given as rumors by the Mercantile Agency. They related to matters peculiarly within the knowledge of the defendant, and were covered by the statement made by him in February. If those rumors had been actually communicated to the plaintiffs they would have had a right to say “ these are rumors which may or may not have foundation; we have the positive statement of our customer given in February that he was entirely solvent, and owed no debts; these rumors relate, not to any changed condition of affairs, but to his condition at the time we extended him credit as well as now; we have still a right to rely upon his statement to us, and we will do so.” Nor would it indicate a lack of business prudence on their part to do so.

The question for us is not how a jury will regard these transactions, but whether the court ought to have taken them from the jury altogether.

I am of the opinion that it ought not to have done so,‘ and that, for that reason, judgment should be reversed and a new trial ordered, costs to abide the event.  