Summary
holding that in an action for fraud, although there are "traditional elements which must be proved . . . [e]qually basic however, is the proposition that fraud is in itself subtle"
Summary of this case from GIW Industries, Inc. v. JerPeg Contracting, Inc.Opinion
45365.
ARGUED JUNE 8, 1970.
DECIDED JULY 1, 1970.
Action for damages. Bibb State Court. Before Judge Phillips.
John M. Hancock, Jr., William V. Hall, Sr., Denmark Groover, Jr., for appellants.
Adams, O'Neal, Steele, Thornton, Hemingway McKenney, H. T. O'Neal, Jr., Jerome L. Kaplan, for appellee.
In a deceit conspiracy action, the elements of deceit need not be laid out and proved in hornbook fashion but may be shown by the number and joint operation of apparently trivial circumstances. Similarly, the law does not require proof the parties held a sinister council in order to show a conspiracy. This too may be inferred from the totality of the evidence.
ARGUED JUNE 8, 1970 — DECIDED JULY 1, 1970.
A defendant in a fraud conspiracy action appeals from the judgment and from the denial of his motions for a new trial and judgment n.o.v. The jury returned a verdict for $22,000 actual damages and $53,000 punitive damages against all three defendants. The other two have withdrawn their appeals.
Sometime in 1966, appellant Grainger, a real estate developer, met three men in New York City. One was named Fox. These men were in the mortgage loan business. In some unspecified way, they were instrumental in convincing Grainger to enter the loan brokering business. They introduced him to a man representing a company with money to lend, and furnished him with the names of two other such companies. In November, First Fidelity Mortgage Co. was chartered in DeKalb County by defendant Rary, an attorney and personal friend of Grainger. Offices were rented down the hall from Rary's and Fox came in as manager. Grainger was the president and, along with his wife, owned all the capital stock. The business of the company was loan brokering — bringing together people who needed large loans and institutions with available money. The borrower would pay First Fidelity 10 percent of the loan as a "finder's fee" for this service. The company placed ads in newspapers around the State. Defendant Newberry saw one of these ads. He was an employee of the Jefferson Standard Life Insurance Company whose job was arranging loans. However, in 1966 his employer had no available funds to lend so Newberry was privately finding sources for their clients. During a 90-day period, he brought three potential borrowers to First Fidelity. For this he received a part of the finder's fee. Evidence of seven separate transactions was introduced at the trial and all followed substantially the same pattern. Upon payment of 5 percent of the loan desired, First Fidelity would write up an application for the borrower and seek out a "loan commitment" from its "sources." This money was to be returned if no loan were secured. Upon receipt of another 5 percent and a release, it would give the original copy of the commitment to the borrower. The "finder's fee" money was supposedly held in escrow by Rary until this point. (However, at least one borrower who wanted to back out of the deal halfway through was told by Rary that the initial 5 percent had already been disbursed). When the borrower signed the release, the money was immediately disbursed — part to Rary for his services as "escrow agent," part to people like Newberry who brought in borrowers and the balance to First Fidelity. There is no evidence any of this money went to the companies which issued the commitments. During the six months of First Fidelity's corporate life, over $111,000 was received from these seven loan applicants and disbursed. In most instances, the commitment which was procured provided that the actual loan closing need not take place for 18 months after date of issue. In no instance did any applicant ever receive any money on these loans or get a refund of the finder's fee. First Fidelity itself was collapsed after six months of doing business and a year before most of the commitments became due.
The plaintiff here was one of these loan applicants. The evidence showed that he had no business training or experience; that he worked at Warner Robins Air Force Base and part time at a skating rink; that the owner of the rink (a Mr. Davenport) offered to sell plaintiff the rink for $200,000 and brought him to Newberry to arrange financing; that plaintiff had no money or property of his own; that he had no concept of financial transactions, had never heard of a loan commitment, and had never even signed a promissory note.
Newberry brought plaintiff to First Fidelity. Plaintiff was the last of the three borrowers found by Newberry, and the evidence suggests that by this time Newberry knew a commitment previously received by another borrower could not be used as the basis for a local loan. To raise the application or finder's fee, Davenport (who had credit) borrowed $22,000 from a local bank and plaintiff in turn gave Davenport two notes totaling this amount. Someone from First Fidelity and an agent of Rary flew to Macon to fill in the application for plaintiff's signature. Several days later they flew back with the commitment and collected the balance of the fee. (Flying back and forth in a chartered airplane was s.o.p. in all out-of-town transactions). All this money was turned over to Rary and disbursed. Newberry received $2,200. Plaintiff testified that Newberry had explained the transaction to him and had told him that a loan commitment was as good as money (that any bank would lend money on its strength). Plaintiff also testified that he believed he was borrowing from Jefferson Standard until he was handed the commitment from a company called Continental Investment Bankers. He and Newberry took it to a local bank which refused to lend anything on it. (This was before Newberry accepted his $2,200). He then asked Newberry to try to get Continental to close the loan as soon as possible. After about six months with no results, plaintiff consulted a lawyer for the purpose of expediting and closing the loan. The lawyer, after several more months of investigation, was unable to even locate Continental Investment. A man in Kansas City who was supposed to be its president told the lawyer that he didn't know what had happened to the company.
Defendant Grainger testified that before commencing business he looked up in Dun Bradstreet the three companies from which First Fidelity procured commitments and they were rated for a combined worth of 20 million dollars. He also testified that he had not participated in any of First Fidelity's day to day business (which was all handled by Fox) as most of his time was spent with his real estate projects; that he never met or negotiated with any of the borrowers; and that he never even heard of Newberry until they were both sued by plaintiff. Finally, he stated he did not know where the First Fidelity business records were as he only kept records of his current businesses.
Newberry testified also that he had never met Grainger and that even after the fee was paid and the commitment delivered, he made every effort to assist plaintiff in getting the loan closed.
Rary testified that he did nothing but incorporate First Fidelity and act as escrow agent on several occasions for their transactions.
1. Defendant contends the court erred in denying his motion for judgment n.o.v. as neither fraud nor conspiracy was proved. He contends that no misrepresentation was ever made to plaintiff — that First Fidelity agreed to procure, and plaintiff received, a commitment and only parted with his money after personally examining it — and that they never guaranteed the continued solvency of the lender or that the loan would be closed regardless of circumstances. He further contends that even if someone connected with the transaction (the missing Fox, presumably) did perpetrate a fraud, there is no basis for holding Grainger liable because even though an officer of the corporation, he had no personal connection or knowledge thereof; that Newberry similarly did nothing to defraud plaintiff, just the contrary; and finally, there is absolutely no evidence that these alleged conspirators in any manner reached an agreement so as to make each responsible for the acts of others.
In an action for deceit, there are traditional elements which must be proved, of course, and a material misrepresentation or concealment is one of them, as is knowledge of the falsehood or reckless disregard of the true facts. Code § 105-302. Equally basic however, is the proposition that fraud is "in itself subtle," Code § 37-706, and that "circumstances apparently trivial or almost inconclusive, if separately considered, may by their number and joint operation ... be sufficient to constitute conclusive proof." Eberhardt v. Bennett, 163 Ga. 796, 802 ( 137 S.E. 64).
That defendants did not make an obvious and quotable misrepresentation is hardly to be wondered, given an operation of the financial magnitude and sophistication of First Fidelity. With the exception of plaintiff, all the borrowers were businessmen of sorts and presumably would not buy the Brooklyn Bridge. The badges of fraud are present, however, in the totality of the evidence, and the jury was authorized to infer that those who dealt with the prospective borrowers led them to believe, either by representation or omission, that the commitment they were to procure had some intrinsic value; that what was being bought for thousands of dollars was worth more than the sheet of paper on which it was written; that the promise of a loan it contained was backed by the intent and the resources to perform; and that they, as professional loan brokers, knew or should have known whether their sources were sound and would not have used them otherwise. At the very least, First Fidelity omitted to inform its customers that it knew (according to Grainger) nothing about the committing companies other than what a quick glance at some unspecified Dun Bradstreet report had disclosed, and did not know whether these companies had ever actually closed a loan for anyone. The jury would also be authorized to find that Grainger knew what was going on in his own company and to hold him responsible for any fraudulent scheme the ubiquitous Fox might be running. Similarly, there was evidence from which the jury could infer that Newberry was aware of the dubious value of the commitments before he told plaintiff they were as good as money and knew plaintiff's commitment could not be borrowed against locally before he accepted his commission on plaintiff's finder's fee.
2. With sufficient evidence of fraud by at least one of the defendants, the issue becomes whether there is sufficient evidence of a conspiracy to bind the others. Appellant stresses the lack of evidence that the three came to any kind of agreement to defraud plaintiff. He points out the paucity of personal contact among themselves. However, the law does not require proof that the parties held a sinister council. "To show conspiracy ... it need not appear that the parties met together either formally or informally and entered into any explicit or formal agreement; nor is it essential that it should appear that either by words or writing they formulated their unlawful objects. It is sufficient that two or more persons in any manner whether positively or tacitly come to a mutual understanding that they will accomplish the unlawful design. And anyone, after a conspiracy is formed, who knows of its existence and purposes and joins therein, becomes as much a party thereto ... as if he had been an original member." Woodruff v. Hughes, 2 Ga. App. 361, 365 ( 58 S.E. 551); Cook v. Robinson, 216 Ga. 328, 330 ( 116 S.E.2d 742). "Conspiracy may sometimes be inferred from the nature of the acts done, the relation of the parties, the interests of the alleged conspirators, and other circumstances." Nottingham v. Wrigley, 221 Ga. 386, 388 ( 144 S.E.2d 749); Walden v. State, 121 Ga. App. 142 ( 173 S.E.2d 110).
The inference was authorized here.
3. Defendant contends the court erred in admitting the evidence of other transactions as being prejudicial. The Georgia law is clear on this point. Evidence of similar transactions is admissible to show fraudulent intent or motives. Deckner-Willingham Lumber Co. v. Turner, 171 Ga. 240 ( 155 S.E. 1); Wyatt v. State, 16 Ga. App. 817 ( 81 S.E. 802).
4. All other enumerations are without merit.
Judgment affirmed. Deen and Evans, JJ., concur.