intended to assume in writing the bond. This, I think, is sufficient to charge the defendants with liability for loss incurred as a result of assuming the risk, at least in the absence of proof of some independent intervening cause wholly unconnected with the subject of the representations. Any other rule would impose an impossible burden upon the plaintiff in a case of this kind. There are countless factors which enter into every business failure and any number of different things may have played a part in the failure of this large-scale building operation -- lack of intelligent management or of skilled technical direction, basic infirmities in process and method, delays, miscalculations, inefficiency of unskilled personnel and many others. Total lack of free capital would almost certainly be a major factor, but I doubt that it could ever be proved that it was the sole or proximate case or that, given requisite financing, the enterprise would have succeeded. The cause of action here is an intentional wrong and the harm contemplated was to expose the bonding company to the risk of writing a bond for a contractor which had not a dollar of cash capital. The harm eventuated in loss through the failure of the contractor to fulfil its contract. This is the very harm the risk of which was increased by the misrepresentation. See Restatement, Torts, Sec. 915.
The questions raised by the motions of defendants Weinrott and Gannon have been disposed of in the foregoing discussion. As to these defendants, the verdict is supported by ample evidence.
The motion of the defendant George B. Gay for judgment notwithstanding the verdict will be granted, on the ground that the evidence submitted to the jury of his participation in the plan was insufficient to meet the well established requirements for proof of fraud or deceit. The only facts in the case against him, upon which the verdict could have been rendered, were the following:
Early in the course of the negotiations, at a time when they were talking about a bond for only a thirty-house operation, he stated to Smith, in substance, that he was 'handling' Permacrete's capital structure, which had not then been completed, and that 'he would be responsible' for the capital.
Three days after the bonds were delivered, he loaned the defendant Weinrott $ 10,000. This money was deposited by Weinrott to make up the $ 170,000 which the plaintiff required and which it proposed to verify at the bank. Gay denied that he knew the purpose of the loan, which, on its face, was a personal loan to Weinrott, and there is no direct evidence that he did know what Weinrott did with it.
He signed a letter a day after the bonds were delivered, certifying that Permacrete had $ 170,000 of cash capital and surplus. This letter, the Court ruled, could not be considered by the jury as an inducing factor because the plaintiff had already delivered the bond but could be considered as evidence bearing upon the participation by Gay and Gannon in the fraud.
In order to hold Gay liable, two things would have to be shown by clear and convincing evidence, first, that he knew that representations were being made that Permacrete had $ 170,000 of surplus and cash capital, second, that Permacrete did not have and did not intend to have $ 170,000 cash capital and surplus. That he knew the first fact can be assumed from his signing of the letter so certifying. There is no proof that he knew the second. There is so little evidence as to just what his participation in the enterprise was that the jury could not properly have found that he must have known about the way in which the money was obtained by Permacrete in order to make a showing of having met the plaintiff's requirements.
The motion of the defendant Gay for judgment will be granted. The motions of the other defendants will be denied.