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Brink's, Inc. v. American District Telegraph Co.

July 17, 1969


Kiley and Kerner, Circuit Judges, and Holder, District Judge.*fn*

Author: Kiley

KILEY, Circuit Judge.

A jury returned a verdict for defendant ADT in plaintiff Brink's' diversity suit seeking $3,500,000 compensatory and punitive damages*fn1 for fraud and deceit. Judgment was entered on the verdict. Brink's has appealed claiming error in the district court's instructing and re-instructing the jury.*fn2 We affirm.

For many years ADT has been a well-known supplier of electrical protection devices against burglars. Brink's has been similarly recognized as a protector and transporter of money and other valuables. From 1962 to 1966 Brink's also operated Brink's Signal Company, a business similar to ADT. It has also used ADT's service for many years in the United States and Canada.*fn3

At its office in Syracuse, New York, Brink's used ADT's central station system to protect its vault. In this system detection devices sensitive to sound or vibration are located inside the vault and are connected by a telephone wire to an ADT central station some distance away. When a detection device is activated, it transmits an alarm signal over the telephone wire to the central station where a watchman notifies police or sends an ADT patrol to the protected area. In addition, the station watchman periodically tests the entire system by sounding a horn in the vault activating the sensing device, which in turn sounds an alarm in the central station. This periodic testing device, which succeeded in frustrating an attempted burglary in Quebec City, Canada, was in use at Syracuse to assure proper operation of the system. In October, 1965, by use of an improved electronic device, burglars overcame the testing device and circumvented the Syracuse system so that no alarm signal was transmitted to the station. The burglars then, in four hours, using the same equipment used in Quebec City, fired 20mm armor-piercing shells through the 18" reinforced concrete wall of Brink's' vault, entered and escaped with cash and checks totaling $250,000.

This suit followed, alleging ADT's deceit and misrepresentation in a statement relied on by Brink's to its damage, that the system installed at Syracuse was "invulnerable." Damages sought were the actual loss at Syracuse and Brink's' subsequent expense in providing additional protection to supplement ADT's central station.

In instructing the jury the court stated the substance of the issues, among others made by the pleadings: whether ADT had misrepresented that the device was invulnerable, and if so, whether as a reasonable and prudent man Brink's reasonably relied upon any alleged false representation. The court then gave Instruction #1,*fn4 challenged here by Brink's as reversibly erroneous. This instruction states the elements that must be proved by Brink's for recovery. Proposition 5 of the instruction, the prudent man test, was given over Brink's' objection and is challenged here. Brink's contends that that part of the instruction implies that if Brink's was negligent it cannot recover and that the implication violates Illinois law which governs here.

The authoritative rule is stated in Schmidt v. Landfield, 20 Ill.2d 89, 169 N.E.2d 229 (1960), that a defendant cannot interpose a defense of negligence on the part of the person to whom the false statement was made, but that the party seeking relief has to establish that he was justified in his reliance, especially where he had an opportunity to ascertain the truth and did not do so. This court in Harry Alter Co. v. Chrysler Corp., 285 F.2d 903 (7th Cir. 1961), does not state a different rule. In Alter this court, applying Illinois law, stated that

It was incumbent upon plaintiff to prove by a preponderance of the evidence that a false representation was made as to some material fact, that the defendant know (sic) of the falsity and intended that plaintiff should rely upon the representation, that plaintiff, in ignorance of the falsity thereof, did rely upon the false representation, and that damage to the plaintiff resulted from its reliance thereon. Id. at 906. (Emphasis added.)

To prove ignorance of a false statement, a plaintiff must objectively show that he acted as a man of ordinary prudence in relying upon the statement's credibility.

We have read the Illinois cases cited by Brink's and ADT on the validity of the challenged instruction here. They vary in expression, but in substance state the same governing rule: Roda v. Berko, 401 Ill. 335, 340, 81 N.E.2d 912, 914 (1948) ("must reasonably believe it to be true"); Pustelniak v. Vilimas, 352 Ill. 270, 276, 185 N.E. 611, 614 (1933) ("or [the absence] of any facts which should arouse doubt or suspicion," (emphasis added) in which events the person was not bound to make inquiries for himself); Endsley v. Johns, 120 Ill. 469, 480, 12 N.E. 247, 251 (1887) ("without knowledge of the falsehood, or the present opportunity or ability of verification, and under circumstances justifying belief * * *."); Schwabacker v. Riddle, 99 Ill. 343, 346 (1881) ("ordinary prudence"); Broberg v. Mann, 66 Ill.App.2d 134, 213 N.E.2d 89 (1965) (relied on with the right to do so); Tate v. Jackson, 22 Ill.App.2d 471, 161 N.E.2d 156 (1959) (citing Endsley).

In Citizens Savings and Loan Ass'n v. Fischer, 67 Ill.App.2d 315, 214 N.E.2d 612 (1966), the court did state that a party cannot escape the legal consequences of his fraudulent conduct by saying that the fraud might have been discovered if the party whom he deceived exercised reasonable care. But the court also stated " in the absence of circumstances putting a reasonable person on inquiry, a person is justified in relying on a misrepresentation of a material fact without making further inquiry." (Emphasis added.) We hold there is no merit in the contention that Instruction #1 is erroneous.

Brink's also claims error in the giving of Instruction #6*fn5 which told the jury in effect that fraud was never presumed, but must be proved by Brink's, that all dealings were presumptively free of intent to defraud and that as between two equally capable constructions of a transaction the law presumes that the transaction is honest and not dishonest. Brink's claims the instruction misstated Illinois law, contrary to the decisions of Endsley v. Johns, 120 Ill. 469, 12 N.E. 247 (1887), and John V. Farwell Co. v. Nathanson, 99 Ill.App. 185 (1900).

Neither of those cases supports Brink's' claim. In Farwell it is not clear that the "fifth" instruction was condemned because of a statement that the law "always * * * preferred" an honest to a dishonest motive where either was justified. In Endsley the "sixth" instruction discussed was not similar to Instruction #6 before us. We think that the instruction challenged here ...

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