times the rule has been frankly repudiated, as in a recent case in Wisconsin, where it was held that one who purchases an estate in remainder, and obtains it for a small price by concealing from the vendor the fact that the tenant for life is already dead and the estate vested, is guilty of such a fraud as will warrant the rescission of the sale.500 § 67. Same; Concealment Accompanied by Fraud or Falsehood.-Although a purchaser of property is not bound to disclose to the seller facts within his knowledge and unknown to the seller which affect the character or value of the property, unless special circumstances impose this duty upon him, yet if, in addition to such concealment, he practises any fraud upon the vendor to induce him to part with the property at an inadequate price, in the way of any trick, artifice, or misrepresentation, the vendor may have relief. The leading case on this proposition was decided by the Supreme Court of the United States, and was an action by the purchaser of a quantity of tobacco against the sellers to recover possession of it. It was in evidence that, before the sale was agreed on, the buyer was asked by one of the sellers whether there was any news which was calculated to enhance the price or value of it. He kept silence, although he had received news of the signing of the treaty of Ghent, which the sellers had not, and which would materially affect the value of the tobacco. The court below directed a verdict for the plaintiff on the theory that he had not done or suggested anything to mislead or impose upon the sellers or induce them to think that there was no such news. But the Supreme Court held that, while it could not be laid down as a matter of law that the intelligence of extrinsic circumstances, which might influence the price of the commodity, and which was exclusively within the knowledge of the vendee, ought to have been communicated by him to the vendor, yet at the same time, each party must take care not to say or do anything tending to impose upon the other, and that the absolute instruc 66 S. W. 942; Wells v. Houston, 29 Tex. Civ. App. 619, 69 S. W. 183. And see cases cited in next section. 500 Moehlenpah v. Mayhew, 138 Wis. 561, 119 N. W. 826. tion of the judge was erroneous, and the question whether any imposition was practised by the vendee upon the vendors ought to have been submitted to the jury.501 In another illustrative case, it appeared that the complainant owned a part interest in a mine, but lived at a distance from the scene and took no part in its operation or management, his interests being looked after by his agents who were employed in hauling the ore to the mill. The foreman of the mine discovered a rich vein of ore, which enormously increased the value of the property, but at once boarded it up, concealing it from the complainant's agents, to whom he stated that there was no improvement in the condition of the mine. But he disclosed the fact of the strike to one M., an outside party, and kept him informed of the development of the new vein. M. bought out the complainant for a price based on the former history of the mine, but not at all proportioned to its present value. It was held that the fraud was sufficient to warrant the cancellation of the deed in equity, in the hands of M. or in the hands of his grantee with notice.502 In another case, the subject of sale was an estate in remainder. The purchaser knew that the life tenant was dying, but concealed this fact from the remainderman, who knew nothing of it. On being asked by the remainderman how the life tenant and her husband were getting on, he replied that he thought they were "getting along a little smoother than they had been." Thereupon he succeeded in purchasing the estate in remainder for about half its value. It was held that his concealment of the material fact, together with his deceptive and misleading answer to the question, furnished ground for the rescission of the contract of sale.50 It may therefore be said that fraud is committed by a purchaser who not only conceals his knowledge of facts affecting the value of the property but also employs artifice to prevent the owner from acquiring the same information until after he has been able to buy the property at an inad 501 Laidlaw v. Organ, 2 Wheat. 178, 4 L. Ed. 214. 502 Gruber v. Baker, 20 Nev. 453, 23 Pac. 858, 9 L. R. A. 302. 503 Hays v. Meyers, 32 Ky. Law Rep. 832, 107 S. W. 287, 17 L. R. A. (N. S.) 284. equate price,504 or by a purchaser who tells the vendor of facts and conditions which are calculated to depreciate the value of the property, but at the same time omits to disclose other facts within his knowledge which would much increase its value.505 And a very common instance of fraud of this kind is seen in the case where the purchaser has discovered a valuable mine, quarry, or mineral deposit on the land, of which the owner is ignorant, and, not content with merely keeping his knowledge to himself, steps over the line and commits an active fraud by assuring the vendor that the land is worth nothing except for the timber on it, or that it is useless except as pasture or grazing land, or, if he admits anything at all in regard to the mineral deposits, misrepresents their value or extent. In these cases, the courts have always been ready to afford relief to the defrauded vendor.50 504 Bowman v. Bates, 2 Bibb (Ky.) 47, 4 Am. Dec. 677. 505 Manley v. Carl, 20 Ohio Cir. Ct. R. 161. 506 Crompton v. Beedle, 83 Vt. 287, 75 Atl. 331, 30 L. R. A. (N. S.) 748, Ann. Cas. 1912A, 399; Caples v. Steel, 7 Or. 491; Harris v. Tyson, 24 Pa. 347, 64 Am. Dec. 661; Stackpole v. Hancock, 40 Fla. 362, 24 South. 914, 45 L. R. A. 814; Livingston v. Peru Iron Co., 2 Paige (N. Y.) 390. But see Storthz v. Arnold, 74 Ark. 68, 84 S. W. 1036. CHAPTER III FALSE REPRESENTATIONS § 68. False Representations as Ground of Rescission in General. 69. Nature of Misrepresentations Justifying Rescission. 70. Materiality of Representations. 71. 72. Representations as to Matters of Law. Same; Law of Another State. 73. Representations Not Contemporary with Making of Contract. 74. Waiver as to Representations Not Embodied in Contract. 75. Representations Made Ultra Vires. 76. Expressions of Opinion. 77. Tests for Distinguishing Expressions of Opinion from Representations of Fact. 78. False Opinion Fraudulently Asserted. 79. Representations as to Value. 80. Same; Exceptions to Rule. 81. Same; Knowledge or Means of Estimating Value. 82. Same; One Party Possessing Exclusive or Superior Knowl edge. 83. Same; Facts Stated as Basis for Estimate of Value. 84. Same; Statement of Cost or Price on Previous Sale. 85. Puffing, Exaggerated Praise, "Dealers' Talk." 86. 87. 88. Statements as to Future Value, Profit, or Efficiency. 89. Promises and Promissory Representations. 90. Same; Intention as to Performance or Non-Performance. 91. Same; Promises as to Improvement or Use of Real Property. 92. False Representations as to Agency, Authority, or Official Character. 93. Representations by Agents and Other Third Persons. 94. Repeating Information Received from Third Persons. 95. 96. Representations to Third Parties Communicated to Plain tiff. Representations to the General Public. Representations to Commercial Agencies. 98. Representations as to Financial Ability. 97. 99. Representations as to Financial Standing of Third Persons. 100. Falsity of Representations. 101. Ambiguous and Misleading Statements. 102. Knowledge of Falsity of Representations. 103. Same; Falsity in Express or Implied Assertion of Knowl edge. 104. Same; Imputed or Constructive Knowledge of Falsity. 105. Same; Statements Made Recklessly Without Knowledge of Falsity. § 106. Same; Good Faith and Honest Belief in Statements Made. 107. Same; Reasonable Ground to Believe Statements True. Intention to Deceive or Mislead. 108. 109. 110. Effect of Representations in Actually Deceiving Party. 111. Representations as Inducement to Contract. 112. Necessity of Actual Loss or Injury. 113. Duty to Investigate Truth of Representations. 114. Same; Decisions Repudiating or Modifying Rule. 115. Same; Extent of Investigation Necessary. 116. Same; Examination of Public Records. 117. Same; Constructive Notice and Facts Suggesting Inquiry. 118. Circumstances Excusing Failure to Investigate. 119. Effect of Fiduciary Relations Between the Parties. 120. One Party Possessing Special, Expert, or Technical Knowledge. 121. Party Relying on His Own Investigation. 122. Investigation Prevented or Thwarted by Other Party. 123. Degree of Care and Vigilance Required. 124. Rejection of Rule Requiring Ordinary Prudence and Care. 125. Relative Situation of Parties as to Mental and Business Capacity. 126. Statements Palpably False, Incredible, or Impossible. § 68. False Representations as Ground of Rescission in General.-A "representation," within the law of fraud, is anything short of a warranty, which proceeds from the action or conduct of the party charged, and which is sufficient to create upon the mind of another a distinct impression of fact conducive to action.1 And a "misrepresentation" or false representation is that which, if accepted, leads the mind to an apprehension of a condition other and different from that which actually exists. Now the element of obligation whereon a contract can be enforced springs primarily from the unrestrained mutual assent of the contracting parties; and where the consent of either is constrained and involuntary, and induced by fraud or force, the contract may be rescinded or adjudged void. If a party is deceived or misled into believing that the material facts are different from what they really are, or is led to place his belief in the existence of alleged conditions or circumstances which are purely supposititious, and is thereby 1 St. Louis & S. F. R. Co. v. Reed, 37 Okl. 350, 132 Pac. 355. 2 Haigh v. White Way Laundry Co., 164 Iowa, 143, 145 N. W. 473, 50 L. R. A. (N. S.) 1091. 3 Central Bank v. Copeland, 18 Md. 305, 81 Am. Dec. 597. |