where the purchaser of property, to induce the vendor to take bank stock in payment for it, knowingly misrepresents the value of the stock, and sends the vendor to the president of the bank to inquire as to its value, expecting that officer to give him false information, and allows the contract to be executed with knowledge that the vendor is acting on such false information, it is a fraud authorizing the rescission of the contract.365

Thus, a

But on the other hand, one who makes a false representation to another, not intending or anticipating that it shall be communicated to a third person, is not liable to such third person, though the latter does come into possession of such false statement and relies on it to his damage. private letter written by defendant to his agent cannot form the basis for an action of fraud or deceit merely because the agent communicated the contents to a third person, in the absence of anything to show that defendant meant him to do so.3 367 And a cause of action for deceit based on misrepresentations made by the owner of property to persons to whom he gave an exclusive agency to sell the property, in the form of an option to purchase, does not pass to a purchaser of the option to whom the misrepresentations were not made.368 So a judgment creditor of an insolvent corporation, suing incorporators for fraud, cannot predicate his action on statements contained in the articles of association, as they were not made to him to procure credit, but to the state officials to procure a charter.369 And the fact that a state insurance commissioner was induced to issue a license to do business to an insurance company by a certificate made by a bank, falsely stating that the company had the full amount of its capital stock on deposit therein, does not give a right of action against the bank for fraud and deceit

365 Graham v. Moffett, 119 Mich. 303, 78 N. W. 132, 75 Am. St. Rep. 393.

366 Western Union Tel. Co. v. Schriver, 141 Fed. 538, 72 C. C. A. 596, 4 L. R. A. (N. S.) 678.

367 People v. Green, 22 Cal. App. 45, 133 Pac. 334.

368 Puffer v. Welch, 144 Wis. 506, 129 N. W. 525, Ann. Cas. 1912A, 1120.

309 McKee v. Rudd, 222 Mo. 344, 121 S. W. 312, 133 Am. St. Rep.

to one who purchased stock of the company solely in reliance on the fact that it had been licensed to do business, or even in reliance on such certificate as a part of the public records, but the plaintiff in such case must show some direct connection between the bank and the communication of the statement, either to himself personally or to the general public. It is, however, sufficient to establish such a connection, and to give a right of recovery, that the bank, knowing that plaintiff contemplated the purchase of stock, referred him to such certificate for information, and that he acted on the information obtained therefrom.370 But it seems that, in a suit brought to avoid a contract for fraud, testimony of representations made by the defendant to other persons can be used to prove that he had formed a design to commit a fraud in the manner shown if an opportunity should offer.871

§ 96. Representations to the General Public.-Where a person knowingly makes false representations concerning a material matter, with the expectation that they will come to the knowledge of various persons as yet unidentified, and with the intention that some one or more of such persons shall be influenced by such representations to enter into a contract or incur an obligation in reliance thereon, he cannot escape liability to a person who is so influenced to change his position to his detriment by the plea that the representations were not made personally to such party; for it is sufficient if they are made to the public at large for the purpose of entrapping any person who may acquire knowledge of them and act upon them.372 The most familiar illustration of this rule is found in the case of a prospectus issued by the promoters of a corporation in pro

370 Hindman v. First Nat. Bank, 112 Fed. 931, 50 C. C. A. 623, 57 L. R. A. 108.

371 Bradley v. Chase, 22 Me. 511.

372 Davis v. Louisville Trust Co., 181 Fed. 10, 104 C. C. A. 24, 30 L. R. A. (N. S.) 1011; Greene v. Mercantile Trust Co., 60 Misc. Rep. 189, 111 N. Y. Supp. 802 (affirmed, 128 App. Div. 914, 112 N. Y. Supp. 1131); Keeler v. Seaman, 47 Misc. Rep. 292, 95 N. Y. Supp. 920; Fisher v. Radford, 153 Mich. 385, 117 N. W. 66; Wells v. Western Union Tel. Co., 144 Iowa, 605, 123 N. W. 371, 24 L. R. A. (N. S.) 1045, 138 Am. St. Rep. 317.

cess of formation, or by the officers of an existing corporation, describing its financial condition, resources, property, and other material matters, and inviting the general public to subscribe for shares of its stock. In such cases, allowance must be made for pardonable exaggerations, and also it must be remembered that statements as to what the corporation expects or hopes to do in the future are merely expressions of opinion. But as to present and existing facts, if the paper contains false, misleading, or deceptive statements, it is a fraud, justifying rescission, as to any person who is induced by it to give in his subscription, and it is not material at all that the particular person who complains was not in the minds of the authors of the prospectus, nor in any way singled out as a victim, the invitation to the public being equivalent in law to a particular invitation to any person who acts on it.373 In one of the English cases it was said: "Reports of joint-stock companies, though addressed to the shareholders, are generally meant for the information of all who are likely to have dealings with the company, and I have no doubt that the directors in the present case knew that this particular report would, a few hours after its publication, be in the hands of all sharebrokers in Liverpool, and that it would be acted on by those who had or wished to have dealings with the bank. But, moreover, we have here positive evidence that it was to be bought by any person who wished to become a purchaser of shares, and it thus came into the hands of the plaintiffs, and the plaintiffs by the perusal of it were induced to buy shares in the bank. I have, therefore, no doubt whatever that the allegation in the declaration that that representation was made to the plaintiffs is most completely established." 374

373 Manning v. Berdan (C. C.) 135 Fed. 159; Bosher v. Richmond & H. Land Co., 89 Va. 455, 16 S. E. 360, 37 Am. St. Rep. 879; Oakes v. Turquand, L. R. 2 H. L. 325; Ross v. Estates Investment Co., L. R. 3 Ch. App. 682; Reese River Silver Min. Co. v. Smith, L. R. 4 H. L. 64; Central Ry. Co. of Venezuela v. Kisch, L. R. 2 H. L. 99; Scott v. Dixon, 29 Law J. Exch. 62, note; Ligon v. Minton (Ky.). 125 S. W. 304.

374 Scott v. Dixon, 29 Law J. Exch. 62, note.

A proper ground for the application of this rule is also found in the case of reports made by corporations, in compliance with the law, to various state officers. Thus, in a case in Iowa, the action was based upon a false statement of the financial condition of an insurance company. The statutes of that state required such companies to file such statements with the state auditor, setting out certain prescribed data, and that the auditor should arrange the information contained in the statement and report the result to the governor of the state, and also that these reports should be printed and distributed as part of the annual report of the auditor, and further, that the companies themselves should annually publish a certificate showing their aggregate amount of assets and liabilities. The plaintiff bought stock in an insurance company from a third person, who was a stockholder, on the faith of reports of this character, and afterwards brought an action of deceit against the secretary of the company, on the ground that the reports so made and published were false and fraudulent. It was held that, since the statutes required wide publicity to be given to the statements so filed, the latter were to be regarded as intended for the protection of individual members of the general public, and that any person purchasing the stock was entitled to rely on them, and therefore the plaintiff's action would lie. Said the court: "Insurance companies know that their reports are thus made public, and it is not going too far to say that they make them as favorable to their interests as the facts will warrant, for the express purpose of inducing public confidence, and by so doing to increase the volume of their business. It is said, however, that in the purchase of stock from a third person the plaintiff had no right to rely upon the representations made in the statement sworn to and filed by the defendant. If the defendant in fact falsely reported the financial condition of his company for the purpose of deceiving the public in relation to its responsibility as an insurer, it seems clear to us that we should not say as a matter of law that he only intended to wrong that particular class, and that those dealing in its stock were not his intended victims; for he knew that stock in such companies

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was often bought and sold, and that reliance might be placed upon his sworn statement by those dealing therein." 875 So in Massachusetts, where the law requires corporations to file an annual certificate, signed and sworn to by certain officers and directors, and setting forth the amount of their assets and liabilities, it was held that a plaintiff who had sold goods to a corporation on the faith of such a return, which was false, was entitled to rescind the sale and recover the goods in replevin.376 On the same principle, directors of a national bank who, in simulated performance of the duties prescribed by law, knowingly make and publish false statements and reports of the financial condition of the bank, with intent to deceive, are liable in an action of deceit for the damages suffered by a person who has relied thereon, though not made directly to him.377 Again, if a person offers property for sale by a published advertisement, he is considered as addressing it directly to any person who may be interested, and is responsible for its correctness to any one who buys in reliance on it. Thus, one who buys a lot relying on a newspaper advertisement authorized by the owner of the property, which falsely represented its frontage to be 54 feet greater than it was, cannot be compelled to perform his contract.378 In another case, the defendant, who was the owner of lands in another state, granted them to one B., who in turn granted them to M., but instead of making out a new deed, B. returned his deed to the defendant, who erased B.'s name as grantee, and then sent the deed to M. with the place for the grantee's name left blank. During the negotiations, M. was shown an abstract of title to the lands, showing the title to be in the

875 Warfield v. Clark, 118 Iowa, 69, 91 N. W. 833. In this case it was further held to be immaterial that the statement of the company had not yet been published and distributed, as required by law, at the time of the purchase of stock, where it had been filed in the auditor's office, and was there examined by the purchaser.

876 Steel v. Webster, 188 Mass. 478, 74 N. E. 686.

877 Stuart v. Bank of Staplehurst, 57 Neb. 569, 78 N. W. 298; Gerner v. Mosher, 58 Neb. 135, 78 N. W. 384, 46 L. R. A. 244; Macdonald v. De Fremery, 168 Cal. 189, 142 Pac. 73.

378 McIntyre v. Harrington, 43 Misc. Rep. 94, 87 N. Y. Supp.