defendant, and was allowed to take a verified copy of it, but not to keep the original, which B. represented was obtained from defendant and must be returned to him. M. then conveyed the lands to the plaintiff, giving the deed in blank and the copy of the abstract. It was held, in an action for deceit, that by putting the deed in blank in circulation, and allowing a verified copy of the abstract to accompany it, defendant represented to plaintiff that he believed himself to have been the owner of the land.379

But some of the cases have proposed a limitation upon this doctrine where the representations in question were not addressed to the broad general public, but to a special or limited class of persons. And it is said that where a false prospectus (for example) is addressed to a limited class only, as the persons intended to be influenced by it, then as a rule persons outside that class, with whom the persons issuing the statement have no dealings, but who may have been injured by reliance on such statements independently coming to their knowledge, cannot maintain an action on them for fraud and deceit.380 Thus, it has been held that officers or promoters of a corporation, who make false representations in respect to its property and affairs in a prospectus, to induce persons to buy its treasury stock from the corporation at par, do not thereby become liable in damages to one who buys stock from another stockholder at less than par, though he may do so in reliance on such representations.381 In the case cited it was said: "While the sponsors for false prospectuses that are issued to bring in money to the common treasury are justly made to respond to all persons who take the invited action, yet the law recognizes, no right of action in one who relies without invitation on a statement addressed to a particular class which he stays out of. * * While the defendants' deceit may afford a ground of action in favor of those who were misled into paying their money or prop

379 Baker v. Hallam, 103 Iowa, 43, 72 N, W. 419.

380 Greene v. Mercantile Trust Co., 60 Misc. Rep. 189, 111 N. Y. Supp. 802 (affirmed, 128 App. Div. 914, 112 N. Y. Supp. 1131).

381 Cheney v. Dickinson, 172 Fed. 109, 96 C. C. A. 314, 28 L. R. A. (N. S.) 359.

erty into the treasury for stock sold by the company, the deceit does not run with the stock into the hands of subsequent transferees." But while it may be admitted that this particular decision was correct, still the general current of authority is more in accordance with the theory that, where false representations are addressed to the indiscriminate public, or are intended for general circulation and publicity, the author of them is responsible for the resultant damages, although the injured party did not deal with him directly, but with a third person.382

Agencies.

§ 97. Representations to Commercial Where a person, firm, or corporation makes false representations to a commercial or mercantile agency, concerning his or its assets and liabilities, resources, or financial condition, for the purpose of securing a rating, and a third person legitimately acquires knowledge of such statements. or of the rating based thereon, and relies on the same, and is thereby induced to enter into a contract, make an investment, or sell goods, it is regarded in law as a fraud practised directly upon the person so misled to his injury, and entitles him to rescind the contract or recover the goods sold or to any other remedy appropriate in such a The reason is that a person who gives to a mer

case.

383

382 Bank of Atchison County v. Byers, 139 Mo. 627, 41 S. W. 325; Warfield v. Clark, 118 Iowa, 69, 91 N. W. 833; Davis v. Louisville Trust Co., 181 Fed. 10, 104 C. C. A. 24, 30 L. R. A. (N. S.) 1011. Compare Hoeft v. Kock, 119 Mich. 458, 78 N. W. 556.

383 Davis v. Louisville Trust Co., 181 Fed. 10, 104 C. C. A. 24, 30 L. R. A. (N. S.) 1011; In re Epstein (D. C.) 109 Fed. 874; Fechheimer v. Baum (C. C.) 37 Fed. 167; McKenzie v. Weineman, 116 Ala. 194, 22 South. 508; Triplett v. Rugby Distilling Co., 66 Ark. 219, 49 S. W. 975; Soper Lumber Co. v. Halsted & Harmount Co., 73 Conn. 547, 48 Atl. 425; George D. Mashburn & Co. v. Dannenberg, 117 Ga. 567, 44 S. E. 97; P. Cox Shoe Mfg. Co. v. Adams, 105 Iowa, 402, 75 N. W. 316; Tennent Shoe Co. v. Stovall, 25 Ky. Law Rep. 1615, 78 S. W. 417; Courtney v. William Knabe & Co. Mfg. Co., 97 Md. 499, 55 Atl. 614, 99 Am. St. Rep. 456; Frisbee v. Chickering, 115 Mich. 185, 73 N. W. 112; Genesee Sav. Bank v. Michigan Barge Co., 52 Mich. 164, 17 N. W. 790; Stevens v. Ludlum, 46 Minn. 160, 48 N. W. 771, 13 L. R. A. 270, 24 Am. St. Rep. 210; Charles P. Kellogg Co. v. Holm, 82 Minn. 416, 85 N. W. 159; Bradley v. Seaboard Nat. Bank, 167 N. Y. 427, 60 N. E. 771; Eaton, Cole & Burnham Co. v. Avery, 83 N. Y. 31, 38 Am. Rep. 389; Bliss v. Sickles, 142 N. Y. 647, 36 N. E. 1064; Converse v. Sickles, 161 N. Y. 666, 57 N. E. 1107;

cantile agency information as to his financial condition knows that such details are gathered by the agency for the sole benefit of its patrons or subscribers, not for any purposes of its own, and therefore he must be held to have authorized the agency to communicate his statements to its customers, and must have intended that they should be so communicated and that they should be relied on by those to whom they are made known.884 Hence in such a case, where rescission is sought, it is entirely immaterial that the false representations were not made directly to the person injured, neither is it necessary that the person making the false representations should have had the plaintiff in mind when he made them or entertained a fraudulent purpose as against him personally, nor even that he should have known the injured party to be a subscriber to the agency or likely to come into possession of the information furnished to it.385 But while these rules undoubtedly apply in cases where the defrauded party is a patron or subscriber of the commercial agency, and therefore entitled to call upon it for information, the case is not quite so clear when he obtains his information. at second or third hand, that is, not directly from the agency, but more or less immediately from one of its customers. However, there is an important decision of a federal court which carries the doctrine even as far as this. It appeared that the plaintiff was negotiating for the purchase of some of the treasury stock of a corporation. The corporation, through its president, had made a

Arnold v. Richardson, 74 App. Div. 581, 77 N. Y. Supp. 763; Ralph v. Fon Dersmith, 10 Pa. Super. Ct. 481; Ernst v. Cohn (Tenn. Ch. App.) 62 S. W. 186; Aultman v. Carr, 16 Tex. Civ. App. 430, 42 S. W. 614; Schwartz v. Mittenthal (Tex. Civ. App.) 50 S. W. 182; Katzenstein v. Reid, 41 Tex. Civ. App. 106, 91 S. W. 360. Compare Dorman v. Weakley (Tenn. Ch. App.) 39 S. W. 890.

884 Soper Lumber Co. v. Halsted & Harmount Co., 73 Conn. 547, 48 Atl. 425; P. Cox Shoe Mfg. Co. v. Adams, 105 Iowa, 402, 75 N. W. 316; Converse v. Sickles, 161 N. Y. 666, 57 N. E. 1107.

385 Tindle v. Birkett, 171 N. Y. 520, 64 N. E. 210, 89 Am. St. Rep. 822; Mills v. Brill, 105 App. Div. 389, 94 N. Y. Supp. 163; George D. Mashburn & Co. v. Dannenberg, 117 Ga. 567, 44 S. E. 97; Pier Bros. v. Doheny, 93 App. Div. 1, 86 N. Y. Supp. 971. Contra, American Lumber & Mfg. Co. v. Taylor, 137 Fed. 321, 70 C. C. A. 21.

statement of its financial condition to Dun & Company, which was false in material particulars. The plaintiff obtained knowledge of the particulars of this statement, and relied on it, and purchased and paid for the stock. But he did not obtain his information directly from Dun & Company, but through a friend from whom he expected to borrow part of the money to pay for the stock. This friend was not a subscriber to the agency in question, but obtained its report through a corporation in which he had an interest and which was one of its patrons. It was held that the plaintiff was entitled to rescind his contract for the purchase of the stock and recover his money.386

But in any case, to entitle the injured party to rescind, the evidence must connect the defendant with the making of the false report on which reliance was placed,887 and if a commercial agency gives a merchant a rating which is false or too high, but which is not based on statements made by the merchant, a sale made to him on the strength of that rating cannot be rescinded unless he referred the vendor to it with approval.388 And where a merchant, called on by a reporter for a mercantile agency, makes a statement of his affairs which is true, or which is not shown to have been false, he is not responsible for the conclusions drawn by the agency from the facts which he states, and though the agency may give him a higher rating than is deserved, or make prognostications as to his business success which are too favorable, this is not sufficient to charge him with any fraud.38

Next, it is necessary that the false or misleading statement should have taken the form of an assertion of fact. Thus, the mere statement by a merchant to a commercial agency of his opinion that his stock was worth a certain sum, which was communicated to a wholesaler by the

386 Davis v. Louisville Trust Co., 181 Fed. 10, 104 C. C. A. 24, 30 L. R. A. (N. S.) 1011. But compare Irish-American Bank v. Ludlum, 49 Minn. 344, 51 N. W. 1046.

887 Cream City Hat Co. v. Tolinger, 62 Neb. 98, 86 N. W. 921. 388 P. Cox Shoe Mfg. Co. v. Adams, 105 Iowa, 402, 75 N. W. 316. 389 Ralph v. Fon Dersmith, 3 Pa. Super. Ct. 618; Bennett v. Apsley Rubber Co., 54 Neb. 553, 74 N. W. 821.

agency as an opinion only, with a statement by the agency that it regarded the valuation as too high, even if relied on by the wholesaler in selling goods to the merchant on credit, does not constitute a fraudulent representation authorizing rescission of the sale.390 Again, it is said that the statements made must have been willfully false, and that no fraud is committed if the person states his financial condition to the mercantile agency fairly and correctly as he himself understands it at the time, though it may prove to have been incorrect,391 or if he makes even an intentionally false statement as to the extent of his liabilities, but the same is made correct, by the reduction of his debts, before credit is extended to him on the faith of it.392 But there is a contrary line of authorities, holding that, in such matters, a person in business is bound to know his financial status, and cannot plead ignorance of his real condition, or an honest belief that items omitted from his list of liabilities were not valid charges or were contingent claims.393

It is the duty of a merchant who has furnished statements to commercial agencies of his financial standing for the purpose of gaining credit, to give them notice of any material change for the worse, to the end that persons with whom he has business dealings may not be misled as to the extent of credit they may safely give him,394 and the failure to do so will be presumptive evidence (but not conclusive) of an intent to obtain goods without paying for them.395 At the same time, it must be remarked that the seller is not exempt from a certain

390 Cohn v. Broadhead, 51 Neb. 834, 71 N. W. 747. That statements of opinion are generally not equivalent to assertions of fact, see, supra, § 76. For the conditions under which assertions of value are regarded as merely expressions of opinion, see, supra, § 79.

391 In re Roalswick (D. C.) 110 Fed. 639; Kirschbaum v. Jasspon, 123 Mich. 314, 82 N. W. 69; Jaffray v. Moss, 41 La. Ann. 548, 6 South. 520.

392 Hamburger v. Lusky (Tenn. Ch. App.) 56 S. W. 24.

393 Tennent Shoe Co. v. Stovall, 25 Ky. Law Rep. 1615, 78 S. W. 417; Arnold v. Richardson, 74 App. Div. 581, 77 N. Y. Supp. 763; Bradley v. Seaboard Nat. Bank, 167 N. Y. 427, 60 N. E. 771.

394 Mooney v. Davis, 75 Mich. 188, 42 N. W. 802, 13 Am. St. Rep.

395 Boaz v. Coulter Mfg. Co. (Tex. Civ. App.) 40 S. W. 866.