duty of care and prudence. Business conditions change rapidly, and he is not justified in relying implicitly on an old or stale report,396 and it is a question for the court whether the report in question was sufficiently near the time of the transaction in suit to be admissible in evidence.397 Further, to entitle a plaintiff to rescission or other relief, he must show that he entered into the contract in question in reliance on the report made to or by the commercial agency,398 and not upon independent or outside information or upon facts otherwise coming to his knowledge, or upon his own judgment as to the financial condition of the other party." 399 And again, a note of warning may be sounded by the comments made by the agency in giving a report on a person's credit or finances, or by suspicious or surprising items in the statement, or even by outside facts coming to the party's knowledge. In such cases, he is put upon inquiry and is chargeable with knowledge of such facts as an inquiry would have disclosed.400 But it is said that one relying upon the rating given by a commercial agency is not bound to examine the detailed statement made to the agency by the person rated, to protect himself against fraudulent misrepresentations therein. 401 But on the other hand, it is ruled in Nebraska that a sale of goods made on the faith of the entire report of a commercial agency as to the financial standing of the proposed buyer, and not particularly in reliance on any single statement made by him to the agency, cannot be rescinded because such single statement was false. 102

896 Bentley v. Woolson Spice Co., 1 Neb. (Unof.) 558, 95 N. W. 803. 397 Nicholls v. McShane, 16 Colo. App. 165, 64 Pac. 375.

398 Beacon Falls Rubber Shoe Co. v. Pratte, 190 Mass. 72, 76 N. E. 285; Ernst v. Cohn (Tenn. Ch. App.) 62 S. W. 186.

399 Richardson-Roberts-Byrne Dry-Goods Co. v. Goodkind, 22 Mont. 462, 56 Pac. 1079.

400 In re Epstein (D. C.) 109 Fed. 874; Beacon Falls Rubber Shoe Co. v. Pratte, 190 Mass. 72, 76 N. E. 285.

401 Aultman, Miller & Co. v. Carr, 16 Tex. Civ. App. 430, 42 S. W. 614.

402 Poska v. Stearns, 56 Neb. 541, 76 N. W. 1078, 42 L. R. A. 427, 71 Am. St. Rep. 688; Berkson v. Heldman, 58 Neb. 595, 79 N. W.

§ 98. Representations as to Financial Ability.-Misrepresentations as to his financial ability or resources, made by one of the parties to any contract, for the purpose of persuading or reassuring the other as to his ability to perform his part of it or discharge the pecuniary obligations which it imposes, may constitute such fraud as will justify rescission. Thus, for example, a sale of goods on credit may be rescinded and the goods reclaimed, when the buyer knowingly made false representations in regard to his solvency, the amount of his property and debts, or other details of his financial condition, for the purpose of obtaining credit, and the seller was thereby induced to make the sale.403 And this rule applies irrespective of the buyer's intention with respect to paying for the goods, that is, it is not necessary for the defrauded vendor to show that the purchaser did not mean to pay for the property, and even though he actually intended to pay, it is no defense against a charge of fraud founded on material false representations of this character.404 For the same

408 In re Marengo County Mercantile Co. (D. C.) 199 Fed. 474; McKenzie v. Weineman, 116 Ala. 194, 22 South. 508; Bell v. Kaufman, 9 Colo. App. 259, 47 Pac. 1035; Freeman v. Topkis, 1 Marv. (Del.) 174, 40 Atl. 948; Hughes v. Winship Mach. Co., 78 Ga. 793, 4 S. E. 6; P. Cox Shoe Mfg. Co. v. Adams, 105 Iowa, 402, 75 N. W. 316; Buffington v. Gerrish, 15 Mass. 156, 8 Am. Dec. 97; Wiggin v. Day, 9 Gray (Mass.) 97; Clark v. William Munroe Co., 127 Mich. 300, 86 N. W. 816; Krolik v. Lang (Mich.) 153 N. W. 686; Wertheimer-Swarts Shoe Co. v. Exchange Bank of Springfield, 56 Mo. App. 662; Burnham v. Jacobs, 66 Mo. App. 628; Omaha Feed Co. v. Rushforth, 75 Neb. 340, 106 N. W. 25; First Nat. Bank v. McKinney, 47 Neb. 149, 66 N. W. 280; Sheffield v. Mitchell, 31 App. Div. 266, 52 N. Y. Supp. 925; Richardson v. Vick, 125 Tenn. 532, 145 S. W. 174; Wertheimer-Swartz Shoe Co. v. Faris (Tenn. Ch. App.) 46 S. W. 336; B. F. Avery & Sons v. Dickson (Tex. Civ. App.) 49 S. W. 662.

404 Bugg v. Wertheimer-Schwartz Shoe Co., 64 Ark. 12, 40 S. W. 134; Stephenson v. Weathersby, 65 Ark. 631, 45 S. W. 987; Morris v. Posner, 111 Iowa, 335, 82 N. W. 755; Moore v. Hinsdale, 77 Mo. App. 217; Kirschbaum v. Jasspon, 123 Mich. 314, 82 N. W. 69; Richardson-Roberts-Byrne Dry-Goods Co. v. Goodkind, 22 Mont. 462, 56 Pac. 1079. But the fact that a buyer of 100 bales of cotton falsely represented himself to be worth a million dollars does not justify the seller in rescinding the contract of sale, unless the buyer is unable to make the purchase at the proper time. Baker v. Lehman, Weil & Co., 186 Ala. 493, 65 South. 321.

BLACK RESC.-17

reason, one who is induced to subscribe for stock in a corporation, or to accept its stock in exchange for property, by the false and fraudulent representations of its officers concerning its financial condition, resources, indebtedness, or property, will be entitled to rescission;405 and the same relief may be accorded to one who sells his stock in a corporation for less than its value, to one who is engaged in the management of the company, being induced to do so by the latter's fraudulent representations as to the financial condition of the corporation.06 The same rule applies to many other classes of transactions, as, for instance, to a sale and conveyance of land effected by means of the buyer's false statements concerning his financial resources, 407 to a lease obtained by the tenant by similar means and which the lessor would not have granted if he had known the real condition of the lessee,* to an exchange of property for an interest in a partnership represented as being solvent and prosperous, but in reality insolvent,409 and to an indorsement of a note, procured by false representations as to the financial ability of the maker.410

408

Misrepresentations of this kind may be made by the direct and positive assertion of financial resources, as, where the party asserts that a certain man of known standing is his partner and has contributed a given amount of capital, that he is amply able to pay a certain judgment against him, whereby he induces another to become sure

411

405 Newbegin v. Newton Nat. Bank, 66 Fed. 701, 14 C. C. A. 71; Southern Ins. Co. v. Milligan, 154 Ky. 216, 157 S. W. 37; McElwee v. Chandler, 198 Pa. 575, 48 Atl. 475; Iler v. Jennings, 87 S. C. 87, 68 S. E. 1041; Robinson v. Dickey, 14 Tex. Civ. App. 70, 36 S. W. 499; Simons v. Cissna, 52 Wash. 115, 100 Pac. 200; McClellan v. Scott, 24 Wis. 81. See Gains v. Massey, 190 Mo. App. 199, 176 S. W. 427.

406 Hume v. Steele (Tex. Civ. App.) 59 S. W. 812.

407 Franklin v. Walker, 171 Ill. 405, 49 N. E. 556; Hinchey v. Starrett, 91 Kan. 181, 137 Pac. 81.

408 Kelty v. McPeake, 143 Iowa, 567, 121 N. W. 529.

409 Brown v. Norman, 65 Miss. 369, 4 South. 293, 7 Am. St. Rep. 663.

410 Hubbert v. State (Tex. Cr. App.) 147 S. W. 267.

411 Standard Horseshoe Co. v. O'Brien, 91 Md. 751, 46 Atl. 346.

414

ty on an appeal bond,12 or where a corporation makes false statements in its annual statement of its financial condition.413 And so, where a vendee in negotiating a purchase of goods, makes designedly false answers to questions put to him by the vendor concerning his means and what he had bought or was intending to buy from others, and thereby obtains credit, the vendor may rescind."14 But concealment may be a fraudulent representation, as well as a positive statement. Hence a fraud of this kind is perpetrated when one fraudulently conceals or omits to mention specific debts which he owes,15 at least if they are large enough to impair his solvency.16 And a corporation to which partners convey property, it agreeing as part of the consideration to pay all their indebtedness, is entitled to relief against them for damages sustained by it through their misrepresentation as to the amount of the indebtedness.417

To warrant rescission on the ground of misrepresentations as to financial ability, it is necessary that they should have been relied on and that they should have constituted the inducement to make the sale or enter into the contract,418 and also that they should have been specific and definite, not loose or vague general assertions.419 Thus, for instance, a statement of the buyer that the seller may draw on him for the amount which the latter has to pay in purchasing the goods, and that, as soon as the buyer has received them, he will pay the balance, is not a representation that the buyer is solvent.420 And also it must be shown

412 Dickinson v. Atkins, 100 Ill. App. 401.

413 Hamilton-Brown Shoe Co. v. Milliken, 62 Neb. 116, 86 N. W. 913.

414 Huthmacher v. Lowman, 66 Ill. App. 448.

415 William Openhym & Sons v. Blake, 157 Fed. 536, 87 C. C. A. 122; Parlin & Orendorff Co. v. Glover,'45 Tex. Civ. App. 93, 99 S. W. 592; Ellet-Kendall Shoe Co. v. Martin, 222 Fed. 851, 138 C. C. A. 277.

416 Noble v. Worthy, 1 Ind. T. 458, 45 S. W. 137. 417 Forbes v. Thorpe, 209 Mass. 570, 95 N. E. 955.

418 Roscoe v. Sawyer, 71 Vt. 367, 45 Atl. 218.

419 Fulton v. Gibian, 98 Ga. 224, 25 S. E. 431; Slayden-Kirksey Woolen Mills v. Weber, 46 Tex. Civ. App. 433, 102 S. W. 471.

420 Skinner v. Michigan Hoop Co., 119 Mich. 467, 78 N. W. 547, 75 Am. St. Rep. 413.

that the representations were false, not technically so, but substantially so, and to such an extent as to prejudice. or injure the other party.21 But these conditions being met, the responsibility of the person making the representations is the same whether he made them carelessly or with a fraudulent purpose, whether he knew them to be false or believed them to be true; for every person is presumed to know his own financial condition, at least to the extent of a close approximation, and is bound to state it truthfully if he states it at all, and one dealing with him is entitled to rely on his representations.+22

But it is necessary to distinguish carefully between a positive assertion of fact and the expression of a opinion; and a statement by a person as to his own financial condition may be the one or the other, according to the circumstances. "Such a representation may be intended as a willfully false statement of a fact, and may be understood as a statement of fact. Or it may be intended as the expression of the opinion or estimate which the owner has of the value of his property, and may be so understood. Suppose that a man who owns property worth $1,000, for the purpose of procuring credit, represents that he has property worth $100,000. It would be self-evident that he meant to misrepresent facts, and such misrepresentation would be fraud. But if the same man should represent that he had property worth $1,500, it might well be regarded as an expression of his judgment or estimate of value, and therefore not an actionable fraud. In such cases it is for the jury to determine." 423 Hence, where a statement by a purchaser of his pecuniary standing is not so grossly excessive as to imply a fraudulent intent, and no such intent is directly proved, the estimate is re

421 Blackman v. Wright, 96 Iowa, 541, 65 N. W. 843; Standard Horseshoe Co. v. O'Brien, 88 Md. 335, 41 Atl. 898.

422 George D. Mashburn & Co. v. Dannenberg Co., 117 Ga. 567, 44 S. E. 97; Fitchard v. Doheny, 93 App. Div. 9, 86 N. Y. Supp. 964; Katzenstein v. Reid, 41 Tex. Civ. App. 106, 91 S. W. 360: Gallipolis Furniture Co. v. Symmes, 10 O. C. D. 514, 10 Ohio Cir. Ct. R. 659; Kelty v. McPeake, 143 Iowa, 567, 121 N. W. 529.

423 Morse v. Shaw, 124 Mass. 59. And see Phillips v. Hebden, 28 R. I. 1, 65 Atl. 266; Syracuse Knitting Co. v. Blanchard, 69 N. H. 447, 43 Atl. 637.