false statement, put forward in a positive manner but without any sufficient ground for believing it to be true, may be said to have been made recklessly.514 And several cases rule broadly that one is liable for a false representation, on which another relies to his prejudice, whether or not he knew of its falsity, where he had full opportunity to know that it was not true.515 Thus, the fact that the president of a bank had excellent opportunities to know the truth authorizes a finding that a false statement of the condition of the bank, published by him, was "made in reckless disregard of its truth or falsity." 16

§ 106. Same; Good Faith and Honest Belief in Statements Made.-An action at law for fraud or deceit cannot be maintained unless a guilty knowledge, actual or constructive, is established, either by showing that the representation was false within the knowledge of the person making it, or that he made it as a positive assertion calculated to convey the impression that he had actual knowledge of its truth when he was conscious that he had no such knowledge, or that the statement was made recklessly and without knowing or caring whether it were true or false. For fraud implies the doing of a wrong willfully; and hence an innocent misrepresentation made through mistake without knowledge of its falsity, or which is honestly believed to be true, and made with no intention to deceive, is not actionable fraud.517 "A person who has rea

514 Devers v. Sollenberger, 25 Pa. Super. Ct. 64.

515 Hindman v. First Nat. Bank, 112 Fed. 931, 50 C. C. A. 623, 57 L. R. A. 108; Scholfield Gear & Pulley Co. v. Scholfield, 71 Conn. 1, 40 Atl. 1046; Wright v. United States Mortgage Co. (Tex. Civ. App.) 42 S. W. 789; Kerr v. Shurtleff, 218 Mass. 167, 105 N. E. 871; Bingham v. Fish, 86 N. J. Law, 316, 90 Atl. 1106; Agnew v. Hackett, 80 Wash. 236, 141 Pac. 319.

516 Trimble v. Reid, 19 Ky. Law Rep. 604, 41 S. W. 319.

517 Pittsburgh Life & Trust Co. v. Northern Cent. Life Ins. Co., 148 Fed. 674, 78 C. C. A. 408; First Nat. Bank v. People's Nat. Bank, 97 Ark. 15, 132 S. W. 1008; Mentzer v. Sargeant, 115 Iowa, 527, 88 N. W. 1068; Eblin v. Sellers, 15 Ky. Law Rep. 539; Boulden v. Stilwell, 100 Md. 543, 60 Atl. 609, 1 L. R. A. (N. S.) 258; Lovelace v. Suter, 93 Mo. App. 429, 67 S. W. 737; Serrano v. Miller & Teasdale Commission Co., 117 Mo. App. 185, 93 S. W. 810; Snyder v. Stemmons, 151 Mo. App. 156, 131 S. W. 724; Buchall v. Higgins, 109 App.

son to believe, and actually believes, a particular fact to be true, and accordingly represents what he believes, is not liable to an action merely because it turns out that he was mistaken and that his representation was unintentionally false." 18 Thus, where the directors of a co-operative life insurance society honestly believe it to be incorporated, and so represent it, such a representation is not fraudulent at law, although the society is not legally incorporated.519 And the fact that the seller of property (not standing in any confidential relation to the purchaser) makes false representations to induce the sale thereof, though he has the means of knowledge by which he could have determined the falsity of the statements made, does not render him liable in an action of deceit, if his statements were made in good faith.520 Again, in a case in New York, the action was brought against a landlord for injuries to the tenant by the fall of a ceiling in the apartment demised, and it was alleged that the defendant falsely represented to the plaintiff that the ceiling was safe, but there was no allegation that the defendant did not believe that such statement was true, or that he intended to deceive the plaintiff, and it was held that the complaint was not sustainable on the theory that a cause of action for fraud was alleged.521 So again, where the seller of a mine told the purchaser (among other things) that a car load of ore taken from the mine assayed 68 ounces to the ton, and this statement was based on in

Div. 607, 96 N. Y. Supp. 241; Moran v. Brown, 113 N. Y. Supp. 1038. But in Michigan this rule is entirely rejected. It is there held that if a representation is false in fact, and actually deceives the one to whom it is made, it is an actionable fraud, though made in good faith and with every reason to believe that it is true. It is sufficient that the representation is false in fact, provided the defendant is benefited by the resulting loss to the plaintiff. But this rule applies only in actions against a party to the contract, and not when the representations are made by a third person or an agent of the other party to the contract. Aldrich v. Scribner, 154 Mich. 23, 117 N. W. 581, 18 L. R. A. (N. S.) 379.

518 2 Add. Torts (Wood's edn.) 403, citing Collins v. Evans, 5 Q. B. 826; Ormrod v. Huth, 14 Mees. & W. 664; Childers v. Wooler, 29 Law J. Q. B. 129.

519 Perkins v. Fish, 121 Cal. 317, 53 Pac. 901.

520 Boddy v. Henry, 113 Iowa, 462, 85 N. W. 771, 53 L. R. A. 769. 521 Kushes v. Ginsberg, 188 N. Y. 630, 81 N. E. 1168.

formation furnished to the seller by the superintendent of the mine, and was made by the seller in good faith, it was held not a fraudulent representation, although it was in fact not true.522 But even at law, as distinguished from the different viewpoint of equity, "it must not be concluded that the purchaser who has been induced by false representations to make the contract is always without remedy because the vendor believed the statements to be true and was innocent of any fraudulent intent. The cases only establish that the vendor has committed no wrong, and is therefore not liable in an action of deceit or any other action founded on tort. But in very many instances a representation made by the vendor amounts in law to a warranty, and when this is the case, the purchaser has remedies on the contract, for breach of the warranty." 528

In a few of the decisions, the attempt has been made to apply these legal principles to the equitable remedy of rescission, on the theory that good faith and an honest belief in the statements made should furnish a protection against even this.52 In an English case it is said: "Where there has been an innocent misrepresentation or misapprehension, it does not authorize a rescission unless it is such as to show that there is a complete difference in substance between what was supposed to be and what was taken, so as to constitute a failure of consideration."525 And it has sometimes been thought that a court of equity should not rescind a contract for an innocent misrepresentation in regard to the subject-matter in a case where the rule of caveat emptor will apply.526

But these decisions appear to lose sight of the consideration that it would be contrary to all the principles of equity to permit a party to retain the advantages gained by a bargain into which the other party would not have entered at

522 Crocker v. Manley, 164 Ill. 282, 45 N. E. 577, 56 Am. St. Rep. 196.

523 1 Benj. Sales, § 713.

524 Stebbins v. Eddy, 4 Mason, 414, Fed. Cas. No. 13,342; Standard Horseshoe Co. v. O'Brien, 91 Md. 751, 46 Atl. 346.

525 Kennedy v. Panama, etc., Mail Co., L. R. 2 Q. B. 580.

526 Brooks v. Hamilton, 15 Minn. 26 (Gil. 10).

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all if he had not been deceived or misled. From this point of view, it is entirely immaterial whether the deception was brought about intentionally or was the result of mistake or accident. The possession of an inequitable advantage, gained by deception, is the point which chancery regards. And though a court of law might not award damages against one thus gaining an advantage through innocent misrepresentations, it is certainly in accordance with good conscience to require him to surrender the advantage so gained, and to restore both parties to their former situation, that is, to rescind the contract. And this doctrine is supported by the great preponderance of the authorities.527 In one of the cases it appeared that a person living in a distant state and having no independent means of knowledge was induced to convey an interest in a mining claim, for a grossly inadequate consideration, on the representation of the purchaser that the seller had no real interest therein, and that he desired the conveyance merely for the purpose of fortifying his own title against pending litigation. The first part of this representation was not true, although the purchaser honestly believed that it was. It was held that the conveyance should be set aside. The court said: "From all the evidence introduced on behalf of the defendants, it is made perfectly plain that Devereux and those acting

527 Baker v. Clark (Ala. App.) 68 South. 593; Grant v. Ledwidge, 109 Ark. 297, 160 S. W. 200; Smith v. Mitchell, 6 Ga. 458; Weise v. Grove, 123 Iowa, 585, 99 N. W. 191; Snyder v. Findley, 1 N. J. Law, 78, 1 Am. Dec. 193; Straus v. Norris, 77 N. J. Eq. 33, 75 Atl. 980; Aldrich v. Scribner, 154 Mich. 23, 117 N. W. 581, 18 L. R. A. (N. S.) 379; Beebe v. Young, 14 Mich. 136; Atlanta & C. A. Ry. Co. v. Victor Mfg. Co., 93 S. C. 397, 76 S. E. 1091; Farmers' Bank of McCormick v. Talbert, 97 S. C. 74, 81 S. E. 305; Culbertson v. Blanchard, 79 Tex. 486, 15 S. W. 700; Brand v. Odom (Tex. Civ. App.) 156 S. W. 547; Magill v. Coffman (Tex. Civ. App.) 129 S. W. 1146; Gibbens v. Bourland (Tex. Civ. App.) 145 S. W. 274; Corey v. Boynton, 82 Vt. 257, 72 Atl. 987; Grosh v. Ivanhoe Land & Imp. Co., 95 Va. 161, 27 S. E. 841; Bradford v. Adams, 73 Wash. 17, 131 Pac. 449; Godfrey v. Olson, 68 Wash. 59, 122 Pac. 1014. And see, further, MacDonald v. De Fremery, 168 Cal. 189, 142 Pac. 73; Lathrop v. Maddux, 58 Colo. 258, 144 Pac. 870; Maywood Stock Farm Importing Co. v. Pratt (Ind. App.) 110 N. E. 243; Halff Co. v. Jones (Tex. Civ. App.) 169 S. W. 906; Taylor v. First State Bank (Tex. Civ. App.) 178 S. W. 35; First Nat. Bank v. Hackett, 159 Wis. 113, 149 N. W. 703.

with him constantly insisted that the Wood heirs had no right or interest in the mine, and it is equally plain that Mrs. Billings finally consented to execute a deed because she believed the representations thus made were true. It is, under the circumstances of this case, immaterial whether Devereux knew the falsity of these statements or not. Even though he believed them to be true, yet as it now appears beyond doubt that these statements were without foundation, and that the Wood heirs held the title to onethird of the property, equity will not permit the grantee in the deed to enjoy the benefits thereof when it appears that the grantor was induced to execute it through a total misapprehension of her right and title, which misapprehension was caused by the representations of the grantee or his agent, even though such untrue representations were at the time made in good faith. In such case the inequity would exist, not in making the representations originally, but in claiming the benefit thereof after discovery that the other party had been misled, to her injury, by relying on the statements made for the purpose of inducing action on her part, which now appear to have been wholly untrue. Thus in Wheeler v. Smith, 9 How. 55, 13 L. Ed. 44, it is held that where the parties stand in unequal position, and one party, reposing confidence in the statements made by the other, surrenders rights without a proper understanding of them, the conveyance thereof will be set aside, even though there was no fraudulent intent on the part of the person making the same. In Smith v. Richards, 13 Pet. 26, 10 L. Ed. 42, the rule is stated to be that a material misrepresentation, if relied upon, will justify setting aside a contract, even though innocently made, because thereby the contracting party is misled to his injury. The facts of the case at bar bring the same fully within the ruling of the Supreme Court in the case last cited, to wit, that a misrepresentation or mistake, innocently made, is ground for rescinding a contract, if the misrepresentation was about a material matter, if the other party relied thereon, having a right so to do, and was thereby misled to his substantial injury." 528

528 Billings v. Aspen Mining & Smelting Co., 51 Fed. 338, 2 C. C. A.