709 rule, representations may be fully relied on without investigation, and are legally equivalent to a warranty of the matter referred to, when made by the seller of a business concerning the profits which he has derived from it in the past,708 or concerning the extent of the subscription list and the net profits of a newspaper which is the subject of the sale, or concerning the amount which the vendor has previously been offered for the property,710 or the amount which it cost him,711 since these are all matters peculiarly within his own knowledge, and of which the other party cannot be supposed to have equal knowledge or equal means of information. So a purchaser of corporate stock, who is ignorant of the financial condition of the corporation, may rely on material and apparently reasonable representations concerning the value of the stock, the solvency of the corporation, and other such matters, made to him by an officer of the company, or by an agent of the corporation employed to sell the stock, without making an independent investigation, and if he is already a stockholder, he is not bound to avail himself of his right to examine the books of the company for that purpose." And the same rule ap 712 Disney v. Lang, 90 Kan. 309, 133 Pac. 572; Stonemets v. Head, 248 Mo. 243, 154 S. W. 108; Fall v. Hornbeck, 132 Mo. App. 588, 112 S. W. 41; Hines v. Royce, 127 Mo. App. 718, 106 S. W. 1091; Perry V. Rogers, 62 Neb. 898, 87 N. W. 1063; Townsend v. Felthousen, 156 N. Y. 618, 51 N. E. 279; Whitehurst v. Life Ins. Co. of Virginia, 149 N. C. 273, 62 S. E. 1067; Unitype Co. v. Ashcraft Bros., 155 N. C. 63, 71 S. E. 61; Grim v. Byrd, 32 Grat. (Va.) 293. And see Maywood Stock Farm Importing Co. v. Pratt (Ind. App.) 110 N. E. 243; Shuttlefield v. Neil, 163 Iowa, 470, 145 N. W. 1. Where a seller misrepresents material facts peculiarly within his own knowledge, and of which the buyer is ignorant, the fact that the seller refuses to give a warranty is not inconsistent with his liability for the fraud; yet where there is in the contract an express stipulation against warranty, the proof of the representation must be clear and satisfactory to warrant the granting of relief. Mitchell Mfg. Co. v. Ike Kemper & Bro., 84 Ark. 349, 105 S. W. 880. 708 Del Vecchio v. Savelli, 10 Cal. App. 79, 101 Pac. 32. 709 Berge v. Eager, 85 Neb. 425, 123 N. W. 454. 710 Isman v. Loring, 130 App. Div. 845, 115 N. Y. Supp. 933. 711 Kohl v. Taylor, 62 Wash. 678, 114 Pac. 874, 35 L. R. A. (N. S.) 174. 712 Neher v. Hansen, 12 Cal. App. 370, 107 Pac. 565; Southern Ins. Co. v. Milligan, 154 Ky. 216, 157 S. W. 37; Union Nat. Bank v. Hunt, 76 Mo. 439. plies to one who lends money to a corporation on the strength of false representations concerning its solvency made by the president and secretary of the company.713 So, inquiring of the sheriff, and relying on the information he gives, as to the nature of the liens and levies of executions in his hands on property offered for sale in his presence, is exercising reasonable caution and diligence, as this is a matter peculiarly within his knowledge."1 And a party making a contract has a right to rely on a statement made by the other party, as to a matter within the latter's knowledge, when the only other information obtainable would be a statement of a third person." 715 718 In the next place, one may rely implicitly on representations made to him where it is impossible to make an independent investigation, or where they relate to matters which are not open to inspection or examination,718 or where the defrauded party would not have been able to discover the falsity of the representations by any investigation which it was in his power to make,717 or where the truth of the matter could not be ascertained without an unreasonable amount of trouble and expense. Thus, for example, false representations as to mining property will give a right of rescission where it was physically impossible to make any examination of the property because the mine was filled with water.719 And the same principle applies where real property, the subject of a sale, is overgrown with brush and the survey stakes destroyed,720 or is covered with snow, so that the purchaser cannot examine the land to determine its character and quality.721 Again, where 718 Daniel v. Glidden, 38 Wash. 556, 80 Pac. 811. 714 Wicker v. Worthy, 51 N. C. 500. 715 Old Colony Trust Co. v. Dubuque Light & Traction Co. (C. C.) 89 Fed. 794. 716 Kathan v. Comstock, 140 Wis. 427, 122 N. W. 1044, 28 L. R. A. (N. S.) 201; Graybill v. Drennen, 150 Ala. 227, 43 South. 568. 717 Dow v. Swain, 125 Cal. 674, 58 Pac. 271. 718 Borde v. Kingsley, 76 Wash. 613, 136 Pac. 1172. And see Becker v. Clark, 83 Wash. 37, 145 Pac. 65. 719 Arbuckle v. Biederman, 94 Ind. 168. 720 Lawson v. Vernon, 38 Wash. 422, 80 Pac. 559, 107 Am. St. Rep. 721 Knapp v. Schemmel (Iowa) 124 N. W. 309. one of the parties to a written contract is blind, he may rescind if its contents were misrepresented to him by the other party.722 So, a buyer of corporate stock may rely on the seller's statement as to the amount of the indebtedness of the corporation where, at the same time, he is told that there are no books of account which would show such indebtedness.728 Again, the failure to test the accuracy of representations inducing a contract may be excused, and relief may be given on account of their falsity, where the defrauded party had not the ability to investigate their truth, because such investigation would require special knowledge, skill, or experience, which he did not possess.724 Thus, where one purchasing an interest in a business was a stranger in the locality and had no adequate means of ascertaining the truth or falsity of statements made by the seller as to the character, volume, and value of the business, he cannot be charged with negligence precluding relief because he failed to investigate their accuracy.725 So, where the buyer of a stock of jewelry was a grocer and unfamiliar with the jewelry business or the quality or value of the jewelry purchased, and relied expressly on the seller's knowledge and the representations which he made, it was held that the rule of caveat emptor would not apply.720 And a similar decision was made in the case of a purchaser of desert land who, having no knowledge on the subject of irrigation, relied on the seller's representations as to the amount of water that would be necessary for the irrigation of the land.727 In the next place, a purchaser is excused from the necessity of making an investigation, and may rely on representations made to him, where the property which is the sub 722 Muller v. Rosenblath, 157 App. Div. 513, 142 N. Y. Supp. 602. And see, supra, § 57. 723 Davis v. Butler, 154 Cal. 623, 98 Pac. 1047. 724 Sanford & Brooks Co. v. Columbia Dredging Co., 177 Fed. 878, 101 C. C. A. 92; Howell v. Wyatt, 168 Ill. App. 651; Hines v. Royce, 127 Mo. App. 718, 106 S. W. 1091; Becker v. Sunnyside Land & Inv. Co., 76 Wash. 685, 136 Pac. 1147. 725 Mayberry v. Rogers, 81 Ill. App. 581. 726 Lyon v. Lindblad, 145 Mich. 588, 108 N. W. 969. 727 Watson v. Molden, 10 Idaho, 570, 79 Pac. 503. ject of the bargain is at a distant place, so that it cannot readily be examined, and to visit the scene and inspect it would involve unreasonable expense and trouble.728 Thus, where defendants, in order to induce plaintiff to purchase an interest in a salmon packing outfit, represented that the property consisted of a store building and site located in a place remote from that where the bargain was made, and practically inaccessible to the plaintiff at the time, and defendants knew that plaintiff had no knowledge concerning such store building and site, except from their own representations, it was held that plaintiff was not bound to exercise diligence to ascertain whether the representations were true or false, but was entitled to rely on their being true, and to recover damages for their falsity.729 And again, a party making a contract to dredge a harbor, and being at some distance from the harbor at the time, is entitled to rely on the representations of the other party, who has done a portion of the work and had access to the chart showing soundings, as to the thickness of the rock to be removed, and is not required to investigate the facts himself.780 On the same principle, where the subject of sale is land which lies in a foreign country or in a state other than that in which the purchaser resides, he is under no obligation to visit the premises (or send an agent) in order to examine into its character, quality, situation, etc., but may rely on what the vendor tells him as to these matters, and if the vendor's representations were false and fraudulent, the purchaser may have appropriate relief, notwithstanding his failure to investigate.781 And this rule 728 Wakefield v. Coleman, 159 Iowa, 241, 140 N. W. 386; Bishop v. Seal, 87 Mo. App. 256; Lindsay v. Davidson, 57 Wash. 517, 107 Pac. 514; Wooddy v. Benton Water Co., 54 Wash. 124, 102 Pac. 1054. 132 Am. St. Rep. 1102; Godfrey v. Olson, 68 Wash. 59, 122 Pac. 1014; Robertson v. Frey, 72 Or. 599, 144 Pac. 128; Christensen v. Koch, 85 Wash. 472, 148 Pac. 585; Rogers v. Rosenfeld, 158 Wis. 285, 149 N. W. 33. 729 Martin v. Burford, 181 Fed. 922, 104 C. C. A. 360. 730 Hingston v. L. P. & J. A. Smith Co., 114 Fed. 294, 52 C. C. A. 206. 731 Lester v. Mahan, 25 Ala. 445, 60 Am. Dec. 530; Crandall v. Parks, 152 Cal. 772, 93 Pac. 1018; Sherwood v. Salmon, 5 Day (Conn.) 439, 5 Am. Dec. 167; Byers v. McNeil (Iowa) 76 N. W. 685; applies even though the vendor tells the purchaser that he himself has never seen the property, if he still makes positive representations concerning its condition and character.732 So, in an action for damages for failure to deliver a mortgage as agreed, which mortgage was stated by the defendant to cover certain described land in another state, which representations were false, the plaintiff is entitled to rely wholly on such representations, without consulting the public records of such other state. And a purchaser of stock of a corporation, whose principal office is in a distant state, and whose property is at a distance, may rely on the representations of the seller as to the business and assets of the corporation, and, in case of misrepresentations, may rescind the purchase and recover the price paid.73 It is also considered that a person relying on representations made to him, and failing to take steps to ascertain their truth or falsity, is not chargeable with such negligence as should preclude relief where the truth of the matter could only be discovered by a test or trial of the subject-matter. For instance, where the vendor of a tannery falsely represented that the water power connected therewith was sufficient to work it continuously throughout the year, and thereupon the purchaser made extensive repairs, and, on the water failing, abandoned the property and notified the vendor, who took possession and had the benefit of the repairs made, it was held that the purchaser could recover for the cost of the repairs.735 So a buyer of letters patent for the manufacture of harness buckles may rely on the seller's statement as to the cost of manufacturing the Scott v. Burnight, 131 Iowa, 507, 107 N. W. 422; Hansen v. Kline, 136 Iowa, 101, 113 N. W. 504; Mountain v. Day, 91 Minn. 249, 97 N. W. 883; Clinkenbeard v. Weatherman, 157 Mo. 105, 57 S. W. 757; Adams v. Barber, 157 Mo. App. 370, 139 S. W. 489; Ross v. Sumner, 57 Neb. 588, 78 N. W. 264; Fishback v. Miller, 15 Nev. 428; Heyrock v. Surerus, 9 N. D. 28, 81 N. W. 36; Linhart v. Foreman's Adm'rs, 77 Va. 540; Stack v. Nolte, 29 Wash. 188, 69 Pac. 753. 732 Savage v. Stevens, 126 Mass. 207. 733 Wilson v. Clark, 63 Wash. 136, 114 Pac. 916. 734 McFeron v. Shoemaker, 73 Wash. 450, 131 Pac. 1126. 735 Farris v. Ware, 60 Me. 482; H. W. Abts Co. v. Cunningham, 95 Neb. 836, 146 N. W. 1036. And see Harlow v. Perry, 113 Me. 239, 93 Atl. 544. BLACK RESC.-22 |