APPEAL from judgment of the General Term of the Supreme Court in the first judicial department, entered upon an order made October 13, 1893, which affirmed a judgment in favor of defendant entered upon the report of a referee.

This was an action to recover damages for fraud and deceit alleged to have been practiced by John P. Kennedy, by which plaintiffs claimed to have been induced to purchase certain bonds and stock of the Howe Machine Company from that company. The action was originally brought against John P. Kennedy He died before this appeal was taken, and his executor was substituted as defendant in his stead.

The Howe Machine Company was a corporation organized under the laws of the state of Connecticut, having its principal place of business at Bridgeport, in that state, and was engaged for many years, and up to September 26, 1885, in the manufacture of sewing machines.

Wheeler H. Peckham and George W. Van Slyck for appellants. The referee erred on his own findings of fact in not giving judgment for the plaintiffs in some amount. (Arthur v. Griswold, 55 N. Y. 400; Brackett v. Griswold, 112 N. Y.467; Phelps v. Vischer, 50 N. Y. 69; Bennett v. Buchan, 76 N. Y. 386; L. S. N. Bank v. Butler Colliery Co., 51 Hun, 63; Schwinger v. Raymond, 38 N. Y. 193; Bonnell v. Griswold, 89 N. Y. 122; Patterson v. Kirkland, 34 Miss. 423; Nickley v. Thomas, 22 Barb. 652.) The referee erred in refusing to find, as requested, "that the said representations of defendant to the plaintiffs were so made as to convey the impression to the plaintiffs that the defendant had actual knowledge of the truth thereof." (Huntington v. Attrill, 118 N. Y. 367; Stone v. Denning, 4 Metc. 151; F. Co. v. Moffatt, 147 Mass. 403; Litchfield v. Hutchinson, 117 Mass. 195.) The opinion of the General Term does not consider and ignores two essential and controlling points in the case : That the representation of the defendant is as of knowledge, and that consequently proof or finding of falsity is proof or finding of knowledge. That as to the liabilities found to have existed

it was the duty of the defendant to disclose them; and that the finding that the defendant "had reasonable cause to believe that said company would not be held liable on said claims" does not relieve from liability. (Huntington v. Attrill, 118 N. Y. 367; Barnes v. U. P. R. Co., 12 U. S. App. 1; Duffany v. Ferguson, 66 N. Y. 482; 22 Barb. 652; Peek v. Gurney, L. R. [6 H. L.] 403; Arkwright v. Newbold, L. R. [17 Ch. D.] 317; Smith v. Chadwick, L. R. [20 Ch. D.] 58; Lee v. Jones, 17 C. B. [N. S.] 506; Phillips v. Foxall, L. R. [7 Q. B.] 679; Devoe v. Brant, 53 N. Y. 462; Rothmiller v. Stein, 143 N. Y. 581; Brackett v. Griswold, 112 N. Y. 467; Cross v. Devine, 46 Hun, 421; Ward v. Wiman, 17 Wend. 193; Haight v. Haight, 19 N. Y. 464.)

William R. Bronk for respondent. There is no conflict between the referee's findings, nor did he err, as claimed by appellants, in refusing to give judgment thereon for plaintiffs. (Redfield y. Redfield, 110 N. Y. 671; Green v. Roworth, 113 N. Y. 462; T. N. Bank v. Parker, 130 N. Y. 415; Meyer v. Amidon, 45 N. Y. 169; Oberlander v. Spiess, 45 N. Y. 175; Kley v. Healy, 9 Misc. Rep. 93; McCarthy v. McCarthy, 143 N. Y. 235; Dibble v. Dimick, 143 N. Y. 549.) The referee committed no error in refusing to find, as requested by plaintiffs, that the representations of the defendant were so made as to convey the impression to the plaintiffs that the defendant had actual knowledge of the truth thereof. (McCarthy v. McCarthy, 143 N. Y. 235, 238; Dibble v. Dimick, 143 N. Y. 549, 553; Daly v. Wise, 132 N. Y.306; Marsh v. Falker, 40 N. Y. 562; Meyer v. Amidon, 45 N. Y. 169; Oberlander v. Spiess, 45 N. Y. 175; Chester v. Comstock, 40 N. Y. 576; Stitt v. Little, 63 N. Y. 427; McIntyre v. Buell, 132 N. Y. 192; Constant v. R. University, 133 N. Y. 640; 2 Pom. Eq. Juris. § 884; Cowley v. Smyth, 46 N. J. L. 380; Wakeman v. Dalley, 51 N. Y. 27.) The statements and representations made were in good faith believed to be true; Mr. Kennedy had reasonable grounds for so believing; and they were in fact substantially

true. (Smith v. Countryman, 30 N. Y. 681; Gordon v. Butler, 105 U. S. 553; Simar v. Canaday, 53 N. Y. 298; Ellis v. Andrews, 55 N. Y. 83; Chrysler v. Canaday, 90 N. Y. 272, 279; Veasey v. Daton, 3 Allen, 380; Parker v. Moulton, 114 Mass. 100; Holbrook v. Connor, 60 Maine, 584; Schumaker v. Mather, 133 N. Y. 590; S. D. Co. v. Silva, 125 U. S. 248; Long v. Warren, 68 N. Y. 426; Slaughter v. Gerson, 13 Wall. 379; 5 Am. & Eng. Ency. of Law, 318, 327, 328, 331; Cooper v. Harvey, 16 N. Y. Supp. 660; Poland v. Brownell, 131 Mass. 138; Nelson v. Luling, 62 N. Y. 645; H. W. & Co. v. Howe M. Co., 54 Conn. 394.) Under the form in which this action is brought it is immaterial whether the representations made were entirely and precisely true in every item and detail or not, unless it is also made to appear (as is not the fact) that the representations made an appreciable diminution of the value of the plaintiffs' bonds. (Gould v. Cayuga Co. Bank, 86 N. Y. 75; 99 N. Y. 333; Bowen v. Mandeville. 95 N. Y. 237; Vail v. Reynolds, 118 N. Y. 297; Rothmiller v. Stein, 143 N. Y. 581; Deobold v. Opperman, 111 N. Y. 531; Hadden v. Griffin, 136 Mass. 229; Dawe v. Morris, 149 Mass. 192; McIntyre v. Buell, 132 N. Y. 192; Bigelow on Fraud, 628, 629; Morse v. Hutchins, 102 Mass. 439; Williams v. McFadden, 23 Fla. 143 ; Neither in the kind nor degree of their proof have the plaintiffs brought their case within the rigid requirements of an action for damages for fraud. (Baird v. Mayor, etc., 96 N. Y. 492; Morris v. Talcott, 96 N. Y. 107; Kerr on Fraud, 382, 384; Constant v. R. University, 133 N. Y. 640; Brackett v. Griswold, 112 N. Y. 467; S. D. Co. v. Silva, 125 U. S. 248; Oberlander v. Spiess, 45 N. Y. 177; Meyer v. Amidon, 45 N. Y. 169; Marsh v. Falker, 40 N. Y. 565, 573; Chester v. Comstock, 40 N. Y. 576; Duffany v. Ferguson, 66 N. Y. 484; Wakeman v. Dalley, 51 N. Y. 27; McIntyre v. Buell, 132 N. Y. 192; Daly v. Wise, 132 N. Y. 306; Kelly v. Gould, 19 N. Y. Supp. 349; 141 N. Y. 596; Gaffney v. Burton, 12 How. Pr. 516, 518; Griswold v. Sabin, 51 N. H. 167; Derry v. Peck, L. R. [14 App. Cas.] 337; Lord v. Goddard, 13 How. [U. S.] 198; Morgan v. Skiddy, 62 N. Y. 319; Lefever v. Lefever,

Opinion of the Court, per ANDREWS, Ch. J.

[Vol. 147.

30 N. Y. 27; Societa Italiana v. Sulzer, 19 N. Y. Supp. 824; Kley v. Healy, 9 Misc. Rep. 93.) The Howe Machine Company was solvent at the time the statement was made, and the referee's refusal to find to the contrary was not error. (Rothmiller v. Stein, 143 N. Y. 581; McCarthy v. McCarthy, 143 N. Y. 235; Dibble v. Dimick, 143 N. Y. 549.) The admission of evidence showing Mr. Kennedy's investments in the New Howe Machine Company was competent. (Cowley v. Smyth, 46 N. J. L. 380; Oberlander v. Spiess, 45 N. Y. 179.) The appellants' criticism and analysis of, and argument made upon, the decision and opinion of the court below are unfounded and fallacious when viewed in the light of all the findings made below. The court will not presume or infer a fact or finding, even to support a judgment, where the referee has expressly refused to make such finding. (Meyer v. Amidon, 45 N. Y. 169, 171.)

ANDREWS, Ch. J. The plaintiffs on this appeal are met by the serious difficulty that the finding of the referee, affirmed by the General Term, exonerated the defendant's testator from the charge of fraud in making the representations upon which the plaintiffs relied in purchasing the bonds and stock of the Howe Machine Company. If this finding has support in the evidence it ends all controversy upon the merits here, because, although it was found that the statement of the liabilities of the company presented by Kennedy to the plaintiffs, upon the faith of which the purchase was made, was grossly inaccurate, and largely understated the actual liabilities of the company, nevertheless, if Kennedy believed the statement to be a true exhibit of the affairs of the company and was guilty of no dishonesty, the action must fail. The principle stated by CROKE, J. (3 Bul. 95), in respect to actions for damages for deceit, that "fraud without damage, or damage without fraud, gives no cause of action, but when these two concur an action lies," has ever since been recognized as the true rule governing the subject. The cases are numerous. The principle has been obscured by the use by judges of the phrase

N. Y. Rep.] Opinion of the Court, per ANDREWS, Ch. J.

'legal fraud," which has sometimes been interpreted as meaning fraud by construction, and as indicating that something less than actual fraud may sustain an action for deceit. The gravamen of the action is actual fraud, and nothing less will sustain it. The representation upon which it is based must be shown not only to have been false and material, but that the defendant when he made it knew that it was false, or not knowing whether it was true or false and not caring what the fact might be, made it recklessly, paying no heed to the injury which might ensue. Misjudgment, however gross, or want of caution, however marked, is not fraud. Intentional fraud, as distinguished from a mere breach of duty or the omission to use due care, is an essential factor in an action for deceit. The man who intentionally deceives another to his injury should be legally responsible for the consequences. But if through inattention, want of judgment, reliance upon information which a wiser man might not credit, misconception of the facts or of his moral obligation to inquire, he makes a representation designed to influence the conduct of another, and upon which the other acts to his prejudice, yet, if the misrepresentation was honestly made, believing it to be true, whatever other liability he may incur he cannot be made liable in an action for deceit. The law affords remedies for the consequences of innocent misrepresentation. A contract induced thereby may, in many cases, be avoided, and the equitable powers of courts are frequently interposed for the rescission of contracts or transactions based upon mistake or innocent misrepresentation. While the common-law action of deceit furnishes a remedy for fraud which ought to be preserved, we think it should be kept within its ancient limits, and should not by construction be extended to embrace dealings which, however unfortunate they may have proved to one of the parties, were not induced by actual intentional fraud on the part of the other. We have referred to a representation made without knowing whether it was true or false, and where the party making it was indifferent whether it was true or false, as sufficient to sustain the action if the representation was in fact