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is damaging being kept back or concealed, so that the partial truth stated creates a deceptive and misleading impression, which would not have entered the mind of the other party if the whole truth had been disclosed to him, this is also a case of fraudulent misrepresentation.63 In an English case, where the plaintiff had been induced to subscribe for stock in a company on the faith of its prospectus, the court remarked: "It is said that everything which is stated in the prospectus is literally true, and so it is. But the objection to it is not that it does not state the truth, as far as it goes, but that it conceals most material facts with which the public ought to have been made acquainted, the very concealment of which gives to the truth which is told the character of a falsehood." But on the other hand, if the essential facts are truthfully stated, the party so stating them is not responsible for the incorrectness of the conclusions from the facts which the other party draws by false reasoning or mistaken calculations.465 And again, allowance must be made for the case where one misleading statement may counteract or balance another. Thus, a published report of the financial condition of a bank, in which the resources and the liabilities are equally inflated, is not such a material misrepresentation as will support an action for deceit, unless by such report the condition of the bank is made to appear better than it actually is. So again, the customs of a particular trade or business may sanction the employment of terms in a sense which would convey a different meaning to the uninitiated. Thus, a statement that the present mileage of a railroad company amounts to a certain number of miles is not fraudulent by reason of the fact that such mileage is obtained by counting each mile of double track as two miles, in accordance with recognized custom.

467

466

463 Kenyon v. Woodruff, 33 Mich. 310; Crompton v. Beedle, 83 Vt. 287, 75 Atl. 331, 30 L. R. A. (N. S.) 748, Ann. Cas. 1912A, 399; Gidney v. Chapple, 26 Okl. 737, 110 Pac. 1099.

464 Oakes v. Turquand, L. R. 2 H. L. 325.

465 Bowman v. Bates, 2 Bibb (Ky.) 47, 4 Am. Dec. 677.

466 Gerner v. Yates, 61 Neb. 100, 84 N. W. 596.

467 Donnelly v. Baltimore Trust & Guarantee Co., 102 Md. 1, 61 Atl. 301.

469

When the alleged misrepresentations are in writing and relate to a matter collateral to the contract (that is, not to its terms or meaning, but to a matter of inducement), it is said that the words should not be construed too loosely, nor given too wide a meaning, so as to make them fraudulent, but all doubts should be resolved in favor of good faith.*** But if a statement by which a plaintiff says he was deceived is ambiguous, the plaintiff is bound to state the meaning which he attached to it and the sense in which he understood it, in order to show its falsity and materiality and that it induced him to enter into the contract, and he cannot leave it to the court to put a meaning upon the statement." In this case it is also open to the defendant to explain his language so as to make it comport with the truth. Thus, in an action of deceit founded on alleged false representations contained in a letter, "of course one will be presumed to have intended his language to be understood according to its usual meaning, and in ordinary cases, in the absence of a reasonable explanation of his mistake, his testimony that he meant something different from what he said will have but little if any weight. But inasmuch as the question involved is what was his state of mind, and his actual intent as distinguished from his apparent intent, he is entitled to explain his language as best he can, if it is susceptible of explanation, and to testify what was in his mind in reference to the subject to which the alleged fraud relates. In this respect, his expressions, whether spoken or written, are not dealt with in the same way as when the question is what contract has been made between two persons who were mutually relying upon the language used in their agreement.'

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When the allegation is of fraudulently misrepresenting the purport or meaning of the contract itself, the rule is not quite the same. It is said that parties are bound by their contracts which are free from ambiguity and are susceptible

468 Ray County Sav. Bank v. Hutton, 224 Mo. 42, 123 S. W. 47. 469 Smith v. Chadwick, L. R. 20 Ch. Div. 27.

470 Nash v. Minnesota Title Ins. & Trust Co., 163 Mass. 574, 40 N. E. 1039, 28 L. R. A. 753, 47 Am. St. Rep. 489.

of construction by the court without the aid of facts.471 And where no other means are employed to induce a person to accept a proposition for a contract than the language contained in a writing, he cannot be heard to say that, because of his inaptness in comprehending on examination the ordinary import and common acceptation of the terms employed, they must be made to mean more or other than what they express.472 And the fraudulent representations of a seller as to the meaning of certain terms in the printed contract of sale which he is endeavoring to induce the buyer to sign are not representations of existing material facts which would constitute an inducement on which the buyer has a right to rely.473 On the other hand, in a case in Michigan, it is held that, where one party to a contract misleads and deceives the other as to its purport or the purpose for which it is made, he is responsible for the understanding which his representations and statements do actually raise in the mind of the other party and which he intends they should raise, though his words, if taken literally, would not create that impression. No one, it was said, can evade the force of the impression which he knows another received from his words and conduct, and which he meant him to receive, by resorting to the literal meaning of his language alone. "It may be that defendants, by a careful use of language, evaded expressing in words the agreement they meant complainant to understand they were making. But this is a species of cunning which amounts to nothing. Their whole conduct, and the impression it was designed to make, must determine their position." 474

§ 102. Knowledge of Falsity of Representations.— When false representations are set up as a cause of action or defense in a suit at law, it is not sufficient merely to show their falsity, but it must also be alleged and proved that the party making the representations knew

471 Fidelity & Casualty Co. v. Teter, 136 Ind. 672, 36 N. E. 283.

472 Kimber v. Young, 157 Fed. 199, 84 C. C. A. 647.

473 Providence Jewelry Co. v. Bailey, 159 Mich. 285, 123 N. W. 1117.

474 Mizner v. Kussell, 29 Mich. 229.

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them to be false at the time of making them. In other words, scienter or conscious falsification is of the essence of the case. This rule applies not only to commonlaw actions of deceit, but also to similar actions under the modern practice for fraud and fraudulent representations, and also to cases where this kind of fraud is set up in defense to an action at law upon the contract or obligation.475 But in equity the matter takes on a different aspect, because the courts of chancery may base their award of relief on considerations which are not permitted to enter into a proceeding at law. An action at law for fraud in making false representations and a suit in equity for the rescission of a contract on the ground of misrepresentations are founded on distinct theories. The former is based on an intentional deceit, which of course includes a knowledge of the falsity of what is affirmed. But the latter is aimed at the undoing of a bargain which circumstances would render it inequitable to enforce and the restoration of the parties to the status quo, and this may be consistent even with entire innocence and ignorance on the part of the person making the misrepresentations, or with his belief in their truth.476 Where one induces another

475 Belding v. King, 159 Fed. 411, 86 C. C. A. 391; Kimber v. Young, 137 Fed. 744, 70 C. C. A. 178; Patent Title Co. v. Stratton (C. C.) 95 Fed. 745; Cooley v. King, 113 Ga. 1163, 39 S. E. 486; Kimbell v. Moreland, 55 Ga. 164; Press v. Hair, 133 Ill. App. 528; American Educational Co. v. Taggert, 124 Ill. App. 567; Anderson v. Evansville Brewing Ass'n, 49 Ind. App. 403, 97 N. E. 445; Security Sav. Bank v. Smith, 144 Iowa, 203, 122 N. W. 825; Field v. Turley (Ky.) 120 S. W. 338; Live Stock Remedy Co. v. White, 90 Mo. App. 498; Adams v. Barber, 157 Mo. App. 370, 139 S. W. 489; Spead v. Tomlinson, 73 N. H. 46, 59 Atl. 376, 68 L. R. A. 432; Straus v. Norris, 77 N. J. Eq. 33, 75 Atl. 980; Faulkner v. Wassmer, 77 N. J. Eq. 537, 77 Atl. 341, 30 L. R. A. (N. S.) 872; Powell v. F. C. Linde Co., 58 App. Div. 261, 68 N. Y. Supp. 1070; Clover Farms Co. v. Schubert, 46 Misc. Rep. 434, 92 N. Y. Supp. 260; Bell v. James, 128 App. Div. 241, 112 N. Y. Supp. 750; Hodgens v. Jennings, 148 App. Div. 879, 133 N. Y. Supp. 584; Martin v. Eagle Creek Development Co., 41 Or. 448, 69 Pac. 216; Bailey v. Frazier, 62 Or. 142, 124 Pac. 643; Scott v. Heisner, 33 Pa. Super. Ct. 286; Jalass v. Young, 3 Pa. Super. Ct. 422; Poag v. Charlotte Oil & Fertilizer Co., C1 S. C. 190, 39 S. E. 345; Compare Palmer v. Goldberg, 128 Wis. 103, 107 N. W.

476 Peters v. Lohman, 171 Mo. App. 465, 156 S. W. 783; Faulkner

to enter into a contract with him by the positive assertion of a fact or state of facts, material to the transaction, which do not really exist, and the other relies thereon and is misled to his injury, the view of equity is that it would be unconscionable to permit the party making the assertion to retain the fruits of the bargain which he has thus secured, and therefore he must be held liable as for a species of constructive fraud, even though he may not have known that his statement was false.*77 He is bound at his own peril to know the truth of the matter of which he speaks,478 and the inquiry is not whether he knew the representation to be false, but whether the other party believed it to be true and was misled by it in entering into the contract.*7 479 Hence we have the well-settled rule in equity that when rescission of a contract, deed, or other transaction is sought on the ground of misrepresentations of material matters of fact, believed in and acted upon by the party seeking relief, and resulting in his injury or prejudice, it is not necessary to show that the party making the representations knew them to be false, but he will be held responsible for their falsity, though he spoke without knowing anything about the matter, though he himself was misinformed and mistaken, and even though he actually believed in the truth of what he affirmed.480

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v. Wassmer, 77 N. J. Eq. 537, 77 Atl. 341, 30 L. R. A. (N. S.) 872; Severson v. Kock, 159 Iowa, 343, 140 N. W. 220.

477 Ingalls v. Miller, 121 Ind. 188, 22 N. E. 995; Converse v. Blumrich, 14 Mich. 109, 90 Am. Dec. 230.

478 Kathan v. Comstock, 140 Wis. 427, 122 N. W. 1044, 28 L. R. A. (N. S.) 201.

479 Kell v. Trenchard, 142 Fed. 16, 73 C. C. A. 202; Grim v. Byrd, 32 Grat. (Va.) 293.

480 Smith v. Richards, 13 Pet. 26, 10 L. Ed. 42; In re American Knit Goods Mfg. Co., 173 Fed. 480, 97 C. C. A. 486; King v. Lamborn, 186 Fed. 21, 108 C. C. A. 123; Simon v. Goodyear Metallic Rubber Shoe Co., 105 Fed. 573, 44 C. C. A. 612, 52 L. R. A. 745; Kell v. Trenchard, 142 Fed. 16, 73 C. C. A. 202; Lanier v. Hill, 25 Ala. 554; Goodale v. Middaugh, 8 Colo. App. 223, 46 Pac. 11; Ladd v. Charies, 5 Fla. 395; Reese v. Wyman, 9 Ga. 430; Newman v. H. B. Claflin Co., 107 Ga. 89, 32 S. E. 943; Jones v. Foster, 175 Ill. 459, 51 N. E. 862; Ellefritz v. Taylor, 84 Ill. App. 396; Ingalls v. Miller, 121 Ind. 188, 22 N. E. 995; Gardner v. Mann, 36 Ind. App. 694, 76 N. E. 417; Woodruff v. Garner, 27 Ind. 4, 89 Am. Dec. 477; Gatling v. Newell, 9 Ind. 572; May v. Snyder, 22 Iowa, 525; Severson v.

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