495 and knows the title to be good is an assertion of positive knowledge, and, if untrue, is a legal fraud, notwithstanding the agent acted in good faith and believed the title was good. And where a defendant induced the plaintiff to purchase certain land by falsely and fraudulently representing that the same was unincumbered, to defendant's personal knowledge, he cannot thereafter assert as a defense to the action for damages sustained by the falsity of such representations, that he in fact had no knowledge. on the subject to which they related.49 So one professing to know a true boundary of land pointed out to a purchaser cannot escape liability for misrepresenting the true boundary, because he did not know that the boundary pointed out was incorrect.497 § 104. Same; Imputed or Constructive Knowledge of Falsity. When one person induces another to part with property or rights or otherwise to change his situation, by means of representations which are false in fact, it is no excuse or defense for the former to say that he was ignorant of the falsity of the representations, or that he sincerely believed he was speaking the truth, if the circumstances are such that the law will impute to him actual knowledge of the matter spoken of, that is to say, in cases where he must be presumed to have known the truth because he had full opportunities for knowing it, or perhaps exclusive opportunities, and because it was his duty to know the facts.498 Thus, for example, where false repre 495 White v. Reitz, 129 Mo. App. 307, 108 S. W. 601. 498 Lehigh Zinc & Iron Co. v. Bamford, 150 U. S. 665, 14 Sup. Ct. 219, 37 L. Ed. 1215; Patent Title Co. v. Stratton (C. C.) 95 Fed. 745; Grant v. Ledwidge, 109 Ark. 297, 160 S. W. 200; Mattingly v. Russell, 15 Ky. Law Rep. 875; Reynolds v. Evans, 123 Md. 365, 91 Atl. 564; Bank of Polk v. Wood, 189 Mo. App. 62, 173 S. W. 1093; Whitehurst v. Life Ins. Co. of Virginia, 149 N. C. 273, 62 S. E. 1067; Dunham v. Smith, 15 Okl. 283, 81 Pac. 427; Joplin v. Nunnelly, 67 Or. 566, 134 Pac. 1177; Curtley v. Security Sav. Soc., 46 Wash. 50, 89 Pac. 180; Tolley v. Poteet, 62 W. Va. 231, 57 S. E. 811. The drawer of a check must be presumed to know the state of his account, and if he gives a check on a bank in which he has no funds, in payment for goods purchased, he may be liable in an action for deceit. King v. Murphy (Co. Ct.) 151 N. Y. Supp. 476. sentations as to the condition and capacity of a typesetting machine sold to defendant were made by the inventor of the machine, it will be presumed that he was fully informed as to its qualities, and that the representations were made with knowledge of their falsity.499 So, if the vendor of a note is aware of such facts as would lead a reasonable man to infer the insolvency of the maker and the worthlessness of the paper, this is equivalent to actual knowledge on his part.500 And generally a party selling property is presumed to know whether the representations which he affirmatively makes in respect to it are true or false, and if he knows them to be false, it is a positive fraud.501 So the cashier of a bank may be held liable for false representations as to the value of stock sold by him, whether he knew the representations to be false or not.502 Whether or not, within the meaning of this rule, the officers of a corporation are to be charged with constructive knowledge of the falsity of representations made by them concerning its business or the value of its stock, because they must be presumed to have ample opportunities of learning the state of its affairs and to be under the duty of doing so, is not so clear. But there is authority for saying (at least in cases where an extensive or complicated business is concerned) that the officers of a corporation are justified in relying on reports, statements, and data furnished them by their subordinates, and are not responsible for the falsity of representations founded on such information, provided that such subordinates are competent and ordinarily trustworthy, and that the officers had no knowledge of any inaccuracy in their reports or statements and were not guilty of gross negligence in failing to verify the ultimate details. 503 Thus, an action of deceit cannot be maintained against the directors of a bank by a purchaser of its stock, which was worthless, on the basis of false state 499 Unitype Co. v. Ashcraft Bros., 155 N. C. 63, 71 S. E. 61. 500 Gordon v. Irvine, 105 Ga. 144, 31 S. E. 151. 501 Snively v. Meixsell, 97 Ill. App. 365. 502 Snider v. McAtee, 165 Mo. App. 260, 147 S. W. 136. 503 Pittsburg Life & Trust Co. v. Northern Cent. Life Ins. Co., 148 Fed. 674, 78 C. C. A. 408; Nash v. Rosesteel, 7 Cal. App. 504, 94 Pac. ments as to the bank's prosperous condition, made in a statement or report prepared by the cashier and to which he affixed the directors' signatures, or made by the directors themselves in good faith on details furnished them by the cashier, if there is no evidence that they acted in bad faith. or that they had any actual knowledge of the insolvency of the bank.50 It is not sufficient to show that they might, by the exercise of ordinary care, have discovered the falsity of the report,505 for the question is one of fraud and not of negligence, and a director's failure to perform the duty incumbent upon him as a director does not operate to render him guilty of affirmative fraud.506 But it is otherwise, of course, if the directors have reasonable cause to know or to believe that the report is incorrect, as where they had previously been warned by the Comptroller of the Currency that certain listed assets were doubtful and must be immediately collected or else written off the books, but nevertheless they allowed a report to be issued, in which such assets appeared, without making any examination.507 But the rule appears to be otherwise in regard to the president of a corporation. This officer is supposed to be the active head and manager of the business, and it is his duty to be intimately acquainted with everything of moment in its affairs, and therefore he is presumed to possess knowledge of all that he could learn by the full discharge of his duties, and according to some of the cases, this presumption is conclusive. Hence if a person is injured in consequence of his reliance on false representations contained in a statement or report of the corporation issued over the president's signature, it is no defense for the latter to say that he was ignorant of the falsity of the representations. 508 So, the 504 Foster v. Gibson, 18 Ky. Law Rep. 716, 38 S. W. 144; Utley v. Hill, 155 Mo. 232, 55 S. W. 1091, 49 L. R. A. 323, 78 Am. St. Rep. 569. 505 Pieratt v. Young, 20 Ky. Law Rep. 1815, 49 S. W. 964. But compare Mason v. Moore, 73 Ohio St. 275, 76 N. E. 932, 4 L. R. A. (N. S.) 597, 4 Ann. Cas. 240. 506 McCauley v. Brown, 99 Mo. App. 625, 74 S. W. 464. 507 Taylor v. Thomas, 195 N. Y. 590, 89 N. E. 1113. 508 Ward v. Trimble, 103 Ky. 153, 44 S. W. 450; Trimble v. Reid, 19 Ky. Law Rep. 601, 41 S. W. 319; Collins v. Chipman, 41 Tex. Civ. App. 563, 95 S. W. 666; Mutual Building & Loan Ass'n v. McGee president of a corporation who participates in the issuance of bonds which falsely represent that they are secured by all the property of the company, is liable in an action for deceit brought by a purchaser of the bonds, although the president was ignorant of the sale in question.500 § 105. Same; Statements Made Recklessly Without Knowledge of Falsity.-Although a person who has induced another, by false representations, to enter into a contract, did not know at the time that the representations were false, yet if he made them recklessly without any knowledge of the facts represented, that is with a careless indifference as to the truth or falsity of his statements and with no concern as to the injurious consequences to a person deceived and misled by them, they will be deemed fraudulent in law, so as to entitle the injured party to rescind the contract or to maintain an action of deceit.510 "In order to maintain an action for deceit in making false repre (Tex. Civ. App.) 43 S. W. 1030. But compare Cahill v. Applegarth, 98 Md. 493, 56 Atl. 794. 509 Stickel v. Atwood, 25 R. I. 456, 56 Atl. 687. 510 L. J. Mueller Furnace Co. v. Cascade Foundry Co., 145 Fed. 596, 76 C. C. A. 286; McCoy v. Prince, 11 Ala. App. 388, 66 South. 950; Sallies v. Johnson, 85 Conn. 77, 81 Atl. 974, Ann. Cas. 1913A, 386; Upchurch v. Mizell, 50 Fla. 456, 40 South. 29; Herman v. Foster & Reynolds Co., 185 Ill. App. 97; Richards v. Frederickson (Iowa) 153 N. W. 151; Goodwin v. Fall, 102 Me. 353, 66 Atl. 727; Vincent v. Corbett, 94 Miss. 46, 47 South. 641, 21 L. R. A. (N. S.) 85; Ray County Sav. Bank v. Hutton, 224 Mo. 42, 123 S. W. 47; Chappell v. Boram, 159 Mo. App. 442, 141 S. W. 19; Champion Funding & Foundry Co. v. Heskett, 125 Mo. App. 516, 102 S. W. 1050; Morgan County Coal Co. v. Halderman, 254 Mo. 596, 163 S. W. 828; Stacey v. Robinson, 184 Mo. App. 54, 168 S. W. 261; Ruddy v. Gunby (Mo. App.) 180 S. W. 1043; Shackett v. Bickford, 74 N. H. 57, 65 Atl. 252, 7 L. R. A. (N. S.) 646, 124 Am. St. Rep. 933; Stolitzky v. Linscheid, 150 App. Div. 253, 134 N. Y. Supp. 805; Bell v. James, 128 App. Div. 241, 112 N. Y. Supp. 750 (affirmed, 198 N. Y. 513, 92 N. E. 1078); 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; Parmlee v. Adolph, 28 Ohio St. 10; Robertson v. Frey, 72 Or. 599, 144 Pac. 128; McFarland v. Carlsbad Hot Springs Sanitarium Co., 68 Or. 530, 137 Pac. 209, Ann. Cas. 1915C, 555; Aitken v. Bjerkvig (Or.) 150 Pac. 278; Dutton v. Pyle, 7 Pa. Super. Ct. 126; Davis v. Driscoll, 22 Tex. Civ. App. 14, 54 S. W. 43; Bradley v. Tolson, 117 Va. 467, 85 S. E. 466; Porter v. Beattie, 88 Wis. 22, 59 N. W. 499; Knudson v. George, 157 Wis. 520, 147 N. W. 1003; Rogers v. Rosenfeld, 158 Wis. 285, 149 N. W. 33. sentations, it is not necessary to show that the party making them knew them to be false. If a party recklessly makes a false representation, of the truth or falsehood of which he knows nothing, for the fraudulent purpose of inducing another, in reliance upon it, to make a contract or do an act to his prejudice, and the other party does rely on it, he is liable for the fraud as much as if he had known it to be false." 511 So in another case it was said: "Such an action requires for its foundation a false statement knowingly made, or a false statement made in ignorance of, and in reckless disregard of, its truth or falsity, and of the consequences such a statement may entail. The evil intentthe intent to deceive-is the basis of the action. Such an intent, it is true, may be inferred from the positive statement as of his own knowledge of a fact concerning which one knows he has no knowledge at all, because such a statement shows such a contempt for the truth, and such a reckless disregard of the rights of others who may rely upon it, that it is deemed sufficient evidence of an evil intent to warrant a recovery when damages have resulted from the falsehood." 512 In effect, to establish a case of fraudulent misrepresentations, it is necessary to show not only their falsity in fact but also a dishonest condition of mind on the part of the person making them with reference to their truthfulness. But this does not mean that he must be shown to have been conscious of their falsity. It is enough if it is shown that he made the representations without any belief in their truth, or with a conscious indifference, not caring whether they were true or not.518 It is not easy to say exactly how this dishonest condition of mind may be established, in the face of the party's testimony that he did not know the representation to be false. But in general, any person of integrity, and who is careful to speak the truth, will not venture on a positive assertion, intended to influence another person, unless he has at least substantial ground for believing that what he says is true. Hence a 511 Beebe v. Keep, 28 Mich. 53. 512 Union Pac. R. Co. v. Barnes, 64 Fed. 80, 12 C. C. A. 48. 513 Shackett v. Bickford, 74 N. H. 57, 65 Atl. 252, 7 L. R. A. (N. S.) 646, 124 Am. St. Rep. 933. |