by the owners as to the presence of extensive beds of ore at the bottom of certain pits and trenches, and are not called upon to go into them and determine the truth by dipping out the water or digging out the earth with which they are filled.681 So, where the property bought is a mill with its machinery, including a boiler, the purchaser is justified in relying on representations made to him concerning the capacity and condition of the boiler, as it is not an article the condition of which can be ascertained by ordinary inspection, but only by tests involving time and labor.682

On the same principle, a person is not to be charged with negligence precluding relief, although the falsity of the representations made to him could have been discovered by inquiries addressed to third persons, even where such inquiries are suggested, and the third persons named, by the other party to the contract.083 For instance, where one buys property incumbered by a mortgage, he can ascertain the exact amount due on the mortgage by inquiring of the mortgagee; but if the grantor makes a positive false representation as to such amount, the grantee's omission to prosecute such an inquiry will not prevent him from obtaining relief.684 The rule is the same in regard to the amount of taxes due on a property sold. This amount could be ascertained by inquiries in the proper quarter or by a search of the records; but the omission to inquire is not negligence, in the face of a willful misrepresentation by the grantor.685 So again, where a subscriber for stock in a corporation relies on the statements of fact set forth in the prospectus, which are misleading and false, he may rescind, notwithstanding the fact that he might have discovered their falsity by an examination of documents which are referred to in the prospectus, for he is not bound to pursue his inquiries to that extent.686 And while the pur

684 Green v. Turner, 86 Fed. 837, 30 C. C. A. 427. 682 Beecher v. Wilson, 63 Wash. 149, 114 Pac. 899. 683 Handy v. Waldron, 19 R. I. 618, 35 Atl. 884.

684 Hutchinson v. Gorman, 71 Ark. 305, 73 S. W. 793.

685 Wright v. United States Mortgage Co. (Tex. Civ. App.) 42 S. W. 789; Woteshek v. Neumann, 151 Wis. 365, 138 N. W. 1000; Clark v. Thorpe Bros., 117 Minn. 202, 135 N. W. 387.

686 Central Ry. Co. of Venezuela v. Kisch, L. R. 2 H. L. App. 99, affirming Kisch v. Venezuela Cent. Ry. Co., 34 Law J. Ch. 545.

chaser of land, knowing the facts and acting upon his own judgment, cannot avoid performance of the contract, because of false representations of the vendor as to the value of the land and the annual rentals therefrom, such purchaser is not deprived of his remedy because he might, by a more thorough inspection, have learned of the falsity of the representations.687 And so, a purchaser of territorial rights under a patent may rely on the representations of his vendor as to their value, and is not obliged to prosecute an inquiry, demanding peculiar skill and knowledge, into their character.688

§ 116. Same; Examination of Public Records. Where representations rendering a transaction rescindable for fraud relate to matters of record, or which are spread upon the public records, the injured party is not chargeable with notice of the facts, nor is he required, as a precautionary measure, to examine the records in order to test the accuracy of the representations, but he may rely on such representations, in the absence of any actual knowledge on his part.689 Thus, for example, a vendor of land, making false representations with respect to the nature or validity of his title, with intent that the same shall be relied and acted on, is liable therefor, if the purchaser does actually rely on them to his injury, although the falsity of the representations could have been discovered by a search of the public records. The same rule applies also where the representations relate to incumbrances on the property, the truth of the matter being discoverable from the records, as, where the incumbrances are falsely represented or it is stated that the property is unincumbered, or where the

690

687 Circle v. Potter, 83 Kan. 363, 111 Pac. 479.

688 Coulter v. Clark, 160 Ind. 311, 66 N. E. 739.

691

689 Hall v. Bank of Baldwin, 143 Wis. 303, 127 N. W. 969; Severson v. Kock, 159 Iowa, 343, 140 N. W. 220. And see other cases cited infra, this section.

690 Morris v. Brown, 38 Tex. Civ. App. 266, 85 S. W. 1015; Hunt v. Barker, 22 R. I. 18, 46 Atl. 46, 84 Am. St. Rep. 812; Curtley v. Security Sav. Soc., 46 Wash. 50, 89 Pac. 180; Manley v. Johnson, 85 Vt. 262, 81 Atl. 919; Morton v. Clack (Ky.) 10 S. W. 796.

691 Blumenfeld v. Stine, 42 Misc. Rep. 411, 87 N. Y. Supp. 81; Gannon, Goulding & Thies v. Hausaman, 42 Okl. 41, 140 Pac. 407, 52 L. R. A. (N. S.) 519; Oben v. Adams (Vt.) 94 Atl. 506.

692

vendor states that he has paid off the mortgage debt," or where the seller of a mortgage or a note secured by mortgage falsely states that the mortgage is a first or only lien.693 So, where defendant exchanges property with plaintiff, and represents that he paid a stated amount for the property, he cannot urge as a defense in an action for damages for misrepresenting the amount paid that the plaintiff did not resort to the means available for the detection of the falsity of the representations, or was negligent in failing to examine the public records for that purpose."** And it is no defense to an action for false representations on a sale of letters patent, the representations being that it was the only patent for the article covered by the letters, that the plaintiff might, by examining the records of the patent office have discovered the fraud.95 So, in an action. by a purchaser of city lots to rescind the sale on the ground that the lots conveyed were not those pointed out to him by his agent employed to negotiate the purchase, where it appears that the supposed agent was the real party in interest, he cannot object that the purchaser could have discovered the fraud by an inspection of the public records, as the latter had a right to rely on the agent's statements."9 And in an action against a vendor for falsely representing the quantity of the land, it is no defense that the purchaser might have ascertained the falsity of the representations by a survey or by reference to the official plats and records.697 So again, the vendor of land cannot avoid the consequences of his fraudulent representations as to the amount of taxes unpaid, merely because the purchaser might have consulted the official tax records.698

692 Scott v. Moore, 89 Ark. 321, 116 S. W. 660.

693 Rollins v. Quimby, 200 Mass. 162, 86 N. E. 350; Kehl v. Abram, 210 Ill. 218, 71 N. E. 347, 102 Am. St. Rep. 158.

694 Holmes v. Rivers, 145 Iowa, 702, 124 N. W. 801.

695 McKee v. Eaton, 26 Kan. 226.

696 Rohrof v. Schulte, 154 Ind. 183, 55 N. E. 427.

697 Miller v. Wissert, 38 Okl. 808, 134 Pac. 62.

698 Clark v. Thorpe Bros., 117 Minn. 202, 135 N. W. 387; Woteshek v. Neumann, 151 Wis. 365, 138 N. W. 1000; Wright v. United States Mortgage Co. (Tex. Civ. App.) 42 S. W. 789.

§ 117. Same; Constructive Notice and Facts Suggesting Inquiry. We have shown in the preceding sections that, where false and fraudulent representations are made, inducing a party to enter into a contract, he is not chargeable with negligence precluding relief merely because the falsity of the representations could have been discovered by him if he had prosecuted an independent investigation into the subject-matter, which he failed to do. But it must now be added that this rule does not apply where there are facts within the knowledge of the defrauded party of such a nature as to cast grave suspicion on the veracity of the representations made to him, or such that a person of ordinary care and prudence would not be satisfied to rely supinely upon them, without making some effort to probe and test their truthfulness. 699 Thus, for example, if one negotiating for the purchase of property is told that a third person claims to be the owner of it and does not admit the validity of the title of the proposed vendor, it would be gross negligence for him to rely upon such vendor's assurance that his title is good, without further inquiry, and he cannot obtain relief if defrauded thereby.700 A similar rule applies where the purchaser of property at auction is told by the auctioneer, in answer to his own question, that the sale is made without any guaranty except of title,701 where the vendor of property makes no representation as to the quality of the goods, but tells the purchaser to look for himself, which the latter omits to do,702 and where a party to the contract, having made a certain material representation, refuses to sign a written statement to the same effect, while reiterating the assurance verbally given.70 So also,

699 Evans v. Duke, 140 Cal. 22, 73 Pac. 732; Gerner v. Mosher, 58 Neb. 135, 78 N. W. 384, 46 L. R. A. 244; Sloan v. Holcomb, 29 Mich. 153; Kaiser v. Nummerdor, 120 Wis. 234, 97 N. W. 932; Shahan v. Brown, 167 Ala. 534, 52 South. 737; Southern Ins. Co. v. Milligan, 154 Ky. 216, 157 S. W. 37; Veney v. Furth, 171 Mo. App. 678, 154 S. W. 793.

700 Grosjean v. Galloway, 82 App. Div. 380, 81 N. Y. Supp. 871; Moore v. Pooley, 17 Idaho, 57, 104 Pac. 898.

701 Rochel v. Berwick, 12 La. Ann. 847.

702 Badger v. Whitcomb, 66 Vt. 125, 28 Atl. 877.

703 Ettlinger v. Weil, 184 N. Y. 179, 77 N. E. 31, reversing 94 App.

where a vendor and vendee deal on equal terms, papers given to the vendee for the purpose of giving him notice of the quantity of land are sufficient to charge him with notice of facts which such documents set forth.704 Again, it is said that a victim of a fraudulent sale, who has received notice sufficient to put him upon his guard, cannot evade the duty of speedy and diligent inquiry by merely calling on the chief perpetrator, whose interest it is to conceal the facts, to reiterate or prove his false statements; and such reiteration does not prevent the vendee's delay from operating as a ratification of the contract, or interrupt the running of limitations, when a diligent inquiry at independent sources would have fully disclosed the fraud.70 But on the other hand, there is a ruling that knowledge of circumstances tending to disclose the falsity of representations inducing the giving of a note will not prevent one from relying upon the representations, if his confidence in the one making them causes him to rely upon the statement that the fact is otherwise than as indicated by the particular circumstances." 706

705

§ 118. Circumstances Excusing Failure to Investigate. Where a representation is made of a fact (as distinguished from an expression of opinion), and relates to a matter as to which the parties have not equal means of information, but is peculiarly within the knowledge of the person making the representation, the person receiving and acting upon it in the making of a contract has an absolute right to rely on the truthfulness of the representation, and is not required to seek means of information to determine its falsity, although such means are available.707 Under this

Div. 291, 87 N. Y. Supp. 1049. And see Zavala Land & Water Co. v. Tolbert (Tex. Civ. App.) 165 S. W. 28.

704 Boddy v. Henry, 113 Iowa, 462, 85 N. W. 771, 53 L. R. A. 769. 705 Scheftel v. Hays, 58 Fed. 457, 7 C. C. A. 308.

706 Wisegarver v. Yinger (Tex. Civ. App.) 128 S. W. 1190.

707 Tillis v. Smith Sons Lumber Co., 188 Ala. 122, 65 South. 1015; Evatt v. Hudson, 97 Ark. 265, 133 S. W. 1023; Hunt v. Davis, 98 Ark. 44, 135 S. W. 458; Rheingans v. Smith, 161 Cal. 362, 119 Pac. 494, Ann. Cas. 1913B, 1140; Wilson v. Nichols, 72 Conn. 173, 43 Atl. 1052; Thomas v. Grise, 1 Pennewill (Del.) 381, 41 Atl. 883; Smith v. Hopping, 158 Ill. App. 439; Westerman v. Corder, 86 Kan. 239, 119 Pac. 868, 39 L. R. A. (N. S.) 500, Ann. Cas. 1913C, 60;