a fictitious credit with the seller by making false returns of property for taxation,188 or if, about the time of the delivery of the goods, he executes a judgment note and a bill of sale to a creditor, which practically closes up his business.184

Finally, if a sale of chattels was induced and procured by means of false and fraudulent representations made by the buyer, this alone constitutes a sufficient ground for the seller to rescind and reclaim his goods, without the necessity of showing that the purchaser did not at the time intend to pay for them, and even though, as a matter of fact, the purchaser did actually expect and intend to pay, his purpose in this respect being immaterial.185 "Where a sale of goods is induced by false and fraudulent representations, intention to pay for them does not sanctify the fraud, and the party defrauded is entitled to rescind without regard to such intention. In such a case of active and aggressive fraud, the question whether or not the wrongdoer intended to pay is immaterial." 186 It is said, however, that the false representations or statements must have been made to the particular vendor, and it is not enough for him to show a general scheme to defraud creditors.187

§ 32. Frauds by Agents and Other Third Persons.-A contract or conveyance may be rescinded for fraud, although the principal in the transaction was not personally guilty of any fraud, where fraud was practised by his agent or representative or by a third person, and the principal either procured or authorized it or knowingly took the benefit of it, or if the agent was acting in the ordinary course

183 Seisel v. Wells, 99 Ga. 159, 25 S. E. 266.

184 Bughman v. Central Bank, 159 Pa. 94, 28 Atl. 209.

185 Ellet-Kendall Shoe Co. v. Ward, 187 Fed. 982, 110 C. C. A. 320; La Salle Pressed-Brick Co. v. Coe, 65 Ill. App. 619; Atlas Shoe Co. v. Bechard, 102 Me. 197, 66 Atl. 390, 10 L. R. A. (N. S.) 245; Gallipolis Furniture Co. v. Symmes, 10 Ohio Cir. Ct. R. 659; Hart v. Moulton, 104 Wis. 349, 80 N. W. 599, 76 Am. St. Rep. 881; In re Hamilton Furniture & Carpet Co. (D. C.) 117 Fed. 774; Judd v. Weber, 55 Conn. 267, 11 Atl. 40.

186 In re Hamilton Furniture & Carpet Co. (D. C.) 117 Fed. 774. 187 In re O'Connor (D. C.) 112 Fed. CC6. But compare In re Johnson (D. C.) 208 Fed. 164.

of his business and employment.188 "Deceits and frauds practised by agents do not fall upon the principal unless the principal adopts and takes the benefit of the fraudulent act with knowledge of the fraud, or unless the fraud was committed by the agent in the transaction of the ordinary business of the principal. The general rule is that the master is answerable for every such wrong of the servant or agent as is committed in the course of the service and for the master's or principal's benefit, though no express command or privity by the master or principal be proved." 189 And where a principal and agent jointly participate in and share the fruits of actionable fraud, they are jointly liable for the resulting damages. 190 Thus, a person who has been induced to purchase shares of stock in a corporation by the fraud of the agent of the company, has a remedy by rescission of his contract of purchase and reclamation of the money he has paid. But "if he is once debarred from seeking that relief by the declared insolvency of the company or from any other cause, there is no other remedy open to him except to bring a personal action against the agent who has been actually guilty of the fraud." 191 The rule also applies to sales of property at auction. Standing by and hearing the auctioneer make a false statement concerning the property, without correcting him, constitutes an acquiescence on the vendor's part in the false statement made by the auctioneer, and is an active fraud.192 So, where the agents for the sale of land conceal from the purchaser the fact that they are part owners of the land, and instead express an intention to purchase an interest themselves upon the same terms as are offered to the purchaser, such representations will constitute such a fraud as will avoid the

188 Felt v. Bell, 205 Ill. 213, 68 N. E. 794; McDonald v. Metropolitan Life Ins. Co., 68 N. H. 4, 38 Atl. 500, 73 Am. St. Rep. 548; Rankin v. Rankin (Tex. Civ. App.) 134 S. W. 392; Porter v. O'Donovan, 65 Or. 1, 130 Pac. 393.

189 2 Add. Torts (Wood's edn.) § 1197, citing Udell v. Atherton, 7 Hurl. & N. 181; Barwick v. English Joint Stock Bank, L. R. 2 Ex. 259; Bostock v. Floyer, L. R. 1 Eq. Cas. 26.

190 Dresher v. Becker, 88 Neb. 619, 130 N. W. 275.

1911 Benj. Sales, § 709.

192 Dayton v. Kidder, 105 Ill. App. 107.

sale.19:

But the mere fact that a vendor paid to his agent a very liberal commission for making the sale does not necessarily show that fraud was practised on the purchaser. 194

On the other hand, a party to a contract cannot have it set aside for fraud practised upon him by a third person, not the agent of the other party, where such other did not instigate the fraud nor participate in it, and did not knowingly take a benefit or gain attributable to it.195 Thus, in one of the cases it appeared that the plaintiff was induced by his co-owners to convey his one-third interest in certain mining property, they representing to him that the entire property was to be sold for $8,000, whereas in fact, by a secret agreement with the purchaser, they were to receive, in addition to their share of the purchase price, $20,000 in capital stock of a corporation to be organized to work the property. The purchaser had knowledge of the fraud thus practised upon the plaintiff by his co-owners, but he did not participate in the deception, nor did he benefit by it, since the concealment did not enable him to acquire the property at any better price, nor otherwise operate to his advantage. And it was held that the relation of the purchaser to the plaintiff was different from that of the coowners, and that a judgment against him for a proportionate share of the stock issued was wrong.196 And again, the fact that the organizers of a syndicate for the purpose of buying land were also agents for the sale of the land will not avoid the sale, where the vendor had no knowledge of such syndicate.197 In another illustrative case, it was

193 Wren v. Moncure, 95 Va. 369, 28 S. E. 588.

194 Brackett v. Carrico, 18 Ky. Law Rep. 874, 38 S. W. 694. 195 Cason v. Cason, 116 Tenn. 173, 93 S. W. 89; Robinson v. Glass, 94 Ind. 211. This is also the rule by statute in Louisiana. "If the artifice be practised by a party to the contract, or by another with his knowledge or by his procurement, it vitiates the contract; but if the artifice be practised by a third person, without the knowledge of the party who benefits by it, the contract is not vitiated by the fraud, although it may be void on account of error [mistake] if that error be of such a nature as to invalidate it; in this case, the party injured may recover his damages against the person practising the fraud." Rev. Civ. Code La., § 1847.

196 Upton v. Weisling, 8 Ariz. 298, 71 Pac. 917. 197 Quinlan v. Keen, 72 Ill. App. 129.

shown that the defendant was induced to purchase a worthless tract of land by extravagant assurances as to the existence and value of mineral veins supposed to underlie it. These representations were made by a person who professed to be able to detect the presence of minerals by the "impressions produced by passing over the place." Also a spiritualistic medium had advised the purchase. The evidence seemed to show that the vendor knew of the influences at work upon the purchaser, and that he took advantage of them to demand an extravagant price for the land, but aside from this, no fraud was brought home to him. was held that these facts constituted no defense to a suit to foreclose a purchase-money mortgage.198 On the same principle, if a husband practises fraud, compulsion, or undue influence upon his wife, to induce her to execute a deed or a mortgage of her property, it cannot avail her against the grantee or mortgagee, if the latter did not instigate or participate in the fraud or improper influence.199

§ 33. Agent Wrongly Exceeding Authority.—Where an agent, in making a contract with a third person, wrongly exceeds his authority or acts contrary to his instructions, it constitutes a constructive fraud against his principal, and may make him liable in damages to the latter.200 But it does not necessarily follow that the principal will be entitled to rescind the contract as against the other party to it. That must in general depend upon whether or not the latter had knowledge of the wrong done by the agent and meant to profit by it.201 Thus, an action cannot be maintained to cancel a policy of fire insurance at the instance of the company, as having been obtained by fraud, after a

198 Law v. Grant, 37 Wis. 548.

199 Mohr v. Griffin, 137 Ala. 456, 34 South. 378; Butner v. Blevins, 125 N. C. 585, 34 S. E. 629; Shell v. Holston Nat. B. & L. Ass'n (Tenn. Ch. App.) 52 S. W. 909; Walker v. Nicrosi, 135 Ala. 353, 33 South. 161. But see Cage v. Perry (Tex. Civ. App.) 142 S. W. 75. 200 As where a broker, by certain representations to a customer, succeeded in selling him a piece of land for a price greater than that asked by the owner, and kept the difference. He was held guilty of fraud and deceit, making him liable to the customer. Hokanson v. Oatman, 165 Mich. 512, 131 N. W. 111, 35 L. R. A. (N. S.) 423.

201 Morton v. Morris, 27 Tex. Civ. App. 262, 66 S. W. 94. And see Schultz v. McLean (Cal.) 25 Pac. 427.

203

loss has occurred, on the ground that the agent of the company who wrote the policy was not permitted to insure property at the particular place, where the assured shows that he had no knowledge of any such limitation on the agent's powers and took out the policy in good faith.202 So, where an agent made a contract to sell land to defendant at a price less than what he was authorized to take, and he had sold other land in the same survey for the same owners and had acted as their agent for years, and the defendant, supposing that the agent had full authority to sell on the terms agreed, occupied the land for a year, making valuable improvements thereon, without being notified that the contract was invalid, it was held that, if the owner refused to accept the contract as made by his agent, defendant was entitled to be compensated for his improvements.2 On the other hand, however, in a case in Mississippi, where the agent of a water company, without authority, executed a contract to furnish water at rates below the company's regular tariff rates, it was held that the court of chancery had jurisdiction of a suit to cancel the contract, although the complainant could obtain redress by refusing to carry it out.2 204 And so, where a deed to land by an agent is void for want of written authority on his part to fill in a blank left for the name of the grantee, the grantee should not be adjudged to reconvey the land, but he should be ordered to deliver up the deed for cancellation, as the deed, being void in its inception, conveyed no title.205 Naturally the other party to the contract may rescind it when he finds that the agent with whom he has been dealing has exceeded or contravened his authority. But it is no ground for the rescission of a contract for the sale of land that one who sold the land as agent had no authority to act, if the principal ratifies his act and is able and willing to make title.20 § 34. Collusion with Agent of Other Party. If one of the parties to a business transaction does not deal directly

202 Phoenix Ins. Co. v. Smith, 95 Miss. 347, 48 South. 1020. 203 Van Zandt v. Brantley, 16 Tex. Civ. App. 420, 42 S. W. 617. 204 Meridian Water Works Co. v. Marks (Miss.) 16 South. 357. 205 Upton v. Archer, 41 Cal. 85, 10 Am. Rep. 266.

206 Alderson v. Harris, 12 Ala. 580.

206