PART EIGHT. CHAPTER XLIV. INJURY TO RIGHTS IN GENERAL-BY FRAUD AND DECEPTION. 712. Introductory. $ 713. Fraud defined. § 714. Instances of fraud present different elements, and kinds § 718. § 719. Same continued-Must cause damage or injury. § 722. Knowledge Is actual knowledge and intent essential. § 723. Knowledge of falsity continued-Rule when false warranty § 726. Right to rely continued-Negligence of the one relying. § 727. Right to rely continued-Conduct of person deceiving as affecting. 728. Right to rely continued-Where confidential or fiduciary re lation sustained. 8729. Right to rely continued-Failure to make personal investi gation. § 730. False representation must be material. § 731. Representation must proximately cause injury. Party complaining must be prudent and cautious. 732. § 733. § 740. Fraud in sales of personalty-Purchase with no intention to pay-Remedy. Torts, Vol. II—86 (1361) § 712. Introductory.-In this part and chapter of our work will appear to be a departure from the plan to which we have adhered so far. After the discussion of the general principles pertinent to all torts, and an exposition of the variations of the liability of the normal person consequent upon the difference in capacity and ability of persons through various relationships and conditions, we have endeavored to discuss the subject of the torts themselves from the standpoint of the rights which they violate. Our treatment of the specific wrongs has not been divided according to the wrongs themselves, nor upon the basis of the various modes in which they may be perpetrated, but we have pursued the plan of presenting the various legal rights of persons, and then showing the modes in which they may be violated. The following chapter will take up a certain field of torts from the opposite side of the picture, and will contain a general treatment of the subject of fraud, one of the modes in which legal rights may be injured. Our excuse for thus departing from the logical plan previously pursued must be twofold. In the first place, the rights injured are so numerous and many of so indefinite a nature as to render their treatment in any other manner impossible. Secondly, the subject of fraud has assumed such importance of late, and, as one learned author has remarked, "is at once the most subtile and the most threatening evil of the times,"1 so that a separate treatment of it as a method of committing torts is both advisable and couvenient. 713. Fraud Defined.-Fraud, while the occasion of a considerable amount of attention at the hands of the courts, has received but scant notice by textwriters. Early judges and authors, while recognizing 1 2 Bigelow on Fraud (Preface), p. x. its importance in legal relations, have avoided framing definitions, because the multitude of forms in which it finds scope for its evils seem to render it impossible that all could be brought within one principle. A further reason has been assigned, that it is imprudent to frame a definition, lest some ingenious scoundrel should discover some means of effecting his ends in a manner not included in the form given. Later authors have displayed great ingenuity in devis ing expressions and divisions to corral the ideas of fraud embodied in the multitude of decisions, but it would seem that the simpler definitions are the better. Fraud is divided into actual and constructive fraud. Actual fraud finds relief in law, while constructive fraud is remediable in equity. Actual fraud, at law, may be defined as injurious deception, intentionally accomplished through statements, actions or concealments upon which the person misled had the right to rely, and did rely to his damage. Other definitions are given in the note.2 Not only are all the essentials included in the definition, but all are essential to constitute fraud. Thus, there must be present deception, injury, the injury must flow from the deception, the latter must have been intended to follow from the statements, actions or silence, and the representations must be such as the one deceived had the legal right to rely upon. Without deception, or injury, or intention, or the right to rely on representations made or without the proximate causal relation between the representations and the injury through deceit, no fraud exists. In all 2 "It may be safely averred, that all deceitful practices in depriving or endeavoring to deprive another of his known right by means of some artful device or plan contrary to the plain rules of honesty, is fraud": Mitchell v. Kintzer, 5 Pa. St. 216, 47 Am. Dec. 408. Fraud or deceit consists in a false representation of a fact with knowledge of its falsity, to one who is ignorant of its falsity, with intent that it shall be acted upon, where the person to whom it is made acts upon it, and by so doing suffers injury. 3 instances of fraud will be found injury flowing from deception intentionally produced. The same mental effects are present in all frauds. It is frequently asserted that equity will not encompass fraud by a definition. Says one learned writer: "It is utterly impossible to formulate any single statement which shall accurately define the equitable conception of fraud, and which shall contain all of the elements which enter into that conception; these elements are so various, so different under the different circumstances of equitable cognizance, so destitute of any common bond of unity, that they cannot be brought within any general formula."4 § 714. Instances of Fraud Present Different Elements and Kinds of Fraud.-The instances of fraud present different modes of suffering injury, different methods of inducing deceit, and different circumstances giving rise to a right to believe in representations. Deception, injury, intention to deceive, modes of deceiving, and classes of instances giving rise to the right to rely on representations of others will be discussed in this chapter. Besides actual fraud, a number of instances of injustice have been classed under the head of constructive fraud. In these will be found to be lacking the element of intention, and in some even that of deceit and consequent loss. These elements are presumptively present, but may none of them be present, and yet the act be characterized as fraudulent. Of this class are dealings by trustees with trust property. In other cases, while there is present an intention to cause loss, it is not an intention to deceive, because it is not made to induce action, nor, on the other hand, does it induce action because 3 A false statement intentionally and knowingly, or fraudulently, made, constitutes fraud: Linscott v. Orient Ins. Co., 88 Me. 497, 51 Am. St. Rep. 435, 34 Atl. 405. 4 Pomeroy's Equity Jurisprudence, sec. 873. it occurs subsequently to the act of the defrauded party; and lastly, the instances are confined entirely to actions and not representations. In this is included fraudulent conveyances. These "constructive" frauds do not belong to the field of wrongs ex delicto, but are properly only consid ered in equity. § 715. How Treated in Law and in Equity.—It would seem that a definition, containing all of the essential elements of the wrong, may be framed, which applies equally to the redress of rights either in law or in equity, and that there is nothing in the contention that a definition, if sufficiently general, will hamper redress in equity, because of the numerous forms of fraud. It must be admitted that there is a marked difference in the manner of practicing the fraud or deception, in the frauds redressible in law, and in equity. Fraud in law, and for which redress in damages is afforded, is intentional, or acts tantamount to intentional, while "fraud in equity includes all willful or intentional acts, omissions, and concealments which involve a breach of either legal or equitable duty, trust, or confidence, and are injurious to another, or by which an undue or unconscientious advantage over another is obtained."5 Fraud, in equity, however, is generally not inten tional falsehood, as it must be in law, but, on the contrary, consists in a breach of duty, or in taking advantage of a confidential relation, or in such acts or omissions as the law declares to be fraudulent in the absence of intentional falsehood or deception. It must be remembered, though, that equity has an original inherent and independent jurisdiction to relieve against every species of fraud, actual or constructive." 5 2 Pomeroy's Equity Jurisprudence, sec. 873; 1 Story's Equity Jurisprudence, sec. 187. 6 Wampler v. Wampler, 30 Gratt, 451. See Holcomb v. Noble, 69 Mich. 397, 37 N. W. 497. |