57

of record, and the other in which an action was held to lie for a representation as to the number of yards of carpet upon a floor to which the purchaser had access for measurement.58 Of course, where the person relying upon statements is not in a position to ascertain their truth or falsity, or when the one making them is in a greatly better position to know, reliance may of right be placed therein."

59

§ 727. Right to Rely Continued-Conduct of Person Deceiving as Affecting. Likewise, one cannot complain of the fact that another has relied upon his misrepresentations when he has put forth efforts to prevent such other from inquiring and informing himself as to frustrate any attempts to ascertain the truth.60 Thus, asking that the purchaser of stock do

57 Grimes v. Kimball, 3 Allen 518, 523. See sec. 738, post, in Sales of Real Estate.

58 Lewis v. Jewell, 151 Mass. 345, 21 Am. St. Rep. 454, 24 N. E. 54.

59 Holst v. Stewart, 161 Mass. 516, 42 Am. St. Rep. 443, 37 N. E. 755; Handy v. Waldron, 18 R. I. 567, 49 Am. St. Rep. 794, 29 Atl. 143; Cressler v. Rees, 27 Neb. 515, 20 Am. St. Rep. 691, 43 N. W. 363; McKinnon v. Vollmar, 75 Wis. 82, 17 Am. St. Rep. 178, 43 N. W. 800; Cottrill v. Krum, 100 Mo. 397, 18 Am. St. Rep. 549, 13 S. W. 753. "Where the representations relate to a material fact within the knowledge of the person making them, or which he assumes to assert from personal knowledge, and with respect to which the person to whom the representations are made has not the present opportunity to test or verify, the latter has the right to rely upon such representations, and in the absence of facts apparent to reasonably arouse suspicion and throw doubt upon the truth of the statements, he is not bound to go further and make inquiries in respect thereof": Endsley v. Johns, 120 Ill. 469, 60 Am. Rep. 572, 12 N. E. 247; Camp v. Camp, 2 Ala. 632, 36 Am. Dec. 423.

60 Stewart v. Stearns, 63 N. H. 99, 56 Am. Rep. 496; Chrysler v. Canaday, 90 N. Y. 272, 43 Am. Rep. 166; Kenner v. Harding, 85 Ill. 264, 28 Am. Rep. 615; Brotherton v. Reynolds, 164 Pa. St. 134, 30 Atl. 234; Hanscom v. Drullard, 79 Cal. 234, 21 Pac. 736; Nysewander v. Lowman, 124 Ind. 585, 24 N. E. 355; Casterholz v. Heller, 82 Wis. 30, 51 N. W. 432; Campbell v. Hillman, 15 B. Mon. 508, 61 Am. Dec. 195, Harris v. Mullins, 32 Ga. 704, 79 Am. Dec.

not investigate its security because of the seller's desire to keep his intended sale from the knowledge of other stockholders," showing a purchaser of timber through thickly-wooded portions of a tract and stating that such parts were a fair average of the whole,62 and the employment of apparently disinterested confederates, are instances of artifices which have been employed to aid misrepresentations.

§ 728. Right to Rely Continued-Where Confidential or Fiduciary Relation Sustained.-Again, the principle is well established that one who occupies a fiduciary or confidential relation toward another is in duty bound to speak the truth in all matters concerning transactions between them.04 The moral principle underlying this rule applies as well to instances in which confidence or trust is placed in one by another from necessity, 65 and where confidence is known to be reposed in one's statements, although no technical confidential relation exists,66 as to the true fiduciary relations recognized in law as such. Thus two children who have been cared for by an aunt, and whose affection she possessed, are not negligent in failing to read a deed of their property to her which she and her attorney represent to be merely a power of attorney for the collection of rents.67

61 Nysewander v. Lowman, 124 Ind. 585, 24 N. E. 355.

63

62 Brotherton v. Reynolds, 164 Pa. St. 134, 30 Atl. 234. Chrysler v. Canaday, 90 N. Y. 272, 43 Am. Rep. 166. 64 See c. 9.

65 Atwood v Chapman, 68 Me. 38, 28 Am. Rep. 5; Endsley v. Johns, 120 Ill. 469, 60 Am. Rep. 572, 12 N. E. 247; Picard v. McCormick, 11 Mich. 68.

66 Smith v. Smith, 134 N. Y. 62, 30 Am. St. Rep. 617, 31 N. E. 258; Bean v. Herrick, 12 Me. 262, 28 Am. Dec. 176; Kilgore v. Bruce, 166 Mass. 136, 44 N. E. 108; Eaton v. Winnie, 20 Mich. 156, 4 Am. Rep. 377.

67 Smith v. Smith, 134 N. Y. 62, 30 Am. St. Rep. 617, 31 N. E.

§ 729. Right to Rely Continued-Failure to Make Personal Investigation. Further than this, many cases have almost repudiated the doctrine that it is negli gent to fail to make personal investigations, and such courts hold that when positive assertions of fact as upon personal knowledge may be relied upon by those to whom they are made for the purpose of inducing action, and such reliance will not be considered negligence.68 These cases are for the most part late ones, and represent a decided departure from the early stringent rule." The reason assigned for such doctrine is that negligence has no place in fraud. If one makes a positive statement of fact, with the intention of causing another to act in reliance upon it, he cannot be heard to deny the right of such other to so rely on his representation. Hence the question under the modern theory in regard to statements of fact is not so much with regard to the right to rely as concerning actual reliance. The inference of actual reliance, however, is subject to rebuttal by proof of personal examination, actual knowledge, or unobstructed opportunity for observation. But it would undoubtedly seem to be the law that the one relying can be imprudent or careless in many instances, but must so conduct himself as that his reliance to his damage cannot be attributable to his own conduct. This we consider later." The obser

70

68 Lahay v. City Nat. Bank, 15 Colo. 339, 22 Am. St. Rep. 407, 25 Pac. 704; Cottrill v. Krum, 100 Mo. 397, 18 Am. St. Rep. 549, 13 S. W. 753; Smith v. Smith, 134 N. Y. 62, 30 Am. St. Rep. 617, 31 N. E. 258: Linington v. Strong, 107 Ill. 295; Roberts v. French, 153 Mass. 60, 25 Am. St. Rep. 611, 26 N. E. 416; Wilson v. Carpenter, 91 Va. 183, 50 Am. St. Rep. 824, 21 S. E. 243; Olcott v. Bolton, 50 Neb. 779; Barndt v. Frederick, 78 Wis. 1, 47 N. W. 6.

69 "Recent authority has gone far toward settling the matter right in principle; the proposition has now become very widely accepted at law as well as in equity, at least as general doctrine that a man may act upon a positive representation of fact notwithstanding the fact that the means of knowledge were specially open to him": Bigelow on Fraud.

70 See sec. 732, post.

vation may be made as to the authorities supporting the rules stated in this section that it will be found upon investigation that the complaining persons in the cases sustaining the rule were justified in their conduct in relying upon the representations.

§ 730. False Representation Must be Material.-The rule is so familiar and fundamental that the representation claimed to be false must be material in the transaction, that its bare statement in this connec tion is all that need be made. The false representations must be of material facts calculated to deceive and induce one to rely and act upon the same.71 Representations as to matters which are merely collateral, and do not constitute essential elements in the transaction are not sufficient.72 The representation need not be the sole inducement to the person acting thereon.73 A representation as to the price paid for land where complaint is made of fraud in the sale of land,74 or representations as to matters of a purely collateral character,75 are not material misrepresentations. But representations as to the condition or quality of property,78 or a statement that a certain man of means and character is a member of a company made to induce another to subscribe to the capital stock," or representations to the

71 Crocker v. Manley, 164 Ill.. 282, 56 Am. St. Rep. 196, 45 N. E. 577; Pennsylvania Ins. Co. v. Crane, 134 Mass. 56, 45 Am. Rep. 282; Heddin v. Davis,136 Mass. 229, 49 Am. Rep. 25; Dawe v. Morris, 149 Mass. 188, 14 Am. St. Rep. 404, 21 N. E. 313; Lebby v. Ahrens, 26 S. C. 275, 2 S. E. 387; Williams v. McFadden, 23 Fla. 143, 11 Am. St. Rep. 345, 1 South. 618; Snively v. Meixsell, 97 Ill. App. 365.

72 Heddin v. Davis, supra.

73 Morgan v. Skiddy, 62 N. Y. 319; Hindman v. First Nat. Bank, 112 Fed. 931.

74 Hemmer v. Cooper, 90 Mass. (8 Allen) 334.

75 Heddin v. Griffin, 136 Mass. 229, 49 Am. Rep. 25.

76 Busterud v. Farrington, 36 Minn. 320, 31 N. W. 360.

77 Lebby v. Ahrens, 26 S. C. 275, 2 S. E. 387.

effect that goods are manufactured in a number of places made for the purpose of securing the services of a person as an agent,78 are illustrations of material representations. It does not seem necessary to multiply illustrations upon this subject, as the ques tion of the materiality of a representation is a question of fact dependent upon the particular circumstances.

§ 731. Representation Must Proximately Cause Injury. To give rise to a right of action the false representation must be the direct proximate or immedi ate cause of the injury. It must be the very ground on which the transaction has taken place.79 The same principle is involved in the matter of the reliance upon the representations already considered.80

§ 732. Party Complaining Must be Prudent and Cautious. The same general principle applies and governs in this class of injuries as in other branches of the law, viz., the complaining party in an action of deceit must show that he has been prudent and careful, and that he has not been misled through any fault or neglect on his part. He must show that he has not omitted to exercise ordinary care to guard against deception and fraud, except where he may have been led to do so by the other party. This finds frequent application in sales in which cases a buyer cannot complain of deception as to the quality of goods sold, where the same are open to his own observation and with ordinary diligence and prudence he could have ascertained it.82 Where the means of

78 Porter v. Stone, 62 Iowa, 442, 17 N. W. 654.

81

79 Dawe v. Morris, 149 Mass. 188, 14 Am. St. Rep. 404, 21 N. E. 313; Adams v. Schiffer, 11 Colo. 15, 7 Ám. St. Rep. 202, 17 Pac. 21. 80 Ante, secs. 726-729.

81 Schwabacker v. Riddle, 99 IN. 343.

82 Brown v. Leach, 107 Mass. 364; Rockafellow v. Baker, 41 Pa. St. 319, 80 Am. Dec. 624.