is in no sense an expression of opinion; his financial status is a fact, and his representation as to that status is the declaration of a fact, though in arriving at such status he must necessarily place valuations on his property.18 And where a person desiring credit, on being asked "how he stood," correctly stated his means, but was silent as to the fact that he owed two-thirds as much as his capital, this was held to constitute a fraud entitling the seller to rescind the sale.19 Where the transactions attacked as fraudulent consist of a number of independent sales extending over a considerable time and not a single transaction, application of the general principles must be applied to each transaction to obtain a proper result; there may be fraud justifying a rescission in one and not in another.20 If the buyer induces the seller by fraudulent representations as to the standing of a third person to accept such third person's note in payment for the goods, the agreement that the note is to constitute a payment is not binding on the seller, but it has been held that where the representations of the buyer, as to the financial condition of such third person, were mere expressions of opinion they do not constitute fraud and afford no ground for relief to the seller. It is also held that a buyer who by fraudulent representations of his solvency induces the seller to sell to him on credit perpetrates a fraud within the meaning of a statute authorizing an attachment to recover debts fraudulently contracted. On account of the divergencies in the laws of different states as to the circumstances under which a seller may rescind the sale and recover the property upon the ground of the buyer's fraud in respect of his financial condition and ability to pay, it sometimes becomes necessary to determine what law shall govern in this respect. There seems to be a tendency upon the part of the courts to refer this question to the law of the place where the executed contract is made.* Wis. 349, 80 N. W. 599, 76 A. S. R. also Thompson v. Peck, 115 Ind. 512, 881. 18 N. E. 16, 1 L.R.A. 201. Notes: 37 Am. Dec. 323; 80 Am. Dec. 268; 18 A. S. R. 362; 26 A. S. R. 566; 14 L.R.A. 264. As to criminal prosecutions for obtaining money or property by false pretenses as affected by a purchase with fraudulent representations of financial condition, see FALSE PRETENSES, vol. 11, p. 848. 18. Gainesville Nat. Bank v. Bamberger, 77 Tex. 48, 13 S. W. 959, 19 A. S. R. 738. 19. Newell v. Randall, 32 Minn. 171, 19 N. E. 972, 50 Am. Rep. 562. 20. Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A. (N.S.) 448. See 1. Hoopes v. Strasburger, 37 Md. 390, 11 Am. Rep. 538; Homer v. Perkins, 124 Mass. 431, 26 Am. Rep. 677; Peters v. Henry, 6 Johns. (N. Y.) 121, 5 Am. Dec. 196. 2. Homer v. Perkins, 124 Mass. 431, 26 Am. Rep. 677. As to the payment of the price generally, see supra, par. 272. 3. Miller v. White, 46 W. Va. 67, 33 S. E. 332, 76 A. S. R. 791. As to grounds for attachment generally, see ATTACHMENT, vol. 2, p. 816 et seq. 4. Perlman v. Sartorius, 162 Pa. St. 320, 29 Atl. 852, 42 A. S. R. 834 (applying the law of Maryland, the place of the sale, as to the effect of a pur 581. Wilfulness of Misrepresentation; Existence of Intention to Pay. It is held that the seller may rescind the sale for fraudulent misrepresentations as to the buyer's solvency though the fraud be not indictable. It has been held that the misrepresentation by the buyer of his financial condition need not be wilful or intended to defraud in order to constitute the fraud which will vitiate the sale." Other cases, however, take the view that the misrepresentation must at least have been knowingly false and it even seems wilfully so.7 And it has been held that an action for deceit will not lie against one for obtaining credit by fraudulently representing that he is "a person safely to be trusted and given credit to." It is not necessary in case of actual misrepresentations to prove that the buyer had no intention to pay, and where goods have been obtained on credit by means of representations known to be false, it is no defense that the purchaser expected to be able to pay for them, and had no intention of subjecting the seller to a loss.10 In this respect a sale of property procured by false representations and a purchase with an existing intent on the part of the purchaser not to pay for the property are distinct, actionable wrongs. The former is complete without the existence of an intent not to pay for the property, and the latter is complete though there is no false representation to induce the sale.11 afford The 582. Time of Representations and Reliance of Seller Thereon.Casual exaggerations of the buyer's financial condition made some time before the sale in question and not in contemplation thereof no ground for the rescission of the subsequent sale.12 false representations by the buyer need not, however, have been made contemporaneously with the sale in order to entitle the seller to rescind; it is sufficient if the goods were obtained by means of the false representations, though they were made on a previous occasion.18 and effect of sales generally, see supra, to what law governs the validity As to place of sale par. 9 et seq. generally, see supra, par. 69 et seq. Cary v. Hotailing, 1 Hill (N. Y.) 5. 311, 10. Atlas Shoe Co. v. Bechard, 102 Me. 197, 66 Atl. 390, 10 L.R.A. (N.S.) 245; Hart v. Moulton, 104 Wis. 349, 80 N. W. 599, 76 A. S. R. 881. Notes: 18 A. S. R. 363; 19 A. S. R. 743. 11. Hart v. Moulton, 104 Wis. 349, 80 N. W. 599, 76 A. S. R. 881. As to 37 Am. Dec. 323; Nichols v. purchases with no intention to pay, see Michael, 23 N. Y. 264, 80 Am. Dec. infra, par. 587 et seq. 259 N 42 6 te: 37 Am. Dec. 323. 12. Arnold v. Hagerman, 45 N. J. Eq. 186, 17 Atl. 93, 14 A. S. R. 712. 13. Atlas Shoe Co. v. Bechard, 102 Me. 197, 66 Atl. 390, 10 L.R.A. (N.S.) 245; Gainesville Nat. Bank v. Bamberger, 77 Tex. 48, 13 S. W. 959, 19 A. S. R. 738. 188, 7 Note: 18 A. S. R. 363. 8 Am 9 N. Note: 10 L.R.A. (N.S.) 245. See infra, par. 585, as to the time One receiving a representation of another's financial standing as a basis of credit, under an agreement that it shall be considered as renewed on the occasion of each purchase until notice from the buyer to the contrary, may rely on it until he has notice from some source which would put him on his guard, and in such a case the fact that the statement was true when made does not prevent a rescission of a subsequent sale made on the faith of it if the statement had become untrue when the sale was made which is sought to be rescinded.14 If the seller does not rely on the false statements of the buyer they will afford no ground for rescission,15 as where he relies as his security for the payment of the price on a provision reserving title in himself to the goods until they are paid for or resold by the buyer.16 This is in pursuance of the general rule that one who claims to have been defrauded by false representations must have acted in reliance on the truth of such representation.17 583. Representations Made to Third Persons Generally.-In order that false representations may support an action of deceit, it is not necessary that they should have been made directly to the complaining party. It is sufficient if they were made to another person with the intention that they should be communicated to the complaining party and acted on by him, and were so communicated and acted on to his injury,18 as where they are made to the seller's agent or clerk and by him communicated to the seller. 19 On the other hand, representations made to a third person not with the view that they shall reach the seller afford the latter no ground for the rescission of the sale.20 584. Representations to Commercial Agency Generally.-A person furnishing information to a commercial credit agency in relation to his own circumstances, means, and pecuniary responsibility can have no other motive in so doing than to enable the agency to communicate such information to persons who may be interested in obtaining it, for their guidance in giving him credit; and if a merchant furnishes to such an agency a wilfully false statement of his circumstances or pecuniary ability, with intent to obtain a standing and credit to which he knows that he is not justly entitled, and thus to defraud whoever may resort to the agency, and, in reliance on the false information of representations made to a com- 47 N. W. 1064, 22 A. S. R. 703. mercial agency. 14. Atlas Shoe Co. v. Bechard, 102 Me. 197, 66 Atl. 390, 10 L.R.A. (N.S.) 245. Note: 10 L.R.A. (N.S.) 245. 15. Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A. (N.S.) 448; Pratt v. Burhans, 84 Mich. 487, 47 N. W. 1064, 22 A. S. R. 703. 16. Pratt v. Burhans, 84 Mich. 487, 17. Pelham v. Chattahoochee Grocery Co., 146 Ala. 216, 41 So. 12, 119 A. S. R. 19, 8 L.R.A. (N.S.) 448. 18. See FRAUD AND DECEIT, vol. 12, p. 363 et seq. 19. Thompson v. Rose, 16 Conn. 71, 41 Am. Dec. 121. 20. Gainesville Nat. Bank v. Bamberger, 77 Tex. 48, 13 S. W. 959, 19 A. S. R. 738. there lodged, extend credit to him, he is liable to an action for deceit,1 and if such an action will lie it will undoubtedly afford ground for rescission by a seller thus imposed on. If the buyer, on request of the seller as to his financial condition, refers him to a report of a commercial agency which he knows is false, though it was not based by the agency on any statement by the buyer, this has been held such fraud as will entitle the seller to rescind. There must be a reliance, by the seller, on the false statements of the buyer, else he is not entitled to relief or redress. If the representation is not communicated to the seller, or if he has no knowledge of it until after the consummation of the contract of sale, clearly he has no right of action or of rescission. It has been held that if a proposed buyer of goods, on the request of a commercial agency, makes a statement of his financial condition which is reported by such agency, together with its own conclusions, to the proposed seller, a sale made on the faith of such report as a whole, and not particularly on the faith of the statement made by the proposed buyer, cannot be rescinded on the mere ground that such statement is false. The fact that a seller receives other information affecting a buyer's standing, after receiving the report of an agency based on the buyer's statements, raises no presumption of law that, in making the sale, he did not rely on the report of the agency. There is authority which seems to take the view that if the buyer's representations to a commercial agency were not made with any intention that persons thereafter selling goods to him would rely on the report of the agency based thereon, but solely for another and not improper purpose, such as to prevent blackmail by third persons, they do not constitute fraud so as to afford ground for the rescission of sale though in fact false and were relied on by the seller. If the report of the commercial agency on the faith of which sale was made by the seller was not based on any statement by the buyer, and the buyer did not refer the seller to such report, its falsity affords no ground for the rescission of the sale.8 . 1. See FRAUD AND DECEIT, vol. 12, 383; 99 A. S. R. 466; 14 L.R.A. 264; p. 365. 2. Fechheimer & Co. v. Baum & Co., 37 Fed. 167, 2 L.R.A. 153; Courtney v. William Knabe Mfg. Co., 97 Md. 55 Atl. 614, 99 A. S. R. 456; 499, 37 L.R.A. 613. 3. Hiller v. Ellis, 72 Miss. 701, 18. So. 95, 41 L.R.A. 707. Note: 85 A. S. R. 383. 5. Poska v. Stearns, 56 Neb. 541, 76 N. W. 1078, 71 A. S. R. 688, 42 L.R.A. 427. Note: 85 A. S. R. 393, 384. Mooney v. Davis, 75 Mich. 188, 42 N 8. Hiller v. Ellis, 72 Miss. 701, 18 585. Representations to Mercantile Agency as Affected by Time of Making. Every variation in a trader's pecuniary circumstances, after having made a statement to commercial agencies, need not be reported to them. If a considerable time elapses, and no new statements are made, it cannot be said that, if his condition is changed, he is guilty of fraud. Unless he knows, or should know, that credit is extended on the strength of the original ratings, or is aware that he will become insolvent, or obliged to suspend, he is not bound to give notice of a change for the worse in his affairs. The view has been taken that, where after a report of the buyer to a commercial agency there is a great change for the worse in his financial standing, it is his duty to notify such agency in order that persons with whom he had had commercial dealings may inform themselves thereof and govern themselves thereby as to the credit they may continue to give.10 Still though representations to mercantile agencies as a basis for obtaining credit are regarded, to some extent, as continuous in their effect, and to afford a basis for fraud, and need not be made at exactly the time of the sale, the better view seems to be that they should be considered as continuing, for a reasonable time only, and some authorities seem to hold that the representations must be connected proximately in point of time with the transaction in which the seller is deceived.11 In the application of the above general rules as to the time of making the representations, it has been held that reliance could be placed on statements made from three months to a year prior to the transaction in question.12 On the other hand, it has been held that reliance may not be placed on statements made to an agency over two years prior to the transaction,13 or even six months.14 586. Representations by Third Persons.-In some of the cases the misrepresentations as to the buyer's financial condition relied on as showing fraud were made by third persons. In such cases if the representations were made in pursuance of a conspiracy on the part of the buyer or with his connivance or sanction, it would be the same as though they were made by the buyer himself. It may happen, however, that they were made without any express sanction on the buyer's part, and it has been held, where the buyer had knowledge at the time of the sale that the representation had been made by the third persons and that the seller was making the sale in reliance thereon, that it then becomes his duty to disclose his true financial condition, as it is a fraud for him to take advantage even of unauthorized mis 9. Note: 85 A. S. R. 385. 42 N. W. 802, 13 A. S. R. 425 (six 10. Mooney v. Davis, 75 Mich. 188, months). 42 N. W. 802, 13 A. S. R. 425. Note: 10 L.R.A. (N.S.) 246. 11. Notes: 85 A. S. R. 385; 10 L.R.A. (N.S.) 247. 12. Mooney v. Davis, 75 Mich. 188, Notes: 85 A. S. R. 385; 10 L.R.A. (N.S.) 246. 13. Note: 85 A. S. R. 385. |