a mistake was one of law has not been considered as necessarily a bar to treating it as a ground for granting relief. * * * Judged by any of the tests above suggested, these defendants were entitled to withdraw from their agreement. Assuming, as the plaintiffs claim, that the agreement covers a division of the estate with them, there was no consideration for the promise. The subject-matter their interest in the estate-had no existence. And they are here seeking relief from a court of equity to the end that they may enforce an equitable bargain. It may be conceded, as the plaintiffs argue, that the rule as to rescission does not apply where the agreement was entered into to settle disputed or doubtful claims. The arrangement here made was not in any sense a settlement of a controversy. It was made because all the parties then supposed that the nephews and nieces were entitled to share in the distribution. There was no difference of opinion which was compromised, but simply a mutual mistake as to their rights in the premises. Believing that all were entitled to share in the estate, the parties made this agreement for the convenient disposal of the property. No action has been taken under the agreement, save the payment of $10 by one of the plaintiffs. By the decree which was entered this is to be returned to him. The contract, if one was made, is still executory. Upon these facts, equity plainly requires the order which was made in the superior court. Exception overruled. SECTION 3.-FRAUD There are few topics of the law which more frequently engage the attention of the courts than that of fraud. Fraudulent practices protrude themselves into every kind of human relationships. The courts are called upon to define what constitutes fraud and to prescribe its legal effects. Fraudulent practices are so infinitely varied that the framing of a definition is next to impossible. Under some circumstances a particular group of acts may constitute fraud, while under different circumstances the same acts would not be regarded as fraudulent. What constitutes fraud depends to a considerable extent upon the nature of the suit and the character of the relief sought. The subject of fraud may become involved in one of three ways: (1) As a defense to an action for breach of contract; (2) as a ground for affirmative relief by way of rescission of a contract or of a transfer of property; and (3) as the ground for affirmative relief for damages in a tort action of deceit. We are interested, primarily, in the subject of fraud as a defense to a contract or as ground for rescinding a contract. Where fraud is relied upon as a defense to an action for breach of contract, we are concerned with a real contract; but the breach of the defendant is justified by proof that the defendant entered into the contract because of the fraud. Sometimes fraud is of such a character that the courts may fairly say that no contract resulted; but in the majority of instances the party knowingly entered into the contract, but would not have done so, if the fraud had not been practiced upon him. Where fraud is relied upon as a ground for seeking affirmative relief against the fraudulent party, the defrauded party is seeking one of two types of relief, and sometimes he seeks both: (1) The defrauded party may desire to have a decree of a court which declares that the particular contract is void; (2) or he may ask that the court grant him a decree which orders the fraudulent party to restore to the defrauded party what he has parted with. Where the defrauded party is asking for a decree that the contract be declared null and void because of fraud, the circumstances will be such that the mere fact that the defrauded party will have a good defense if the fraudulent party should sue him will not be an adequate remedy. Such situations frequently arise in connection with contracts for the sale of land or of deeds to land. Again, the defrauded party may have already parted with the consideration, in which case it is to his interest to rescind the contract; that is, to treat the contract as if it had never existed and ask for a return cf the consideration. Where the defrauded party brings a tort action against the fraudulent party, the contract is only indirectly involved. The gist of the action is the wrong done to the plaintiff, and for this wrong the plaintiff is asking for damages. Generally speaking, a stronger case of fraud must be made out in the tort action of fraud and deceit than is necessary where fraud is relied upon as a defense, or as a ground for a decree declaring the contract void or for a return of the consideration. Fraud has five elements: (1) There must be a false representation of material facts. (2) There must be knowledge, by the party making the assertion, that the facts stated were untrue. (3) The party making the false statement must have had the intention to defraud; that is, he must have intended that the party to whom the untrue statements were made should act upon them as true. (4) The party to whom the false statements were made must have been ignorant of their falsity; that is, he must have relied upon them as true. (5) The party to whom the statements were made must have sustained damage by reason of his reliance upon the untrue statements. At least these five elements are necessary in order to maintain the tort action for fraud and deceit. Where fraud is relied upon as a defense to a contract or as a ground for rescission, it is not necessary to prove that the defrauding party intended to defraud. The contract may be rescinded, or the defense of fraud will be successful, if it be proved that there were misrepresentations of material facts, although such misrepresentations were made innocently. It is apparent that there may be every manner of controversy on the question whether a particular group of circumstances fulfills all of the requisites of fraud. WILSON v. HUNDLEY. (Supreme Court of Appeals of Virginia, 1898. 96 Va. 96, 30 S. E. 492, 70 Am. St. Rep. 837.) * * Action by William Wilson, trustee of the Rivermont Company, for the benefit of creditors, against George J. Hundley, to recover unpaid stock subscriptions. Defendant was induced to subscribe for stock in. the corporation on the fraudulent representation that a certain syndicate had subscribed for a large amount of the stock, and, when informed that the greater part of such subscription was merely optional, he affirmed the contract. RIELY, J. * A contract induced by fraud is not void, but voidable at the option of the party injured by the fraud. Upon the discovery of the fraud, he has, as a general rule, the choice of two remedies: He may elect to rescind the contract, if he can restore what he has received in the same state or condition in which he received it, and sue for and recover back the consideration he has paid or given, or, if he has not paid or given anything, repudiate, the contract, and rely, when sued, upon the fraud as a complete defense; or he may elect to retain what he has received under the contract, and bring an action to recover damages for the injury he has sustained from the deceit. By adopting the latter course, he, in effect, affirms the contract, but not as made in good faith. He consents to be bound by its provisions, but does not thereby release or waive his claim for damages arising from the fraud collateral to the agreement. * * * If, however, the party who has been defrauded elect, on the discovery of the fraud, to affirm the contract, his election is final and conclusive. He has but one election to rescind, and, having once elected to affirm the contract, he cannot thereafter disaffirm it, but must abide by the decision he has made. * * * In Ormes v. Beadel (1861) 30 Law J. Eq. 1, Lord Campbell said: "No case can be found to establish the doctrine that if a voidable contract is voluntarily acted upon, with a knowledge of all the facts, in the hope that it may turn out to the advantage of a party who might have avoided it, he may still avoid it, when, after abiding the event, it has turned out to his disadvantage." * * * [Judgment for defendant reversed.] DAVIS v. BUTLER. (Supreme Court of California, 1908. 154 Cal. 623, 98 Pac. 1047.) Action by H. E. Davis against T. C. Butler. From an order denying a motion for a new trial, defendant appeals. SLOSS, J. On November 7, 1905, the defendant sold to the plaintiff 250 shares of the capital stock of the Salinas Valley Bottling Company, a corporation. In January, 1906, the plaintiff, claiming that he had been induced to buy the stock by means of fraudulent misrepresentations made to him by the defendant, undertook to rescind the agreement of purchase and sale. The defendant refusing to restore the money and property received as the purchase price, the plaintiff brought this action, praying a decree that the agreement be rescinded, and that defendant be required to transfer to plaintiff the property received as the purchase price of the stock upon plaintiff retransferring the 250 shares. of stock. The plaintiff had judgment in the court below. The defendant now appeals from an order denying his motion for a new trial. The Salinas Valley Bottling Company was engaged in the business of bottling and selling beer which it purchased in bulk. Four hundred and thirty shares of its stock, of the par value of $10 each, had been issued. The misrepresentations alleged by plaintiff to have been made by defendant had reference to three matters. The complaint averred that the defendant had stated that the indebtedness of the corporation, over and above the money it then had in bank and solvent credits due to it by its patrons, amounted to the sum of $1,530, and no more, whereas in fact such indebtedness amounted to the sum of $2,963.64. He had represented that the corporation was and had been marketing and selling two car loads of beer per month, whereas in fact it had not been and was not selling more than one car load per month. The third representation relied upon was that the corporation received a net profit of $6.15 per barrel on the beer bottled and marketed by it, when as a matter of fact said net profit did not exceed $3.35 per barrel. ** * A single material misstatement, knowingly made, with intent to influence another into entering into a contract, will, if believed and relied on by that other, afford as complete ground for rescission as if it had been accompanied by a multitude of other false representations. It will hardly be contended that a representation that the indebtedness of the corporation was only $1,530, when in fact it was $2,800, was not material. There are many corporations having assets and conducting a business of such magnitude that a difference, one way or the other, of a few thousand dollars of indebtedness would not appreciably affect the value of their stock. But the Salinas Valley Bottling Company had a total outstanding issue of only 430 shares, of the par value of $10each. The sale to plaintiff embraced 250 shares at par. The difference between $1,530 and $2,800, if apportioned among the outstanding shares of stock, amounts to almost $3 for each of the 430 shares. Such a discrepancy, having a close relation to the value of the stock, would certainly be material in a transaction based on a selling price of $10 per share. * * * * * * * * * The rule that a party may not complain of misrepresentations regarding matters which he has investigated, or, having the opportunity so to do, has begun to investigate for himself. has no application here. While the plaintiff, before purchasing, looked over the books of the corporation, the court finds that defendant stated to plaintiff that neither he nor the corporation kept any books of account showing the corporate indebtedness. The plaintiff was fully justified in relying upon defendant's statements as to such indebtedIt is not essential to the right to rescind a contract for the purchase of property that the purchaser should be able to show that the property purchased was worth less than he paid for it. It is enough that he was induced, by false representations, to buy property which would, if the representations had been true, have been worth more than it actually was worth. ness. * * * * * * The sale to plaintiff was made on November 7, 1905. The notice of rescission was given on January 11, 1906, and the complaint filed on January 18, 1906. The court found that plaintiff did not delay an unreasonable time in electing to rescind the contract after discovery of the falsity of the defendant's representations. This finding cannot be said to be contrary to the evidence. * * * (Supreme Court of Illinois, 1909. 241 Ill. 521, 89 N. E. 651, 24 L. R. A. [N. S.] 735.) Suit by James B. Miller against Milton Sutliff and others. From a decree dismissing the bill for want of equity, on sustaining a demurrer thereto, complainant appeals. CARTWRIGHT, J. James B. Miller filed his bill of complaint in the circuit court of Peoria county against Milton Sutliff, Dwight R. Chapman, Moses J. Richards and their unknown heirs, and Augustus E. Scott, praying the court to set aside a deed made by the complainant to Sutliff, Chapman, and Richards of the undivided one-half of the coal and mineral underlying the lands of the complainant, and a deed of the same made to said Augustus E. Scott, and to declare the same void and a cloud upon complainant's title. *** The material facts alleged in the bill and admitted by the demurrer to be true are as follows: * * * On October 1, 1869, the complainant was the owner and in possession of 900 acres of land in Peoria county, under which there were deposits of coal. On that day the complainant, with his wife, executed a deed to Milton Sutliff, Dwight R. Chapman, and Moses J. Richards, three of the defendants, conveying the undivided one-half of all the coal and other minerals under said lands. The deed recited a consideration of $400, and that it was made in pursuance of a contract subsisting by and between the complainant and Chapman and Phillips and by them performed. There was, in fact no consideration paid, but the complainant was induced to make the deed by representations and promises of said defendants made first at a meeting at the farm of one of his neighbors, and afterward at a meeting held at a public school house, and finally when the conveyance was made. The representations were that said defendants were the owners of large foundries, smelters, coke ovens, and iron mills near Youngstown, Ohio; that they were men of large means and resources; that the supply of coal such as was used in their industries had practically become exhausted at their present location, necessitating a removal of the industries; and that they would remove the industries to complainant's locality if they could find and obtain in sufficient quantities a suitable kind of coal. These representations were first made to secure the privilege of boring and prospecting for coal, and, after prospecting and making borings, said defendants stated that they had found suitable coal in sufficient quantities, and, if the complainant and his neighbors would convey to them the undivided one-half of the coal and other minerals underlying their lands, they would immediately remove their plants and industries to the locality, and would employ a great number of men and build a railroad giving facilities for transportation. They represented to the complainant that, if he would make the conveyance, they would locate one of their plants upon his premises and the remainder in the vicinity, and would proceed at once toward opening up mines on his land. The complainant relied upon the representations and executed the deed, but said defendants * * * * |