There is no deceit, and therefore no ground of action, unless the defendant had knowledge of the falsity of his representations. If the defendant acted with reasonable care and good faith, in making his representations, he is not liable for misstatements which he may accidently have made.18

17 Lockbridge vb. Foster, 4 Scannon, 569.

In an action for deceit, however, the necessity for proving the knowledge of the falsity of the statement by the defendant, can be fulfilled by showing either:

(a) That the defendant actually knew the statement to be false;

(b) That he made the statement recklessly, without taking pains to ascertain whether it was true or false;

(c) That he made the statement positively, when in fact it was only a matter of opinion; or

(d) That the defendant stood in such a relation to the subject-matter that it was his duty to know the truth concerning the matter.19

These various methods of satisfying the requirement for knowledge on the part of the defendant, are discussed in Smith vs. Richards,20 already quoted in this chapter: "Whether the party thus misrepresenting a fact, knew it to be false, or made the assertion without knowing whether it were true or false, is wholly immaterial, for the affirmation of what one does not know, or believe to be true, is equally, in morals and law, as unjustifiable as the affirmation of what is known to be positively false. And even if the party innocently misrepresents a fact by mistake, it is equally conclusive, for it operates as a surprise and imposition on the other party. Or as Lord Thur-low expresses it, in Neville vs. Wilkinson, 'it misleads the parties contracting, on the subject of the contract.'

18 Toner vs. Menssdorffer, 123 Cal., 462; 56 Pac, 39; Davidson vs. Jordan, 47 Cal., 351; Cornell vs. El Paso Gold Min., etc., Co., 78 Pac., 677; Holdon vs. Aver, 110 111., 448; Riley vs. Bell, 120 Iowa, 618; 95 N. W., 170.

19 Some decisions, however, nave held that actual knowledge of the falsity of the statement is absolutely essential. Warfield vs. Clark, 118 Iowa, 69; 91 N. W., 833; Boddy vs. Henry, 113 Iowa, 462; 85 N. W., 771; 53 L. R. A., 769; Watson Coal, etc., Co. vs. James, 72 Iowa, 184; 33 N. W., 622. 20 13 Peters, 26.

"The author of the treatise last cited thus states the modifications of the doctrine:

"The misrepresentation must be of something material, constituting an inducement, or motive to the act, or omission of the other, and by which he is actually misled to his injury.

"In the next place, the misrepresentation must not only be in something material, but it must be in something, in regard to which the one party places a known trust and confidence in the other. It must not be a mere matter of opinion, equally open to both parties for examination and inquiry; and which neither party is presumed to trust to the other, but to rely on his own judgment.

" The doctrine of these text writers is illustrated by the cases in the books, some of which present very strong applications of it; for it is held to extend not only to the parties to the contract, but also to others, who, from gross negligence, are guilty of misrepresentation. Thus, for example, in the case of Pearson vs. Morgan (2 Brown's Ch. Cases, 385), where A, being interested in an estate in fee, which was charged with £8,000 in favor of B, was applied to by C, who was about to lend money to B, to know whether the £8,000 was still a subsisting charge on the estate. A stated that it was, and C lent his money to B accordingly. It appeared, afterwards, that the charge had been satisfied, yet it was held that the money lent was a charge on the lands in the hands of A's heirs, because he either knew, or ought to have known the fact of satisfaction, and his representation was a fraud on C.

"Of a similar character was the case of Hobbs vs. Norton (1 Ver., 136), where one entered into an agreement for the purchase of an annuity, charged on the lands of a third person, and was encouraged in the course of the transaction by the latter, who suggested his own title, and it afterwards appeared that such title was of a nature to have enabled the owner to avoid the annuity; yet he was, as to the purchaser, held under an obligation to confirm it.

"Cases of this class present the principle in its strongest aspect; because in these cases, the parties making the representation were bound by it to prevent a loss to others, although they themselves derived no advantage from it; whereas, in those instances in which the parties to the contract made the representation, they would receive benefit to the amount of the loss which the misrepresentation would produce to the other party, who acted on the faith of it; if the court did not relieve against it.

"This principle has been adopted in the courts of our own country. In Fulton's Executors vs. Roosevelt (5 Johns Ch. Rep., 174), the case was this: Fulton was induced by the representations of Roosevelt that he had discovered a valuable coal mine on the bank of the Ohio River, to contract for the purchase of a tract of land, stated by Roosevelt to embrace the mine; and besides giving to Roosevelt $4,400, Fulton covenanted to pay him $1,000 annually, for twenty years; but the annuity was to cease, if, after the mine was faithfully worked by Fulton, it should not produce at least $12,000, etc.

"And the land was accordingly conveyed to Fulton. It appeared that there was no coal within the boundaries of the land conveyed although there was coal adjoining it, in the bed of the river, which was navigable, deep and rapid; but the working of the mine, if practicable, would be very hazardous, expensive and unprofitable. The contract on the part of Fulton was held to be founded in mistake and misrepresentation, and Roosevelt was perpetually enjoined from bringing any suit against Fulton, to recover the annuity agreed to be paid him.

"In that case, the Chancellor says: Whether the defendant made the statement in his letter to Fulton through mistake, or under the delusions of his own imagination, or by design, I am not able to say. It is sufficient for the decision of this case, that the representations are not supported, but are contradicted by proof, and that the claim of the annuity, upon such a state of the case, is unconscientious and unjust. And this decree was affirmed in the Court of Errors (2 Cowen, 129).