This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
It is not necessary, however, that any technical relations of trust should exist to make concealment operate as fraud. If confidence is in fact known to both parties to be reposed,1 as where one is the son-in-law of the other party,2 or is the brother of the adversary party,3 as where a sister relies entirely on her brother in entering into a contract for the division of their father's estate,4 or where without any relationship, one party knows that the other relies on his judgment,5 omission to disclose material facts is a constructive fraud. So omission by a priest to disclose to his parishioner the invalidity of a will, whereby he obtains a deed for the. purpose of carrying the invalid will into effect, is fraud.6
If A's legacy is paid to B under a contract between A and B, by which B is to pay to A interest on such legacy for life only, equity will ignore such contract and follow the fund if it is shown that A had actual trust and confidence in B and did not understand the terms of such agreement or the effect thereof.7
2Mereness v. Bank, 112 la. 11, 84 Am. St. Rep. 318, 51 L. R. A. 410, 83 N. W. 711.
3Hamilton v. Toner, 17 Ind. App. 380, 46 N. E. 921. .
4Stinson v. Aultman, 54 Kan. 537, 38 Pac. 788. (As to the running of the statute of limitations.)
1Alabama. Rogers v. Brightman, 189 Ala. 228, 66 So. 71.
Arkansas. Reeder v. Meredith, 78 Ark. 111, 115 Am. St. Rep. 22, 93 S. W. 558.
Michigan. Witham v. Walsh, 156 Mich. 582, 121 N. W. 309.
Minnesota. Shevlin v. Shevlin, 96 Minn. 398, 105 N. W. 257.
West Virginia. Ballouz v. Higgins, 61 W. Va. 68, 56 S. E. 184.
2Cooper v. Lee, 1 Tex. Civ. App. 9, 21 S. W. 998.
3Bowen v. Kutzner, 167 Fed. 281; Reeder v. Meredith, 78 Ark. 111, 115 Am. St. Rep. 22, 93 S. W. 558; Shevlin v. Shevlin, 96 Minn. 398, 105 N. W. 257.
4Bowen v. Kutzner, 167 Fed. 281.
5 Emmons v. Moore, 85 111. 305; Friend v. Lamb, 152 Pa. St. 529, 34 Am. St. Rep. 672, 25 Atl. 577. (Omission to disclose that deposits of coal had been removed from the land sold.) Bennett v. McMillin, 179 Pa. St. 146, 57 Am. St. Rep. 591, 36 Atl. 188 [sub nomine, Zahn v. McMillen in Pennsylvania Report]. (Omission to disclose that better terms for the property sold were offered by others.)
6Finegan v. Theisen, 92 Mich. 173, 52 N. W. 619.
If trust and confidence are actually reposed by the beneficiaries in one who is appointed an executor without bond, such executor must make full disclosure in all transactions between himself and such beneficiaries with reference to such estate.8