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.
A statement as to a matter of law is ordinarily not such a statement of fact as amounts to actual fraud. Between persons in confidential relations, however, a false statement as to a matter of law may amount to constructive fraud.1 A mistake or misrepresentation of law, as between attorney and client, may be a ground for avoiding a transaction.2 Thus A, a client, conveyed realty to B, his attorney, in order to secure for A a more advantageous settlement from his wife. A did not know the power of the attorney with reference to a reconveyance. It was held that after A and his wife had resumed marital relations, A might have reconveyance on account of such mistake.3 So a false statement of law made by an executor to the heirs may be ground for avoiding a transaction induced thereby, where there is actual trust and confidence reposed.4 A representation made by an administrator who has promised expressly to look after the interests of a beneficiary, to the effect that her interest in such estate is subject to a life estate of the widow, amounts to fraud.5 If an heir is induced to consent to a redivision of her father's estate less advantageous to her than the interest given to her by his will, through the false statement made by the executor that unless she consented to such redivision the property would have to be sold, such conveyance will be canceled by the court of equity.6 It is said that if an executor buys at a foreclosure sale at the request of the beneficiaries, so that they may have an opportunity of redeeming the property, an innocent misrepresentation by him as to the time within which such property may be redeemed is a misrepresentation for which equity will hold him as trustee after the statutory period of redemption has elapsed.7
1Manley v. Felty, 146 Ind. 194, 45 N. E. 74.
2Miranovitz v. Gee, 163 Wis. 246, 157 N. W. 790.
3Achilles v. Achilles, 137 111. 589, 28 N. E. 45.
1Schneider v. Schneider, 125 la. 1, 98 N. W. 159.
2James v. Steere, 16 R. I. 367, 2 L. R. A. 164, 16 Atl. 143.
3James v. Steere, 16 R. I. 367, 2 L. R. A. 164, 16 Atl. 143.
4Schneider v. Schneider, 125 la. 1, 98 N. W. 159; Schuttter v. Brandfass, 41 W. Va. 201, 23 S. E. 806.
A false statement of law made by a husband to his wife may amount to constructive fraud. Thus where a husband falsely represented to his wife that she was liable on certain debts, and thus induced her to convey her property to him to defraud her creditors, it was held that constructive fraud existed, that they were not on equal terms and that she might have cancellation.8 A false statement as to a matter of law may be the means of perpetrating constructive fraud where actual trust and confidence is in fact reposed, even if no technical relationship exists between the parties. If A enters into a contract under mistake of law in the inducement, and B is guilty of inequitable conduct with reference to such mistake, A may have rescission. Thus, if B knows of A's mistake and takes advantage thereof,9 or if B, by concealing the truth, confirms A in his mistake,10 or if A's mistake is due to B's misrepresentation,11 A may have rescission. Thus, where, after loss, the agent of the insurance company represented to the in-
5Schneider v. Schneider, 125 la. 1, 98 N. W. 159.
6Schuttler v. Brandfass, 41 W. Va. 201, 23 S. E. 808.
7King v. Turner, 112 Ark. 337, 165 S. W. 949. (Obiter, as no attempt was made to redeem within the period stated by the executor.)
8Boyd v. De La Montagnie, 73 N. Y. 498, 29 Am. Rep. 197.
9McCormick v. Miller, 102 111. 208, 40 Am. Rep. 577; Clark v. Clark, 55 N. J. Eq. 814, 42 Atl. 98; Haviland v. Willetts, 141 N. Y. 35, 35 N. E. 958.
10Clark v. Clark, 55 N. J. Eq. 814, 42 Atl. 98; Haviland v. Willetts, 141 N. Y. 35, 35 N. E. 958.
11Arkansas. State v. Paup, 13 Ark. 129, 56 Am. Dec. 303.
Kentucky. Titus v. Ins. Co., 97 Ky. 567, 53 Am. St. Rep. 426, 28 L. R. A. 478, 31 S. W. 127.
Maine. Jordan v. Stevens, 51 Me. 78, 81 Am. Dec. 556; Freeman v. Curtis, 51 Me. 140, 81 Am. Dec. 564.
Michigan. Macklem v. Bacon, 57 Mich. 334, 24 N. W. 91.
Minnesota. Benson v. Markoe, 37 sured that his policy was void because insured was not the sole owner,12 or because the property insured was encumbered by liens,13 and thereby induced a compromise, the insured is allowed rescission. So where A entered into a mutual assessment fire insurance company on the representation of the officers and other members that the premium note given by him is the limit of his liability, he can not on the insolvency of the company be made to pay the statutory liability necessary to pay the losses.14 So where A, who was not a man of strong mind, was residing on Indian lands as tenant of B, at a time when a statute was passed giving the occupant of such lands the first right to purchase them at a fixed price, and A, being under the influence of B and B's agent C, was led to believe that B, of whom he was holding, had the legal right to make such purchase, and accordingly agreed to convey his right to B for less than a fifteenth of its real value, A was allowed to avoid such agreement on learning that he had the legal right to make such purchase.15 So if a quit-claim deed is given by a mortgagee to a mortgagor, not knowing that it discharged the mortgage, cancellation of such quit-claim deed may be had in equity.16 So an agreement to give a release to the children of a devisee who had died before testator may be avoided as to the executory part thereof, if entered into because the promisor did not know that the death of the devisee before the testator caused the devise to lapse.17 It must be admitted that the results reached in some of these cases are contrary to those reached in others on substantially similar facts.18 The doctrine of constructive fraud is invoked in some cases, while in others it is held that the parties were really dealing at arm's length and that no trust or confidence was or should have been reposed. Thus it was held that rescission could not be had where grantor voluntarily conveyed a right of way, not knowing that such conveyance prevented him from recovering damages caused to the rest of his property by the use of such right of way, even though the grantee knew of such mistake and did not advise grantor of the effect of the deed.19 The views expressed in some of the cases are a relic of the doctrine originally entertained by the English courts of equity; namely, that if one acting in ignorance of a known and established principle of the common law should convey property, equity would presume fraud or undue influence, and so would grant relief.20
Minn. 30, 5 Am. St. Rep. 816, 33 N. W. 38; Lane v. Holmes, 55 Minn. 370, 43 Am. St. Rep. 508, 57 N. W. 132.
New York. Berry v. Ins. Co., 132 N. Y. 49, 28 Am, St. Rep. 548, 30 N. E. 254.
Pennsylvania. Wilson v. Ott, 173 Pa. St. 253, 51 Am. St. Rep. 767, 34 Atl, 23.
Tennessee. Trigg v. Read, 24 Tenn. (5 Humph.) 529, 42 Am. Dec. 447; Sparks v. White, 26 Tenn. (7 Humph.) 86.
12 Berry v. Ins. Co., 132 N. Y. 49, 28 Am. St. Rep. 548, 30 N. E. 254.
13Titus v. Ins. Co., 97 Ky. 567, 53 Am. St. Rep. 426, 31 S. W. 127.
14Macklem v. Bacon, 57 Mich. 334, 24 N. W. 91.
15Sparks v. White, 26 Tenn. (7 Humph.) 86.
16Benson v. Markoe, 37 Minn. 30, 5 Am. St. Rep. 816, 33 N. W. 38.
17Haviland v. Willetts, 141 N. Y. 35, 35 N. E. 958. (Payments made under such contract can not, it is said, be recovered.)
18See Sec. 166.