1 1 Story, Eq. Jur. § 148, 149, 197, and note; § 205, 207, 208; 2 Kent, Comm. 484, 485, 4th ed.; Laidlaw v. Organ, 2 Wheat. 178, 195.
§ 647. But, if there be a special trust or confidence between two parties, growing out of the circumstances of the case, the concealment of a material fact in regard to the subject-matter will annul the contract. Thus, if a vendor should sell an estate to which he knew that he had no title; or should conceal the fact that there were incumbrances thereupon;2 or should sell a house, situated in a distant town, which he knew, at the time of the sale, to be destroyed, or greatly injured by fire, the contract, in all these cases, would be void, because there is evidently a trust reposed by the vendee in the vendor, in the one case with regard to the clear title, or in the other case in regard to the existence of the thing.3 So, also, whenever silence would be equivalent to a misrepresentation, or assent to a false statement, no party would be permitted to be silent. Where, therefore, A. represented in writing to B. that C. was entitled to credit, concealing the fact that C. was a minor, under the belief that C. would not obtain credit, if he should be known not to be of age, it was held to be a fraud, which would entitle B. to recover from A. the amount of goods sold to C. in consequence of his representation, without first bringing an action against C.4 So, if the vendor of a picture, other, the utmost good faith must be observed, and concealments which would ordinarily not vitiate a contract, will be sufficient to invalidate contracts between such persons.1 It behooves, therefore, persons standing in the relation of attorney, or trustee, or guardian, or agent, to exercise the strictest caution and the most entire openness in dealing with their clients, fidei-commissaries, ward, or principal.2 Indeed, so careful is the law in its rules respecting persons occupying such fiduciary relations, that where contracts are made by a trustee with the cestui que trust, it is not sufficient to show that no advantage has been taken, but the cestui que trust may set aside the transaction at his own option.3 If a person represents that certain property can be bought for a certain price,-and thereby induces another to buy with him at that price, and subsequently purchases at a much less price, it is a fraud upon the other buyers.4 So, also, agents are not allowed to purchase of their principals, unless upon the most entire good faith, and after a full disclosure of all facts and circumstances, and an absence of all undue advantage or influence.5 Indeed, in all these relations, any undue advantage or concealment will avoid the contract. Yet, if the subject-matter of the bargain be of a complicated nature, such as an account, running over many years and through many volumes, and relating to actions which may in a measure have passed out of the memory, all that would seem to be necessary, on the part of an agent, if there were entire good faith, would be to give information sufficient to lead the principal to inquiry, to be willing to answer all questions, and to submit all the materials of knowledge possessed by the agent.6
1 Laidlaw v. Organ, 2 Wheat. 178. See Hadley v. Clinton Co. Importing Co., 13 Ohio St. 502; Bryant v. Crosby, 36 Me. 562; Barron v. Alexander, 27 Mo. 530; Cardwell v. M'Clelland, 3 Sneed, 150; Baker v. Seahorn, 1 Swan, 54; Smith v. Countryman, 30 N. Y. 655. But was not the buyer bound to answer the question, and was not his silence equivalent to a statement that there was no such news, and did it not actually operate as a direct fraud on the seller, as much as if he bad asserted the fact that there was no news?
2 Arnot v. Biscoe, 1 Ves. 95; Pilling v. Armitage, 12 Ves. 78. But see Greenby v. Cheevers, 9 Johns. 126.
3 1 Story, Eq. Jur. § 142, 208, 209; Pilling v. Armitage, 12 Ves. 78; Pothier de Vente, n. 240, n. 4; Dig. Lig. 18, tit. 1, 1. 57, § 1.
4 Kidney v. Stoddard, 7 Met. 252. Hubbard, J., in delivering the opinion of the court, said: "It is argued that the jury were compelled to find for the plaintiffs, on the mere concealment of a single fact by the defendant; or, in other words, that the charge of the presiding judge was knowing that the vendee labors under a delusion in respect to it, which materially influences his judgment, permit him to purchase it, without removing the delusion, the sale would be a fraud.1 So, also, if a man, knowing himself to be insolvent, and incapable of making payment, purchase goods of another, who sells to him in the implicit belief in his solvency and good faith, it has been said the concealment would be a direct fraud,2 erroneous. But the jury were not directed to return a verdict for the plaintiffs, unless they found, as a fact, that the defendant concealed that his son was a minor, with a view to give him a credit, and knowing or believing that he would not obtain a credit if that fact were known.
"It is very certain, as has been maintained by the defendant's counsel, that a mistaken opinion, honestly given, can never be taken as a fraudulent representation. This is true in principle, and supported abundantly by authorities. But the misfortune of the defendant's case is, that the verdict of the jury rests not on the honest mistake of the defendant, but upon the ground of material concealment of a fact especially within his knowledge; a fact important to be known, as it regarded the credit of the son; a fact designedly concealed, and with the view of obtaining that credit for the son, which he, the father, knew or believed he could not obtain if that fact were known.
"It needs no lengthened argument to establish the materiality of the fact. The result of this case is a sufficient witness of it. The plaintiffs were induced by the letter, from which this fact was carefully excluded, to give a credit to the son, which they would not otherwise have given; and as the direct consequence of it, they have sustained the loss set out in the declaration. Here then are proved fraud and deceit on the part of the defendant, and damage to the plaintiffs; and these facts have long been held to constitute a substantial cause of action. From the time of the judgment in the great case of Pasley v. Freeman, 3 T. R. 51, to the present day, through the long line of decisions both in England and America, the principle of that case, though with some statute modifications, remains unshaken and unimpaired." See also McConnell v. Wilcox, 1 Scam. 344. In Tryon v. Whitmarsh, 1 Met. 1, the court say: "We are of opinion that the question for the jury was, whether the defendant knew that the assertion or opinion contained in his letter was false, or that he did not fully believe it to be true, or whether he did not conceal a material fact from the knowledge of the plaintiffs, with the intention to deceive them. It is true, as the defendant's counsel have-argued, that the defendant was not bound to disclose the facts on which his opinion was founded; but if he kept back any material fact, with the intent to deceive the plaintiffs, this would be fraudulent." See also Corbett v. Brown, 8 Bing. 33.