Misrepresentation of a material fact, made willfully to deceive or recklessly without knowledge and acted on by the opposite party or made innocently and mistakenly and acted on by the opposite party, constitutes legal fraud.
(Orig. Code 1863, § 3105; Code 1868, § 3117; Code 1873, § 3174; Code 1882, § 3174; Civil Code 1895, § 4026; Civil Code 1910, § 4623; Code 1933, § 37-703.)
Law reviews.- For article, "Consumer Protection Against Sellers Misrepresentations," see 20 Mercer L. Rev. 414 (1969).
JUDICIAL DECISIONSANALYSIS
Fraud is either actual or constructive, and either constitutes legal fraud. Jordan v. Belvin, 57 Ga. 719, 196 S.E. 132 (1938); Southeastern Greyhound Lines v. Fisher, 72 Ga. App. 717, 34 S.E.2d 906 (1945).
Legal fraud in concealment of corporate status.
- Concealment by defendant of the financial status of the corporation when it was in fact a losing business facing lawsuits coupled with delivery of nonvoting stock instead of the promised voting stock constituted legal fraud when it was proven to the satisfaction of the jury. Adkins v. Lee, 127 Ga. App. 261, 193 S.E.2d 252 (1972).
Constructive fraud.
- Misrepresentation of a material fact, if made by mistake, and innocently, and acted on by the opposite party to one's injury, constitutes constructive fraud. Southeastern Greyhound Lines v. Fisher, 72 Ga. App. 717, 34 S.E.2d 906 (1945).
Material misrepresentations in insurance applications.
- In the case of fire and life insurance applications a misrepresentation is material if the misrepresentation changes the character, nature or extent of the risk. State Farm Mut. Ins. Co. v. Anderson, 107 Ga. App. 348, 130 S.E.2d 144, cert. dismissed, 219 Ga. 211, 132 S.E.2d 556 (1963).
When it is shown that a material statement in an application is false which was known to the insured at the time the insured made it and it was made with a view toward obtaining the insurance, with the company having no knowledge of its falsity, when the company acted upon it to its injury, the law will conclusively presume an intent to deceive, and a case of actual fraud will be made out. State Farm Mut. Auto. Ins. Co. v. Anderson, 107 Ga. App. 348, 130 S.E.2d 144, cert. dismissed, 219 Ga. 211, 132 S.E.2d 556 (1963).
Any misrepresentation intended to deceive and which does deceive is a fraud, for which a party is entitled to a remedy at law. Adkins v. Lee, 127 Ga. App. 261, 193 S.E.2d 252 (1972).
In order for a fraud to be actionable, the representation relied on must be more than a promise which is void or unenforceable. Barrett v. Independent Order of Foresters, 625 F.2d 73 (5th Cir. 1980).
Statements as to the nature of insurance coverage are opinions of law and cannot be the basis of a cause of action for fraud. Macon-Bibb County Hosp. Auth. v. Georgia Kaolin Co., 646 F. Supp. 90 (M.D. Ga. 1986), aff'd, 817 F.2d 98 (11th Cir. 1987).
Knowledge of seller that product unavailable.
- Salesman fraudulently induced customers to execute a sales contract by representing that "blue sculpted" carpet was available when he knew it was not or recklessly asserted the fact with intent to deceive. Country Pride Homes, Inc. v. DuBois, 201 Ga. App. 740, 412 S.E.2d 282 (1991).
Civil fraud and theft by deception have different elements and showing that there are jury issues as to fraud does not necessarily show that there are jury issues as to theft by deception; a failure to show the level of intent needed for proving theft by deception would preclude a jury issue on that crime as a predicate act for RICO purposes, defeating a RICO claim. Avery v. Chrysler Motors Corp., 214 Ga. App. 602, 448 S.E.2d 737 (1994).
Cited in Hixon v. Hinkle, 156 Ga. 341, 118 S.E. 874 (1923); Mangham v. Cobb, 160 Ga. 182, 127 S.E. 408 (1925); Nix v. Citizens Bank, 35 Ga. App. 55, 132 S.E. 249 (1926); Penn Mut. Life Ins. Co. v. Taggart, 38 Ga. App. 509, 144 S.E. 400 (1928); Hamlin v. Johns, 166 Ga. 880, 144 S.E. 659 (1928); Lancaster v. Neal, 41 Ga. App. 721, 154 S.E. 386 (1930); Equitable Bldg. & Loan Ass'n v. Brady, 175 Ga. 43, 164 S.E. 674 (1932); Wall v. Wall, 176 Ga. 757, 168 S.E. 893 (1933); Roper v. White, 178 Ga. 293, 173 S.E. 115 (1934); Dover v. Burns, 186 Ga. 19, 196 S.E. 785 (1938); Crowell v. Brim, 191 Ga. 288, 12 S.E.2d 585 (1940); Norwood v. Norwood, 207 Ga. 148, 60 S.E.2d 449 (1950); Patterson v. Correll, 92 Ga. App. 214, 88 S.E.2d 327 (1955); Sorrells v. Atlanta Transit Sys., 218 Ga. 623, 129 S.E.2d 846 (1963); Walsh v. Campbell, 130 Ga. App. 194, 202 S.E.2d 657 (1973); Thibadeau Co. v. McMillan, 132 Ga. App. 842, 209 S.E.2d 236 (1974); City of Jesup v. Spivey, 133 Ga. App. 403, 210 S.E.2d 859 (1974); Clements v. Warner Robins Supply Co., 235 Ga. 612, 221 S.E.2d 35 (1975); North Peachtree I-285 Properties, Ltd. v. Hicks, 136 Ga. App. 426, 221 S.E.2d 607 (1975); McClure v. Thomas Cook, Inc., 158 Ga. App. 467, 280 S.E.2d 876 (1981); Everson v. Franklin Disct. Co., 248 Ga. 811, 285 S.E.2d 530 (1982); Bill Spreen Toyota, Inc. v. Jenquin, 163 Ga. App. 855, 294 S.E.2d 533 (1982); Rhodes v. Perimeter Properties, Inc., 187 Ga. App. 55, 369 S.E.2d 332 (1988); O'Brien v. Union Oil Co., 699 F. Supp. 1562 (N.D. Ga. 1988); Johnson Realty, Inc. v. Hand, 189 Ga. App. 706, 377 S.E.2d 176 (1988); Vickers v. Roadway Express, Inc., 210 Ga. App. 78, 435 S.E.2d 253 (1993); In re Dukes, 213 Bankr. 202 (Bankr. S.D. Ga. 1997); Sellers Bros., Inc. v. Imperial Flowers, Inc., 232 Ga. App. 687, 503 S.E.2d 573 (1998); GE Life & Annuity Assur. Co. v. Donaldson, 189 F. Supp. 2d 1348 (M.D. Ga. 2002); GE Life & Annuity Assur. Co. v. Barbour, 189 F. Supp. 2d 1360 (M.D. Ga. 2002); McBride v. Life Ins. Co., 190 F. Supp. 2d 1366 (M.D. Ga. 2002); GE Life & Annuity Assur. Co. v. Barbour, 191 F. Supp. 2d 1375 (M.D. Ga. 2002); GE Life & Annuity Assur. Co. v. Combs, 191 F. Supp. 2d 1364 (M.D. Ga. 2002); J'Carpc, LLC v. Wilkins, 545 F. Supp. 2d 1330 (N.D. Ga. 2008).
Remedies
1. In General
Election of remedies.
- When a vendee is induced to enter into a contract for the purchase of land by the fraud of the vendor, when the former discovers the fraud he has an election of remedies. One of such remedies is to rescind the contract, and another is to affirm the contract and sue for damages for the fraud. Price v. Mitchell, 154 Ga. App. 523, 268 S.E.2d 743 (1980).
2. Rescission
Rescission of transaction based on misrepresentation authorized.
- Material misrepresentation, made for the purpose of inducing another to execute a promissory note, will authorize the maker, after executing the note, to rescind the transaction on discovery of the fraud, if the maker relied upon the representation and was induced thereby to execute the note. Thompson v. Wilkins, 143 Ga. App. 739, 240 S.E.2d 183 (1977).
A promise to do a certain thing for the benefit of the promisee, made to induce his entrance into a contract, the promisee earnestly believing that he would receive the benefits consequent upon the fulfillment of the promise, when at the time of making the promise there was no intention on the part of the promisor to fulfill it, but, on the contrary, the promise was made with intent not to fulfill it and was uttered as a mere scheme or device to defraud, is such a fraud as will void any contract induced thereby. A promise thus fraudulently made will authorize rescission of a written instrument purporting to be a contract. Price v. Mitchell, 154 Ga. App. 523, 268 S.E.2d 743 (1980).
Constructive fraud, as well as actual fraud, voids the contract at the election of the injured party, and may authorize a rescission of a written release from liability. Southeastern Greyhound Lines v. Fisher, 72 Ga. App. 717, 34 S.E.2d 906 (1945).
A material representation falsely made by a vendor to a vendee to induce a sale, and made with knowledge of its falsity and acted upon to the vendee's injury, amounts to actual fraud, and will void a contract, and authorize rescission by the vendee if he acts promptly after discovery of the fraud and restores or offers to restore whatever of value he has received by virtue of the contract. Price v. Mitchell, 154 Ga. App. 523, 268 S.E.2d 743 (1980).
3. Damages
Damages generally.
- Misrepresentation of a material fact, made by one of the parties to a contract, though made by mistake, and innocently, if acted on by the opposite party, constitutes legal fraud, and the party injured in consequence thereof may set up the damages thus arising in defense to an action upon the contract. Morton v. W.T. Tharpe & Co., 41 Ga. App. 788, 154 S.E. 716 (1930).
When a vendor agrees to sell a designated tract of land to another and points out to the latter its boundaries and if such boundaries include lands to which the vendor has no title, in consequence of which the purchaser loses the land, the purchaser can setoff at law the value of the portion of the land so lost, against the purchase money whether the representations were designedly made by the vendor to deceive the purchaser, or were innocently made. Bonner v. Cotton, 223 Ga. 843, 159 S.E.2d 61 (1968).
When there is a material misrepresentation, a policy (of insurance) may be voided. State Farm Mut. Ins. Co. v. Anderson, 107 Ga. App. 348, 130 S.E.2d 144, cert. dismissed, 219 Ga. 211, 132 S.E.2d 556 (1963).
Voiding insurance policy when guilty of fraud.
- When insured furnished false evidence which was relied upon by the insurance company in reinstating insurance policies the insured was guilty of fraud in law which would void the policy, whether the insured was in good or bad faith and whether the insured intended to deceive or not. New York Life Ins. Co. v. Odom, 93 F.2d 641 (5th Cir. 1937), cert. denied, 304 U.S. 566, 58 S. Ct. 948, 82 L. Ed. 1532 (1938).
Ordinary Diligence
Ordinary diligence required of party claiming injury.
- An equitable action to cancel a deed on the ground of fraud, which clearly shows that the complainant failed to use even slight diligence to discover the fraud, fails to allege a cause of action. Courts of equity will not grant relief to one whose long delay renders the ascertainment of the truth difficult, though no legal limitation bars the action. Whitfield v. Whitfield, 204 Ga. 64, 48 S.E.2d 852 (1948).
While the doctrine of caveat emptor would charge the purchaser with looking out for the title which the seller had to the tract offered for sale as his, it would not charge him with looking out for the boundaries of that tract when the seller undertook to locate and point them out, thus professing to know them sufficiently to enable them to furnish this information to purchasers instead of leaving the latter to their own resources in acquiring the information. Bonner v. Cotton, 223 Ga. 843, 159 S.E.2d 61 (1968).
Blind reliance exists where it cannot be said that the purchase originated in fraud so much as in the carelessness of the purchaser to exercise ordinary care for his own interest. Adkins v. Lee, 127 Ga. App. 261, 193 S.E.2d 252 (1972).
One cannot claim to be defrauded by the false representation of another when, by the exercise of ordinary diligence, such person could have discovered the falsity of the representations before acting thereon. Barrett v. Independent Order of Foresters, 625 F.2d 73 (5th Cir. 1980).
Failure to open trunk of car represented as new.
- It cannot be said as a matter of law that failure of plaintiff to open trunk of car represented as new in order to inspect for damage, either at time of purchase or within three and a half months thereafter amounted to failure of due diligence. Horne v. Claude Ray Ford Sales, Inc., 162 Ga. App. 329, 290 S.E.2d 497 (1982).
Pleading and Practice
In order to give rise to an action for damages, the defendant's fraud must be actual, i.e., the misrepresentation must be made either knowingly or with reckless disregard for the consequences. Irvin v. Lowe's of Gainesville, Inc., 165 Ga. App. 828, 302 S.E.2d 734 (1983).
"Innocent" or "constructive" fraud exists only as an equitable doctrine and will not support an action in tort for damages. Irvin v. Lowe's of Gainesville, Inc., 165 Ga. App. 828, 302 S.E.2d 734 (1983).
Questions of fraud, bad faith and materiality of misrepresentation are ordinarily for a jury. Adkins v. Lee, 127 Ga. App. 261, 193 S.E.2d 252 (1972).
A contention that fraud is a personal defense or plea, and could be made only by the party deceived, is without merit. Houston v. Horton, 202 Ga. 307, 43 S.E.2d 90 (1947).
RESEARCH REFERENCES
Am. Jur. 2d.
- 27 Am. Jur. 2d, Equity, § 20. 37 Am. Jur. 2d, Fraud and Deceit, § 247 et seq.
Conveyance with Intent to Defraud Creditors, 5 POF2d 697.
False Representation as to Quality or Character of Product, 35 POF2d 255.
C.J.S.- 30 C.J.S., Equity, § 48. 37 C.J.S., Fraud, §§ 3, 19 et seq.
ALR.
- Misrepresentation as regards validity of conveyance or transfer of property as fraud, 9 A.L.R. 1051.
False representations in business transaction as within statute relating to "confidence game", 9 A.L.R. 1527; 56 A.L.R. 727.
Seller's concealment of ownership of other property inducing exclusion of same from contract as actionable fraud, 26 A.L.R. 990.
Promises and statements as to future events as fraud, 51 A.L.R. 46; 68 A.L.R. 635; 91 A.L.R. 1296; 125 A.L.R. 879.
Misrepresentation as to market price or market value as fraud, 71 A.L.R. 622.
Employer's misrepresentations as to employee's or agent's future earnings as actionable fraud, 16 A.L.R.3d 1311.
Duty of vendor of real estate to give purchaser information as to termite infestation, 22 A.L.R.3d 972.
Purchaser's misrepresentations as to intended use of real property as ground for vendor's equitable relief from contract and deed, 35 A.L.R.3d 1369.
Consumer class actions based on fraud or misrepresentation, 53 A.L.R.3d 534.
Modern status of rules regarding materiality and effect of false statement by insurance applicant as to previous insurance cancellations or rejections, 66 A.L.R.3d 749.
Fraud predicated on vendor's misrepresentation or concealment of danger of possibility of flooding or other unfavorable water conditions, 90 A.L.R.3d 568.
Misrepresentation in proxy solicitation - state cases, 20 A.L.R.4th 1287.
Vendor's action against vendee's prospective lender for misrepresentation respecting or failure to complete loan commitment, 30 A.L.R.4th 474.
Misrepresentation regarding sterility or use of birth control, 31 A.L.R.4th 389.
Liability of termite or other pest control or inspection contractor for work or representations, 32 A.L.R.4th 682.
Remedies for fraud or misrepresentation as to heating or cooling costs of realty purchased, 32 A.L.R.4th 828.
Real-estate broker's or agent's misrepresentation to, or failure to inform, vendor regarding value of vendor's real property, 33 A.L.R.4th 944.
Sexual partner's tort liability to other partner for fraudulent misrepresentation regarding sterility or use of birth control resulting in pregnancy, 2 A.L.R.5th 301.
Parent's child support liability as affected by other parent's fraudulent misrepresentation regarding sterility or use of birth control, or refusal to abort pregnancy, 2 A.L.R.5th 337.