Etting 1826. him credit, and thereby to procure the security in question, by which means the plaintiff in error was deceived, and induced to endorse the said the U. S. note, was a fraud upon him, and vitiated the con V. The Bank of tract. 3. That the continuance of M'Cullough in the office of cashier, from the 16th of March, 1819, (when his misconduct in office came to the knowledge of the president and directors of the bank,) until the 18th of May following, when he was dismissed, was a violation of the duty of the president and directors to the government of the United States, and to the public, and, therefore, vitiated any contract obtained by means of such continuance in office. Upon the first point, it was argued, that the concealment of material circumstances, known to one party, and unknown to the other, vitiates the contract." In the opinion given by the Court below, the principle was admitted, but with this qualification, that it must be on inquiry or communication, for the purpose of information. In this view of the subject, the only question would be, whether the rule is subject to this limitation, i. e. of inquiry or communication for the purpose of information. But an exception to the rule was supposed to exist, and it might be said, that a party is not bound to communicate circumstances ex a 1 Com. Contr. 38. 1 W. Bl. Rep. 465. 1 Fonbl. Eq. 379. note (h.) Dougl. 18. Hill v. Gray, 1 Starkie's N. P. Rep. 434. Verplanck on Contracts, passim. 8 Mass. Rep. 408. Etting V. The Bank of trinsic to the contract, and that the circumstances 1826. concealed were extrinsic. If this proposition were true, although there had been inquiry and communication, yet the facts themselves being the U. S. of such a character that they need not to have been disclosed, that alone created the exception to the rule. But, it was insisted, the exception ought to be confined to those facts which are equally open to both parties." The ground upon which Etting undertook for M'Cullough's performance, was his confidence in his supposed integrity, and in his resources and credit derived from his connexion with the bank. No case could be found, which states, that inquiry is necessary to create the obligation to disclose material facts, which are not equally within the knowledge of both parties. The fraud consists in dealing with the party in ignorance, and leaving him so. It is not necessary that the other party should have created the false impression, or intended to have created it. It is sufficient that he knows it, and takes advantage of it. Undue concealment consists in the suppression of a material fact, not in the knowledge of both parties, and not of a nature to be equally known to both parties, in a case where confidence is reposed that the fact does not exist. In Laidlaw v. Or a Laidlaw v. Organ, 2 Wheat. Rep. 183. b Stuart v. Wilkins, Dougl. 18. Pidcock v. Bishop, 3 Barnw. & Cresw. 605. Smith v. Bank of Scotland, 1 Dow. Parl. Rep. 272. 1 Brod. & Bingh. 289. Jackson v. Buchaire, 3 Term Rep. 551. Etting 1826. gan, the intelligence was of a nature to be equally known to both parties, and it was not a fact respecting which confidence is generally rethe U. S. posed that it will be disclosed. The Bank of On the second point, it was argued, that here was an act done in order to give a false credit, and it did give false credit. It was a positive deceit by acts, though not by words. It was asked, whether a party might lawfully deceive in one way, and not in the other? The law is more consistent with common justice, and says you must do nothing to deceive." It was a case of industrious concealment. By continuing the cashier in office, the defendants in error gave him a fictitious credit which they knew did not belong to him. It was analogous to the ordinary case of the fraudulent misrepresentation of the credit of another. It had been said there was no inquiry. Why was there none? Because, the very continuance of the officer in office, was evidence that they thought him honest. It might, perhaps, be contended, that nothing was positively said or done by the bank calculated to mislead the surety. But silence, or an omission to act, may, in many cases, as effectually deceive the party, as the most explicit declaration, or the most positive acts. Continuing the cashier in office was equivalent to a suggestio falsi." a 2 Wheat. Rep. 295. 1 Dow. Parl. Rep. 294, 295. 2 Term Rep. 587. b Sugd. Vend. 226, 227. and the cases there collected. d In the case of Smith v. Bank of Scotland, (1 Dow. Parl. Rep. 294.) Lord ELDON spake of another case which had come a Etting Y. The Bank of On the third point, the peculiar character of 1826. the bank was insisted on, as an instrument of the government, not created for its own profit merely, but as a means to aid the financial operations the U.S. of the government Both the public and the government were deceived and injured by the misplaced confidence of the bank in their cashier. It was their duty to have removed him the instant his default was discovered. It is contrary to the policy of the law to enforce a contract obtained by a breach of duty to the public. The bank may be considered as a public officer, and is bound by the same obligations, and owes the same duties, as any other public officer. But, would it be pretended, that a public officer could keep an unworthy agent or deputy in office, for before him. (Maltby's case.) "A clerk to the Fishmonger's Company had incurred a considerable debt. The deficit had been increasing from year to year, and was at length carried beyond what the company were likely to recover. They demanded additional security, which he procured. The case had come before him only upon motion, but he had thought a good deal upon it, and the light in which it appeared to him was this: If he knew himself to be cheated by an agent, and, concealing that fact, applied for security, in such a manner, and under such circumstances, as held him out to others as one whom he considered as a trustworthy person, and any one acting under the impression that the agent was so considered by his employer, had become bound for him; it appeared to him, that he could not conscientiously hold that security. He was, then, of opinion, that the Fishmonger's Company could not hold their security. He did not know what had become of the case afterwards, but, he believed, that his opinion was submitted to, and that no further proceedings were had. He had since reconsidered the matter, and still retained his former opinion, and would act upon it judicially, if occasion offered." a M'Cullough v. Maryland, 4 Wheat. Rep. 411. 422. 1826. Etting V. The Bank of the mere purpose of securing a debt due to himself? On the part of the defendants in error, it was the U. S. stated, that the rule is accurately laid down by Mr. Fonblanque, as to what circumstances a contracting party is bound to disclose: "If a man, by the suppression of a truth which he was bound to communicate, or by the wilful suggestion of a falsehood, be the cause of prejudice to another, who had a right to a full and correct representation of the fact, it is certainly agreeable to the dictates of a good conscience, that his claim should be postponed to that of the person whose confidence was induced by his representation." Under certain modifications, and with certain exceptions, the party is bound to communicate all circumstances intrinsic in the contract itself; all those circumstances which enter into the contract as ingredients, and form constituent parts of it. But, with regard to circumstances extrinsic to the contract, though forming inducements to enter into it, however powerfully he may believe and know they are operating with the opposite party, he is at liberty to keep silence. Intrinsic circumstances are such, for example, as regard the quality and price of the article, which must, of necessity, enter into the inducements. Extrinsic circumstances are those considerations which form no component part of the contract itself, but which may form inducements with the party to enter into it. The distinction is founded a 1 Fonbl. Eq. 164. |