“Trust, but verify” was used by President Reagan in describing his dealings with the Soviet Union. Interestingly, it was a Russian proverb, “doveryai, no proveryai” (Russian: Доверяй, но проверяй) and had been frequently used by Lenin. It could also serve as a succinct statement of the law of reasonable reliance in fraud cases when a false representation could have been found out by checking another source, like the public record.
Can a person ever rely on a fraudulent statement, though, when he could have determined that the statement was false by looking at a publicly filed document?
This is the question answered by a recent South Carolina Supreme Court case, Moseley v. All Things Possible, Inc.. In Moseley, the seller showed the buyers an altered plat on which an existing easement of record had been removed. After acquiring the property, the buyers discovered the easement, to their dismay. When the buyers sued the seller for fraud, the seller defended, in part, on the basis that the easement was shown on a recorded plat filed at the courthouse, and the buyers were therefore on constructive notice of the easement, even though the buyer had taken pains to hide it from the sellers on the forged plat. The Supreme Court, however, referred to the state’s prior decisions reflecting a preference for a case-by-case approach to the question of whether a person’s reliance on misrepresentations is reasonable. “That is so because “[f]raud … assumes so many hues and forms, that courts are compelled to content themselves with comparatively few general rules for its discovery and defeat, and all the facts and circumstances peculiar to each case to bear heavily upon the conscience and judgment of the court or jury in determining its presence or absence.”
The court concluded: “While there may be cases in which a hearer’s reliance on a misrepresentation that is a matter of public record is unreasonable as a matter of law, this is not one of those cases.” The court found that the case presented a question of fact to be decided by a jury and that the seller’s fraudulent misrepresentations, when viewed in a light most favorable to the buyers, induced the buyers to refrain from an examination of the public records. Whether the buyers’ reliance on the seller’s fraud was reasonable, given that the easement was in the public record, is a question to be determined by a jury. For the full decision, seeMoseley v All Things Possible, Inc.