(after stating the facts). (1) In Evatt v. Hudson, 97 Ark. 268, the court said, “Representations, to be fraudulent in law, must be material to the contract or transaction, which is to be avoided and ‘must be made by one who either knows them to be false, or else not knowing asserts them to be true and made with the intent to have the other party act upon them to. his injury, and such must he their effect’. ” Louisiana Molasses Co. Ltd. v. Fort Smith Wholesale Gro. Co., 73 Ark. 542; Jarratt v. Langston, 99 Ark. 442.
In First Nat’l. Bank of Newark v. People’s National Bank of Springfield, 97 Ark. 15, the court said: “A false representation, to be actionable, must not only mislead, but must be made fraudulently and with that intent. No one can be held liable for a false representation, who honestly believed it when made, however false it may be, but he is liable if he knew it to be false, or knowing nothing about it, asserts it to be true.”
It is not disputed that the bank cashier represented to the purchasers of the stock that it was worth $1.59, and that these -representations were made at the time they were -solicited to become purchasers, and with the view of inducing them to do so, but contended -only that the representations were honestly made in the belief that they were true, with the knowledge of the cashier of the bank’s condition. It was the intention of the cashier of the bank -and the vice president, -McCord, the brother of one of the appellees, who purchased the stock, in inducing them to take it, to secure a majority of the stock of the bank in the hands of the cashier, and those friendly to him, in order that he might be continued as cashier thereof, and the purpose was so stated by them to the purchasers of the stock. The cashier was fully informed of the bank’s condition, and testified that he made the statement relative to this value ’of the stock, and that he not only believed it to be true .at that time, but still believed at the time he testified after the failure of the bank because of conditions that afterward developed, that the stock was of that value at the time of the sale of it to appellees. The bank had paid good dividends upon the stock from its organization and upon every increase of its stock to and including the time of the purchase by .appellees and one year thereafter. The amount of these dividends were disclosed by thef estimony, and a dividend of 10 per cent, was declared and paid upon the stock shortly after its purchase by appellees, and one of like amount one year thereafter, with a surplus of $2,-000 set ¡aside each of .said years. The bank was declared insolvent in June, 1912, because of the depreciation of certain of its assets on account of the failure and insolvency of some of its debtors, some of whom were indebted to it in rather large amounts at the time of the purchase of the stock by appellees. The cashier and others testified however that these debtors were solvent and able to pay the ¡amounts they were due the ¡bank at the time of the sale of the stock, except the Greenwood ¡Coal & Lumber ¡Company, .and that its paper was secured ¡by 'the endorsement of R. W. McFarlane, who was .regarded financially sound at that time, .and John F. Rutherford, who had the reputation of being a very wealthy man. Said company, ¡through its said endorsers on April 3, ¡after the sale of the stock procured a loan from a bank in Fort Smith of $15,000, and deposited it, covering its overdraft and leaving a balance to its credit of more than $3,000. Said »ompany continued to do business with appellant bank and was indebted on overdraft at the time of its failure in the sum of about $6,000. McFarlane’s affairs became involved, and after making two expensive and unsuccessful political campaigns, he became insolvent, and Rutherford later died, and his affairs were discovered to be greatly involved. No one testified that McFarlane and Rutherford’s endorsement and liability to the payment of the indebtedness due the bank from them and their concerns, was not good, nor that they were not solvent and well able to meet all their obligations at the time of the sale of this stock, and one of appellees sold $1,000 of his stock in the bank as late as June, 1912, at $1.75.
The strong inference of fact that the representations as to the value of the stock were false when made, arose from the fact that said certain parties were indebted to the bank .at the time of the sale of the stock, and a considerable time thereafter became insolvent, destroying the value of their endorsement and of the bank’s assets, which they were liable to the payment of. We do not think, however, that the testimony warrants the chancellor’s findings that the representations relative to the value of the stock were false and fraudulently made with intent to have the purchasers act upon them to their injury. The burden of proof is upon the appellees, and the chief purpose, as disclosed in the sale was to place the majority of the stock of the bank in the hands of friends of the cashier, who had successfully managed its affairs from its organization till then, in order that he might continue to do so and the clear preponderance of the testimony shows that the representation as to the value of the stock was substantially true. Moreover, the appellees received two 10 per cent, dividends upon the stock purchased 'and twice renewed the notes given in payment therefor, and if they desired to avoid the payment of the notes given for the purchase of the stock, they should not have renewed the notes nor waited until after the failure of the bank to do so.
If it be urged that they had no knowledge of the falseness of the representations made to induce them to purchase the stock .and execute their notes in payment therefor until after the two renewals of the notes more than a year after such purchase, which was disclosed as they contend, by the bank’s failure, it argues that they gave no heed to the affairs of the bank in which they were stockholders, iand did not take advantage of the opportunity to inform themselves of its condition and the fact that its unsound condition was not sooner discovered, supports the view that it did not exist at the time of the sale of the stock.
(2) They either had knowledge or should have learned from their connection with the bank as stockholders and knowledge of its condition, that the representations made to them were false, before the last renewal of the note in any event, and being chargeable with knowledge thereof, waived such /a defense by said renewal. Stewart v. Simon, 111 Ark. 358, and cases cited; Haglin v. Friedman, 177 S. W. (Ark.) 429, 118 Ark. 465.
It follows that the chancellor erred in the decree rendered, which is reversed and the cause remanded with directions to enter a judgment in appellants ’ favor for the amount of the notes sued on.