Beck, Cm J.
— Many questions presented and discussed in tbe argument of counsel, in the view we take of one branch of the case, need not now be considered by us. In our opinion the charges of fraud made in the petition are of such a character as to defeat the right df defendants to collect and receive the tax, if they be established and are not sufficiently denied by the answer to authorise the dissolution of the injunction thereon.
i taxationroaií*- °eíec-" íoiit representations. I. It is charged that the signatures to the petition upon which the trustees ordered the vote, were, in many instances, Procured by fraudulent representations whereby y°ters were induced to sign the same; that the elec^on was ordered because of false representations made to the trustees, and finally through like fraudulent and false statements, and -misrepresentations of fact, the proposition was adopted at the election, the electors being deceived and induced thereby to vote for the proposed aid to the railroad.
It may be stated as a general proposition, that every obligation, whereby one may become bound to do an act, is annulled and defeated, if it be obtained by the fraud of the party asking to enforce it, or for whose benefit it is sought to be enforced, or with his knowledge and consent. “ Fraud avoids a contract db initio both at law and in equity, whether the object be to deceive the public or third persons, or one party endeavor to cheat the other. For the law will not sanction dishonest views and practices, by enabling an individual to acquire, through the medium of his deception, any right or interest.” Chit. Contr. 678. All transactions of men are rendered invalid by fraud, and courts will enforce no claims based thereon.
Defendant’s counsel insist that the charges of fraud are immaterial, because the representations which are alleged to have been false, did not become a part of tlm conditions of the vote of the people to aid the construction of the road; in other words, that they are merely matters of negotiation, or contemporaneous stipulations, or terms not incorporated in the proposition voted upon, and as that constitutes the contract by the electors and the incorporation building the road, these repre[29]*29sentations alleged to have been false constitute no part thereof. The position both of fact and law may be admitted, and yet it does not follow that it is of any avail for defendants, for it is not applicable to the case made by the record before us. It is not claimed that the matters which were fraudulently misrepresented constituted a part of the proposition, but simply that they were used by the railroad company as inducements, whereby signatures to the petition were obtained and the electors were induced to vote for the aid. In other words, the electors were by fraud induced to adopt the proposition, that is,-they became bound by the contract through fraud, being induced to consent thereto by the misrepresentation of those for whose benefit the defendants seek to collect the tax. The terms of the contract, the proposition voted for, may' be unobjectionable, but its submission to a vote of the people was procured, and plaintiffs and others were induced to vote for the tax, by the false statements and fraudulent misrepresentations of the railroad company and its agents. This fraud enters into and invalidates the contract, will defeat it in a court of law, and is ground for annulling it in chancery. These principles are familiar, and for their support need neither discussion nor the citation of authority.
2. is.ttjxcdissolved upon answer alone. II. It is a familiar rule that upon the equity of a bill being fully and explicitly denied by the answer, a preliminary injunction allowed thereon will be dissolved. But there are exceptions to the rule, and cases to which . . . it is not applied.
The denial of the equities shown in the bill must be upon the personal knowledge of the defendant; it will not be sufficient if based upon mere information and belief. The answer must be of such a character as to entitle it to as much credit as the affirmation of the bill, in order to authorize the dissolution of an injunction thereon. Morris Canal & Banking Co. v. Jersey City, 3 Stockt., 13. The answer must be a satisfactory denial of the equities of the bill to justify the dissolution of an injunction. Thomas v. Horn, 14 Geo., 481. So if the statements of the answer are such as to leave the mind of the court in reasonable doubt whether the equities are [30]*30sufficiently answered, tlio injunction ought not to be dissol vep. Monroe v. MeIntire, 6 Ired. Eq., 65; James v. Lemly, 2 Ired. Eq., 278; Miller v. Washburn, 3 Ired. Eq., 161.
It would appear that the answer must be of such a character as to completely counterbalance the case made by the bill, and leave nothing to inference and presumption. In other words, the denial must be direct, by a party who lias personal knowledge of the facts he denies; in such a case, his statements being entitled to as much credit as those of plaintiff in the petition, it may be fairly said that the court, without a doubt in its mind, ought to regard the equities of the petition answered. But such would not be the result if an answer is based upon hearsay, or made by a person who, from the nature of the casé, could not have had personal knowledge of the matter upon which his denial is based.
- When relief is sought by an injunction against fraud, which is the gravamen of the bill, the court will continue the injunction though the defendant has fully answered the equity set up. Dent v. Summerlin, 12 Geo., 5.
This rule ought certainly to apply when the denial is by a party claiming benefits under fraudulent acts, though not a party thereto, yet charged with notice thereof, and at the same time not showing personal knowledge upon the subject in his answer, and when the person charged with having committed the fraud is not a party to the action, or has not answered thereto. Direct evidence of fraud is seldom- attainable, or at least is often unattainable. This is peculiarly so of fraudulent intentions and designs, as they rest, ordinarily, concealed in the breast of the guilty party. In such cases it is established by circumstances; like some forces and substances in nature, its' existence is determined by its manifestations. Upon manifestations the charge of fraud may well be made in a bill; the denial of its existence by one whose knowledge' is confined to, and opinion is based upon, such manifestations only, it is evident does not refute the charge, for of its very existence beyond such evidence he is ignorant, and of the force and effect of evidence he can give to the court no ojoinion or information. While these remarks are peculiarly applicable to [31]*31frauds which are secret in their character, yet the reasons upon which they are based require the rule to be extended to all cases where false and fraudulent acts and statements charged in a bill are not answered by those having personal knowledge of the matters by the denial of the acts and representations themselves, or their false and fraudulent character.
The answer of defendants is within these exceptions to the general rule above stated. Moles neither admits nor denies the allegations of the bill, having no information of the matters sufficient to justify a belief thereon. The other defendants deny positively the allegations of fraud, and all other disputed facts set out in the bill.
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Beck, Cm J.
— Many questions presented and discussed in tbe argument of counsel, in the view we take of one branch of the case, need not now be considered by us. In our opinion the charges of fraud made in the petition are of such a character as to defeat the right df defendants to collect and receive the tax, if they be established and are not sufficiently denied by the answer to authorise the dissolution of the injunction thereon.
i taxationroaií*- °eíec-" íoiit representations. I. It is charged that the signatures to the petition upon which the trustees ordered the vote, were, in many instances, Procured by fraudulent representations whereby y°ters were induced to sign the same; that the elec^on was ordered because of false representations made to the trustees, and finally through like fraudulent and false statements, and -misrepresentations of fact, the proposition was adopted at the election, the electors being deceived and induced thereby to vote for the proposed aid to the railroad.
It may be stated as a general proposition, that every obligation, whereby one may become bound to do an act, is annulled and defeated, if it be obtained by the fraud of the party asking to enforce it, or for whose benefit it is sought to be enforced, or with his knowledge and consent. “ Fraud avoids a contract db initio both at law and in equity, whether the object be to deceive the public or third persons, or one party endeavor to cheat the other. For the law will not sanction dishonest views and practices, by enabling an individual to acquire, through the medium of his deception, any right or interest.” Chit. Contr. 678. All transactions of men are rendered invalid by fraud, and courts will enforce no claims based thereon.
Defendant’s counsel insist that the charges of fraud are immaterial, because the representations which are alleged to have been false, did not become a part of tlm conditions of the vote of the people to aid the construction of the road; in other words, that they are merely matters of negotiation, or contemporaneous stipulations, or terms not incorporated in the proposition voted upon, and as that constitutes the contract by the electors and the incorporation building the road, these repre[29]*29sentations alleged to have been false constitute no part thereof. The position both of fact and law may be admitted, and yet it does not follow that it is of any avail for defendants, for it is not applicable to the case made by the record before us. It is not claimed that the matters which were fraudulently misrepresented constituted a part of the proposition, but simply that they were used by the railroad company as inducements, whereby signatures to the petition were obtained and the electors were induced to vote for the aid. In other words, the electors were by fraud induced to adopt the proposition, that is,-they became bound by the contract through fraud, being induced to consent thereto by the misrepresentation of those for whose benefit the defendants seek to collect the tax. The terms of the contract, the proposition voted for, may' be unobjectionable, but its submission to a vote of the people was procured, and plaintiffs and others were induced to vote for the tax, by the false statements and fraudulent misrepresentations of the railroad company and its agents. This fraud enters into and invalidates the contract, will defeat it in a court of law, and is ground for annulling it in chancery. These principles are familiar, and for their support need neither discussion nor the citation of authority.
2. is.ttjxcdissolved upon answer alone. II. It is a familiar rule that upon the equity of a bill being fully and explicitly denied by the answer, a preliminary injunction allowed thereon will be dissolved. But there are exceptions to the rule, and cases to which . . . it is not applied.
The denial of the equities shown in the bill must be upon the personal knowledge of the defendant; it will not be sufficient if based upon mere information and belief. The answer must be of such a character as to entitle it to as much credit as the affirmation of the bill, in order to authorize the dissolution of an injunction thereon. Morris Canal & Banking Co. v. Jersey City, 3 Stockt., 13. The answer must be a satisfactory denial of the equities of the bill to justify the dissolution of an injunction. Thomas v. Horn, 14 Geo., 481. So if the statements of the answer are such as to leave the mind of the court in reasonable doubt whether the equities are [30]*30sufficiently answered, tlio injunction ought not to be dissol vep. Monroe v. MeIntire, 6 Ired. Eq., 65; James v. Lemly, 2 Ired. Eq., 278; Miller v. Washburn, 3 Ired. Eq., 161.
It would appear that the answer must be of such a character as to completely counterbalance the case made by the bill, and leave nothing to inference and presumption. In other words, the denial must be direct, by a party who lias personal knowledge of the facts he denies; in such a case, his statements being entitled to as much credit as those of plaintiff in the petition, it may be fairly said that the court, without a doubt in its mind, ought to regard the equities of the petition answered. But such would not be the result if an answer is based upon hearsay, or made by a person who, from the nature of the casé, could not have had personal knowledge of the matter upon which his denial is based.
- When relief is sought by an injunction against fraud, which is the gravamen of the bill, the court will continue the injunction though the defendant has fully answered the equity set up. Dent v. Summerlin, 12 Geo., 5.
This rule ought certainly to apply when the denial is by a party claiming benefits under fraudulent acts, though not a party thereto, yet charged with notice thereof, and at the same time not showing personal knowledge upon the subject in his answer, and when the person charged with having committed the fraud is not a party to the action, or has not answered thereto. Direct evidence of fraud is seldom- attainable, or at least is often unattainable. This is peculiarly so of fraudulent intentions and designs, as they rest, ordinarily, concealed in the breast of the guilty party. In such cases it is established by circumstances; like some forces and substances in nature, its' existence is determined by its manifestations. Upon manifestations the charge of fraud may well be made in a bill; the denial of its existence by one whose knowledge' is confined to, and opinion is based upon, such manifestations only, it is evident does not refute the charge, for of its very existence beyond such evidence he is ignorant, and of the force and effect of evidence he can give to the court no ojoinion or information. While these remarks are peculiarly applicable to [31]*31frauds which are secret in their character, yet the reasons upon which they are based require the rule to be extended to all cases where false and fraudulent acts and statements charged in a bill are not answered by those having personal knowledge of the matters by the denial of the acts and representations themselves, or their false and fraudulent character.
The answer of defendants is within these exceptions to the general rule above stated. Moles neither admits nor denies the allegations of the bill, having no information of the matters sufficient to justify a belief thereon. The other defendants deny positively the allegations of fraud, and all other disputed facts set out in the bill. But it nowhere appears that they have any personal knowledge whatever of the matters constituting the foundation of the relief asked by plaintiffs. On the contrary i't is fair to presume from the facts developed, both in the bill and answer, that whatever knowledge they have upon the subject is based upon hearsay, and derived possibly from those who committed the acts complained of as fraudulent. There may be a few material facts stated in the answer to which this remark is not applicable.
While the parties answering are officers of the M. W. R. R. Co., and were, probably, at the time of the transaction complained of, it is not charged that the misrepresentations were by them made, nor do they show directly or indirectly in their answer such a state of facts upon which it would be fair to presume that they were personally cognizant of the matters in question.
In our opinion the answer is not a satisfactory denial of the equities of the bill, and is not sufficient to remove reasonable and well founded doubts which should have existed in the mind of the court below upon that point.
_. aisore_ tion: practice. III. While the continuing or dissolving of an injunction rests in the sound discretion of the court originaiijr passing upon the question, yet this is a legal discretion, and if abused or exercised upon insufficient grounds will be reversed by an appellate court. De Godey v. Godey, 39 Cal., 157; Conolly v. Cruger, 40 Geo., 259. In our opinion the District Court was not authorized to dissolve the injunction upon the answer filed in the case. '
[32]*32The following authorities support the doctrines above announced: Attorney General v. Oakland Co. Bank, 1 Walker’s Ch’y, 90; Ward v. Bokkelen, 1 Page Ch’y, 100; Irick v. Black, 2 C. E. Greene, 189; Huffman v. Hummer, Ibid., 263; Firmstone v. DeCamp, Ibid., 309; Society, etc., v. Low, Ibid., 19.
a^estopmu; ranee btsn° IY. The position taken by defendants’ counsel that plaintiffs, upon the showing made by the bill and answer, are estopped to deny the validity of the tax on the grounds that the work upon the railroad was done and money expended therefor,, all of which were well known to plaintiffs before the bill was filed, or any objection made by plaintiffs, and that many of plaintiffs voted at the election, aird others of them voted for the tax, cannot be sustained. Plaintiffs aver that the frauds complained of were not known to .them until after the work was done. This averment of fact is not overthrown by a'sufficient denial in the answer. It is very plain that the acts of a party, whatever they may be, would not estop him to deny frauds of which he was at the time ignorant, when claims under such frauds are attempted to be enforced by the guilty party or one having notice thereof. Nothing further need be said on this point.
It is proper to remark that no objection is made by defendants, on the ground that the railroad company or others are necessary parties, and are not joined as defendants. No question, therefore, which might arise on this state of the record is before ns for consideration. The other questions we refrain from passing upon, as those above determined are decisive of the case, and the views above announced demand a reversal of the judgment of the District Court.
Reversed.
Cole, J., dissenting.
Day, J.
— Without determining that fraud practiced upon an elector, whereby his vote is secured, will vitiate an election, or whether an answer in chancery which denies- positively the allegations of the petition, must also affirmatively show that the defendant denying has personal knowledge respecting the [33]*33•matter alleged, I concur in the result of the foregoing opinion upon the following grounds:
The petition alleges facts showing that fraud was practiced in securing the submission of the question of taxation to vote. The fact, if proved, in my opinion would invalidate the election.
When the gravamen of the bill, as in this case, is fraud, a temporary injunction will not be dissolved upon an answer-denying the facts and circumstances alleged in the petition, but it will be continued until the hearing on the merits.
Upon these grounds I concur in the opinion of the Chief Justice.