Majority
p. 368Mary A. Masterton et al. plaintiffs and appellants, vs. Charles Beers et al. defendants and respondents.
Headnote
1. The reliance, by a vendor of land, upon a representation made by a vendee or his agent, of the non-occurrence of a certain event, without any knowledge on his part whether it has taken place or "not, after being informed by such vendor that he would, in case such event had not occurred, accept a far inferior price, will, in case such event has not occurred, give the vendor a right • to have any contract made in consequence of such misrepsentation, avoided; although the fact misrepresented does not directly affect the value or price of the land.2. Thus, where the defendants, on applying to the plaintiffs for the purchase of a lot of land owned by the latter, were informed that the lot was not for sale, and that they (the owners) did not wish to sell it “ until the improvements had been commenced;” that if L.’s lots (which were in the neighborhood,) were sold, the price of theirs would be $30,000; and on being pressed for a refusal of the lots in question, the plaintiffs named, as a price, $21,500, adding, “ if Mr. L.’s lots are sold, the price of ours is $30,000, for then the improvements have commencedwhereupon they signed a contract giving the defendants the refusal of the lot for twenty days, at $22,000; within which time the defendants applied to the plaintiffs to complete the contract, inform- ’ ing them, in answer to an inquiry, that L.’s lots were not sold; the plaintiffs repeating that they wanted $30,000, as their price, if the L. property was sold; if not, only $22,000, and the defendants again saying that it was not sold; upon which a contract was executed by the plaintiffs, for the sale of the lot to the defendants, at $22,000; such representation of the defendants being untrue, L. having, in fact, previously sold his lots;
Held that it was a proper case for setting aside the agreement, on the ground of fraudulent representations made by the defendants; such fraud being estab- ■ lished by the want of knowledge, on their part, as to whether the fact represented had occurred or not; and that it was erroneous to decree a specific performance thereof, by the plaintiffs, on the ground of the immateriality of the misrepresentation.
3. The materiality of a representation whose falsehood affects a contract, does not depend upon its effect on the value or price, but upon its supposed ■influence on the mind of the contracting party, in entering into the contract.
p. 369(Before Robertson, Ch. J., and Jones and Monell, JJ.) Heard June 12, 1868; decided December 31, 1868.
4. If a purchaser has notice how the vendor considers a sale of property in the neighborhood as affecting the price of his, however absurd or illogical his supposition may be, the purchaser has no right to take advantage of the delusion by falsehood and fraud.
This was an action brought to annul a contract for a sale of land by the plaintiffs to the defendant Beers, by him entered into for the benefit of, and assigned to, the defendant Faulkner. It was dated and executed on the 30th of October, 1866, and the price agreed therein" to be paid for such land was $22,000. The land sold consisted of a rectangular parcel, situate at the southwesterly corner of Elm and Worth streets, in the city of New York, being on the former street and in the rear twenty feet wide, and on the latter street and throughout, fifty-nine feet, three inches deep.
On the 25th of October, 1866, the defendant Beers applied to the plaintiffs, two unmarried ladies, at their residence in Tarrytown, Westchester county, at some distance from New York city, at the request of his employer, (Mr. Bianco,) whose clerk he was, to purchase the lot in question, for, as he stated, according to the direction of such employer, a Mr. Duhain, (who lived near the property.) One of the plaintiffs (Caroline) whom he saw, said it was not for sale; .He pressed her to sell, and she declined, because she did not wish to do so “ until the improvements had commenced.” She said, if a Mr. Ludlam’s lots were sold, the price of theirs would be $30,000. He urged them to give him a refusal for twenty days. The plaintiffs then named, as a price, $21,500, and one of them (Caroline) added: “ If Mr. Ludlam’s lots are sold, the price of ours is $30,000, for then the improvements have commenced.” Hpon which they signed a refusal of their lots, to Mr. Duhain, for twenty days, in order to enable him to buy other lots.
The lots so spoken of by the parties as belonging to Mr. Ludlam, composed a rectangular piece of land on the
p. 370
southerly side of Worth street on the same block or square with that of the plaintiffs, to the westward of it and separated therefrom by a lot twenty feet wide. It was forty-five feet wide and extended southwardly back from Worth street eight feet on each side.
On the 30th of October, 1866, about eight o’clock in the morning, during a heavy rain storm, the plaintiff Beers again applied to the plaintiffs, at their residence in Tarry-town, to enter into a contract with him for .the land in question pursuant to the refusal he held. He said he could compel them to sell in twenty days, and would do it. They said they had no friends present, and it was not fit for them to go out. If they were so situated they would comply. He then offered them $500 in cash to do so, and counted out $300 and laid it down. They asked him about the Ludlam lots, and he said they were not sold. One of them, (Caroline,) said to him, “if Mr. Ludlam’s lots are sold, take back your money.” He answered, they were not. He then drew up the contract; and they brought in a neighbor, (Mr. Lee,) to witness its execution. In his presence they again said they wanted $30,000 as their price, if the Ludlam property was sold; if not, only $22,000; and he repeated that it was not sold. It was agreed that if the agreement was accepted, Beers or the purchaser was to telegraph at six o’clock that evening; if not accepted the plaintiffs were to return the $300. This was before the contract was signed.
Mr. Ludlam had signed a contract for the sale of the piece of land in question belonging to him bn the 26th of October, 1866, to a Mr. Soleliao and on the 31st of the same month executed a deed to the vendee, dated on the 30th, (the day previous.)
The complaint alleges among other things, that the. plaintiffs were induced to execute the contract in question, by the false representation of Beers before mentioned, after they had informed him that they would not agree to sell for the price mentioned, unless Ludlam’s lots were not sold,
p. 371
but would demand a larger sum, and that he made such representation knowing it tó be false, in order to obtain such land of them for the smaller price. The answer of the defendant Beers, denied all such allegations, as also did that of the defendant Faulkner, of whom the other defend- . ant acted as agent in making such contract, and to whom he assigned the same without any new consideration. It prayed as affirmative relief, for specific performance of the contract referred to in the complaint. A reply was filed to such answers, taking issue.
The action was tried before one of the justices of the court, without a jury. He found as facts, in his decision, the application by the defendant Beers for the purchase of the lots in question, (eighth finding,) the notice by the plaintiffs to him, upon such application, that if Mr. Ludlam had sold his lots their price was $30,000, but if he had not, only $22,000, (ninth finding;) his statement in reply, that Ludlam had not sold his lots; made in order to induce them to sell at the less' price, (tenth finding;) their execution of the contract relying upon the truth of the representation so made, (eleventh finding;) the untruth of such representation at the time of making it, (twelfth finding;) and the agency of Beers for the defendant Faulkner in making such purchase. It was also found that such representation by Beers was “ not of a material fact or matter of substance.” The learned judge did not pass directly upon the intent of Beers in making such representation, but as matter of law concluded, in such decision, that such agreement was not void as fraudulent, and adjudged therein that the plaintiffs should execute and deliver a proper conveyance to the defendant Faulkner of such premises substantially according to the terms of the contract.
Exceptions were duly filed to the findings and conclusions • of law contained in such decision, and an appeal taken from the judgment rendered thereon, on which the case was heard.
p. 372I. It is conceded as the law of this case, in the opinion delivered at special term, that “ one owning real estate has a right to estimate what its value will become upon the happening of a certain event, and to set the price at which, on the happening of that event, he will hold his property. If another, knowing that one has thus set a certain price at which he holds his property upon a particular event happening, assert that the event has not happened, when in fact it has, and thus obtains the property at less than such certain sum, he must be deemed to have made the assertion either with full knowledge that the event has happened, and therefore with a deliberate intent to deceive, or to have made it without knowing how the fact really was, either from fear that the owner would decline to sell until he had made inquiries, which might result in ascertaining that the event had happened and a refusal to sell, except at the estimated value, or from a willingness, with a view to obtain some expected benefit by closing the contract at once, to take the chance of the facts turning out to be as represented, and in case it does not, to abide by the consequences of the misrepresentation. .In either aspect, the owner has been beguiled into parting with his property at a sum less than that which, under the circumstances as actually existing, he asked for it, as the purchasing party well knew. As a matter of strict natural justice, such a contract should not be allowed to stand against the owner.” It would seem to follow from this concession as to the law, and from the representation found, that the contract thus negotiated by Beers could not stand. The plaintiff Caroline had said on the first interview that she had set the price from the Worth street property of Mr. Ludlam; this first interview was Thursday, October 25, and the negotiations were Tuesday, October 30; the plaintiffs were not in town between those dates; the plaintiffs did not wish to sell until the improvements had commenced; if Ludlam’s lots were sold, the improvements had commenced. On Tuesday, the day of
G. H. Forster, for the appellants, plaintiffs.
p. 373
those negotiations, in the evening after this contract was obtained, the plaintiffs had another offer, of $25,000, and on the Friday following another offer, of $28,000; later still, another application. The object of the representation was to discourage the plaintiffs from seeking other purchasers for their property at the higher price, to induce them to sell it as property not in demand for the lower price, and to create the impression on .their minds that the defendant, who had then come from Hew York, and knew all about the property, knew there was no demand for property in that neighborhood. The fact of the sale of Ludlam’s lots was a material circumstance affecting the demand for, and price of, Worth street lots, as stated by the plaintiffs. This is shown by the fact, that so soon after that sale the plaintiffs had these offers, and conclusively by the 9th, 10th and 11th findings. If Ludlam had not sold, the plaintiffs’ price was $22,000; if he had sold, their price was $30,000. The subject of the representation made a difference of $8000 in the price; this was certainly a matter of substance. Beers made the representation in order to induce the plaintiffs to close this contract, and they, relying upon such representation, agreed to make the sale at the lower price, and executed the contract. The principle of the authorities is, that such inducement, and such reliance, and the success of the representation, establish its materiality. (Bench v. Sheldon, 14 Barb. 66 , 74. Monell v. Colden, 13 John. 402 . Bradley v. Bosley, 1 Barb. Ch. 125 , 148. Livingston v. Peru Iron Co., 2 Paige, 390. Phillips v. Duke of Bucks, 1 Vern. 227. Harding v. Cox, note to last ease. Canham, v. Barry, 29 Eng. Law and Eq. 290. Atwood v. Small, 6 Clarke & Fin. 395. Dobell v. Stevens, 3 Barn. & Cres. 621. Laidlaw v. Organ, 2 Wheat. 178 . Pilmore v. Hood, 5 Bing. N. C. 97. 6 Scott, 827. Waters v. Mettingly, 1 Bibb. 244 . Broderick v. Broderick, 1 Pr. Wms. 240. Fulton’s executors v. Roosevelt, 5 John. Ch. 174; affirmed Court Errors, 2 Cowen, 129. Taylor v. Fleet, 1 Barb. 471 . 1 Story’s Eq. Jur. §§ 193 to 205. Turney v. Harvey, Jacobs’ R. 169, 178. Pidcock v.
p. 374H. We respectfully point out the following errors in the trial and decision of this cause, as grounds for a reversal of the judgment, and a new trial. The matters of fact requested by the plaintiffs at folios 322-324, 328, 329, were fully sus
Bishop, 3 Barn, & Cres. 605. Taylor v. Green, 8 Car. & P. 316. Cochran v. Cummings, 4 Dallas, 250. Bellas v. Hays, 5 Aery, tf- AyZe, 433. Goepp’s appeal, 3 Harris, 428. Bishop v. Reed, 3 Watts f A. 264. Bodine v. Glading, 9 i.d. 54. Wade v. Tatton, 2 Jwr. IV. A. 491. Denton v. Great Northern R. Co., Id. 188. Rawlings v. Wickham, 4 ZcZ. 990. A. C. 5 id. 281, opinion of Turner, L. J. Bennett v. Judson, 21 JV. Z Rep. 238. Craig v. Ward, 36 Barb. 378 . Brown v. Montgomery, 20 JZ. Z. Rep. 287. Nichols v. Pinner, 18 Zd. 295. Cassard v. Hinman, 6 Bosw. 8 . Sharp v. The Mayor, fc. 40 Barb. 256 . 25 .¿Tow. 389. Meade v. Bunn, 32 A". Z. Rep. 275. Botsford v. McLean, 45 J3arZ>. 479.) The materiality of a misrepresentation cannot be determined by court or jury from the effect it would be likely to have on their minds had they been in the place of the contracting party, but the true and only test of its materiality to the thing obtained must be: "Was it the inducement? was it made with that intent ? was it successful ? was the representation so connected with the contract as to influence the minds of the plaintiffs in making it? [Canham v. Barry, 29 Bng. Law and Bq. 296, opinion Jarvis Ch. J. Bellas v. Hays, 5 S. f R. 433.) If those questions are answered affirmatively as matter of fact, the materiality follows as a conclusion of law. The 13th finding was erroneously found as a fact, but as a conclusion of law, or mixed conclusion of law and fact, is inconsistent with the evidence and previous findings of fact, and should be reversed, and the seventh exception sustained; and the court having all the facts found and not excepted to by the defendants, should reverse this thirteenth finding and the six conclusions of law, and the judgment thereon, and render judgment absolute for the plaintiffs, with costs, that the paper of 30th of October was fraudulently procured, and is. fraudulent and void.
p. 375
tained by the evidence of See, a disinterested witness, “ if the agreement was accepted, Beers or the purchaser was to telegraph that evening, at six o’clock, positively. Beers impressed it upon his mind, and drew his attention to the refunding of the money. Beers gave the reason for wishing the contract thus open, confirmed by the plaintiff Caroline, that “he had this refusal to go to Hew York and telegraph;” and by the plaintiff Mary, “Beers agreed to buy the property conditionally; he was to telegraph to me if accepted by the party,” not contradicted by any testimony of defense except so far as Beers’ statements may be taken as an implied contradiction. Beers had as impliedly denied the false representations proved by the same witness, See, and the plaintiffs, and found by the court. It is respectfully submitted that the court at special term was bound to find the facts as requested, on this testimony as it stood, even though to the mind of the court there was an improbability that the parties would have made such an arrangement. It is apparent from an examination of their testimony, as well as from the nature of the false representation by which they were induced to sign, and on which they relied in signing the contract, that the minds of these ladies were affected by very different considerations from that of the court. For it is clear from the opinion of the court, that these representations of Beers, which so affected the plaintiffs as to enable Beers by such means to procure this contract, would not have affected the mind of the judge at special term, had he been the owner of this property. For he, after very patient examination, was still of the opinion that it was neither the necessary nor ordinary result of the salé of one lot to affect the value of an adjoining lot, nor did he think it reasonable to suppose that the anticipated sale of Ludlam’s lot would have that effect; yet, on the facts of this case as found, the plaintiffs did so suppose, and Beers was so far from thinking such supposition unreasonable, that he misrepresented the fact of that sale in order to induce .them to close this contract; and within a week
p. 376after the sale of Ludlam’s lots, the plaintiffs had four applications. The different effect of the same fact upon the minds of the plaintiffs, and the mind of the court, makes this misrepresentation material, when made to them, though it would have been without effect, and so immaterial, had it been made to the judge at special term; so it is submitted, that even though the court thought it unreasonable that it should have been part of the agreement that the same was a refusal, to become binding only by a telegraph of acceptance to be sent by six o’clock that evening,; yet as that fact was unequivocally sworn to by three witnesses and not substantially contradicted, even by Beers, and he entitled to no credit, as the party guilty of false representations, and also of falsehood oh the trial, in denying that any thing was said about Mr. Ludlamy it should have been found. Beers himself drew the contract, and his testimony brings this case clearly within the principles of the cases allowing reformation of a written contract, when part of the agreement was not inserted in the paper by the party who was trusted to draw the agreement. IH. The representations found must prevent the enforcement of the specific performance of this contract. The rule is even stronger against the party seeking such remedy; it goes so far that the court will not even enforce the specific performance of a contract obtained by the intentional concealment of a fact from the adverse party, the disclosure of which would have prevented his making the agreement, but the contractee will be left to his remedy at law, even though the suppressio veri was not sufficient to set aside the sale on the ground of fraud. (Livingston v. Peru Iron Co., 2 Paige Ch. 391 . Seymour v. Delancy, 3 Cowen, 445. Best v. Stow, 2 Sandf. Ch. 298 . Phillips v. Duke of Bucks, 1 Venn. 227; and other cases cited above.) Clearly the defendant was not entitled to a specific per- ’ formance; the twelfth, thirteenth and fourteenth exceptions must be sustained, and the fourth, fifth and sixth conclusions of law-, and the judgment thereon, should be reversed.
p. 377(Harris v. Kemble, in House of Lords, 2 Dow & C. 463. Lord Clemonts v. Tasburgh, J. & W. 112. Edwards v. McLeay, 2 Swanst. 287.) IV. Each of the conclusions of law are erroneous, and the ninth, tenth and eleventh exceptions should he sustained. I. There was no fraud in the making of the .contract; the same was drawn' in the presence of the parties, was
V. The judgment and decision were also erroneous in first adjudging that the defendant was entitled to a specific performance of the contract, then in modifying the contract and adjudging its specific performance as so modified. The contract provided for the payment, besides the mortgages, of $8000 cash, less $300 already paid, to be paid within sixty days, together with lawful interest on the same from the date of the contract, and contained a covenant by Beers that he would pay such several sums, with the interest thereof, without deduction of any taxes whatever; the plaintiffs agree to pay assessment for Belgian pavement, but no other, and the testimony shows that plaintiffs were not to pay any taxes, assessments, or other incumbrances on the property, except the assessment for Belgian pavement. Yet the decision and judgment vary this contract by exempting the defendant from interest, fro in-payment of the $3000 mortgage, of taxes confirmed since 10th December, 1866. Where the conditions of sale provide that interest shall be paid from a certain day, if the purchase be not then completed, the purchaser cannot relieve himself from the payment of interest by alleging that delay in completing the contract was caused by the vendor. (Esdaile v. Stephenson, 1 Sim. & Stu. 122.) Faulkner retained his money after the offer to pay, and did not deposit the money, or make any sufficient tender, and has had the use of it, and is therefore chargeable with interest, if a specific performance can be adjudged of a contract obtained by the false representations found in this case.
H. C. Van Voorst, for the respondents, defendants.
p. 378read over carefully to them in the presence of a third party of their own selection, and it was compared and well considered before signature. It was read for the purpose of having all understand what the agreement was, and after the minds of the parties had fully met in regard to price, the time and manner of payment, assumption of incumbrances, and all things had been fully considered, the contract as made and read was understood. There was and could be no mistake in regard to the contents of the paper. What was said about telegraphing was no part of the contract, and was optional with the defendant. The learned judge refused to find that what was said about telegraphing was a part of the contract. And it is evident that it is an after thought with the plaintiffs. They suppose they can now get more for the lots, and would if they could avoid the contract. Ho such' ground would have been taken if the lots had fallen in the market; and there is no doubt but they could have successfully maintained an action for a specific performance. H. The representation hy_ Beers, as found by the judge, that Ludlam’s property had not been sold, is free from any charge of intentional fraud or misrepresentation. I. Heither he nor Faulkner knew of Ludlam owning any lots, or of any sale by Mm. 2. The statement when made, on the 25th October, was true, as the evidence shows that Ludlam’s agreement do sell was not made till the 26th. 3. The sale of the Ludlam lot was not completed until after the 30th of October. Ludlam’s deed was not acknowledged until the 31st October, the day after, and as it required a separate examination of the wife, the deed could not have been delivered before the latter day, and it was not recorded until the 22d Hovember, 1866; so that the statement found to have been made on the 30th was strictly true, as Ludlam’s lot was not actually sold at the time. 4. The. talk about Ludlam’s lots on the 30th October was pimply the renewal of the conversation of the 25th. and
p. 379independently of Beers’ denial of any knowledge on the subject, the presumption, (in the absence of any evidence to the contrary,) is, that he was ignorant of the agreement made by Ludlam on the 26th October. 5. But the contract of the 26th October, with respect to the Ludlam lot, was executory only, and had some sixteen days yet to run ; such contract may never have been performed, or.the sale actually consummated. If Beers had had knowledge of such contract, which he had not, he could not have asserted that the Ludlam lot was sold on the 30th October, for he cOuld not know that the parties to it would certainly carry it out and complete the transaction. m. The statement that Ludlam’s lots were not sold, did not and could not affect the value of the plaintiffs’ lots. They were worth no more the day after than they were the day before the sale of Ludlam’s. The sale might have proved a detriment instead of a benefit. There was no connection between the mere fact of such sale and the value of plaintiffs’ lot. The result depended not on the sale, but the use to which the Ludlam lots might be applied. So long as they remained in their then condition the plaintiffs’ lots would not be in any way affected. If a manufactory had been erected it might have injured the plaintiffs’ lots. The idea of benefit was merely speculative and wholly uncertain, depending on several contingencies, viz: 1. The sale of Ludlam’s lots. 2. That they were bought for the purpose of immediate building on them, and not on speculation or to hold for a rise. 3. That the purchaser would build immediately. 4. That he had the means to do so. 5. That his building would actually add to the value of the plaintiff’s lots: 6. The inquiry was not whether Ludlam’s lots had been sold to any particular person, or for any certain price, but whether or not they were sold ; suppose they had been sold and for a low price ? Suppose sold to a person not meaning to improve ? , There is nothing in the inquiry which tends to show any relation between the sale of the lot and the value of the plaintiffs’ lot.
p. 380TV". There is no proof that the sale by Ludlam did, or would be likely to add to the value of the plaintiffs’ lots. It was merely an imaginative idea on the part of the plaintiffs.' Ludlam’s lot was separated from the plaintiffs’ by an intervening lot, and could not be used in connection with it; Lynch’s lot, on the other hand, adjoins the plaintiffs’ lot, and could be used in connection. If the inquiry had been whether or not Lynch’s lot was sold, there might have been some pertinency in the inquiry. But the plaintiffs knew the defendants were in treaty for the Lynch lot, and designed to improve it in connection with theirs, and with knowledge of these facts fix the price at $22,000, and in fixing their price at $22,000, the plaintiffs knew the defendants designed to improve; they availed themselves of all the advantage to be derived from that; the defendant Beers said the improvements had commenced. V. The representation that Ludlam’s lots were not sold, was not a material representation, nor did it affect the substance of the contract. It related to an outside fact which could not affect the value of the plaintiffs’ lots. The mere untruth of the representation will not render the contract void. Even where a vendor, without any fraudulent intent, had misrepresented the quantity of land sold for a gross sum, he was held not to be bound to compensate the vendee for the deficiency. (Johnson v. Taber, 10 N. Y. Rep. 329 .) And the rule as to fraud and representations is the same in equity as at law. ( Whitney v. Allaire, 1 N. Y. Rep. 305 .) VI. Material representations are such as directly relate to the land itself, or to something connected with, or appurtenant to it, and affecting its actual value ; such as quantity,location, quality or condition of the land, rents or profits derived from it, growing crops, incumbrances, or the like. (Johnson v. Taber, supra. Whitney v. Allaire, supra. Haight v. Hay, 19 N. Y. Rep. 464 . Clark v. Baird, 9 id. 183. Bennett v. Judson, 21 id. 238. Hutcheon v. Johnson, 33 Barb. 392 .) The misrepresentation, in order to afford ground for the equitable interposition of the court, must consist of some
p. 381thing material and by which the other party is misled to his injury. (Story’s Eq. Jurisp. vol. 1, § 195, and cases cited, §§ 202, 203. Winston v. Gwathney’s heir, 8 B. Monroe, 19.) VII. No case has been found in which a representation of a fact, the effect of which was uncertain, and merely speculative, has been held material; and in the language of Judge Bronson, in Whitney v. Allaire: “ It is a strong argu ment against the action that no precedent for it has been found.” The misrepresentation must be something in regard to which the one party places a known trust or confidence in the other; the plaintiff had no reason to suppose the defendant Beers had any knowledge in regard to the Ludlam property, or whether sold or not; this was a matter equally open to the plaintiffs and the defendant. In fact it was more particularly within the province of the plaintiffs to know, as Beers did not know Ludlam or that he had property there. (Story’s Eq. Juris, vol. 1, § 197.) VIH. The price, $22,000, in the contract, was adequate and the fair and full value of the plaintiffs’ lots. IX There is evident confusion in the minds of the plaintiffs as to the telegraphing by Beers. 'That they did not consider the contract rescinded by his not doing so, is plain from the fact of their taking the contract and deed of the lots to Mr. Forster, a day or two afterwards, for him to draw a deed to Beers, and their using the $300 paid by him on account several days after the 30th October, and after the deed was in Mr. Forster’s hands. X. The rule that all previous negotiations are merged in the written contract applies not only to this question of telegraphing, but also to the representations as to Ludlam’slots. Sir E. Sugden states the principle to be, that in the absence of actual fraud, representations and assertions upon a treaty are concluded by a contract in which no notice is taken of them; that in the great case of Small v. Atwood, where a purchaser who was induced to buy a very large estate by the misrepresentations of the sellers as to the cost of producing pig iron from the land, was precluded by the contract, not
p. 382' having inserted any stipulation to guard against the incorrectness of the representation. (Sugden on Vend. and Pur. 6th Am. ed. 1843, pp. 280, 383, §§ 6, 7.) XI. The defendant Faulkner had a rightto elect to abandon his right to the rents and profits, and to be exempt from payment of interest on the purchase money so long as the plaintiffs are in default or the completion delayed by them. (Dias v. Glover, Hoff. Ch. 72. 3 Sugden on Vend. and Pur. 115, 119, original paging, §§ 43, 44, 45, 46, ed. 1843.) Even at law a tender precludes any claim for subsequent interest. (Raymond v. Bearnard, 12 John. 274 .) XUI. The present is a case of dependent covenants, both to be performed at the same time; the tender by Faulkner, to perform his part of the contract, gives the other parties no right to the money without performance by them. If the same principle applied, as at law, to tender by a defendant, the Mastertons might possibly gain (in equity) both the money and the land. It is absurd for parties, who deny the validity of a contract of sale, to demand security for the price; much more so to demand payment. XIV. In order to rescind the contract, the party should have moved in this direction promptly and as soon as the alleged fraud was discovered. There is no evidence of any intention to rescind expressed by the plaintiffs before the tender made by the defendants, on the 8th of December, and, on that occastion, they did not refuse, absolutely; but said: “ They did not feel disposed to do that at that time, they would prefer to close it at their counsel’s office.” They
XU. It was not necessary for Faulkner to pay the money into court, for on the question of specific performance he is plaintiff and the Mastertons are defendants. A tender by a defendant is an unconditional admission of the plaintiffs’ right to the amount, and when paid into court it never can be reclaimed by the defendant, but the plaintiff’ may take it, whether he proceeds with the action or not, or even if he be nonsuited or a verdict passed against him. (Saunders’ Pl. and Ev. Tender, 837, and Payment of Money into Court, 680.)
p. 383exhibited no intention to rescind or refuse. They should have offered to return all they had received under the contract. This they did not do. They attached no importance to the non-receipt of the telegram, because, after the time, they used the money, and did what they could to affirm and regard the contract as valid and binding, by taking their deed to their counsel to prepare a conveyance to the defendant. There is no evidence of a repudiation of the contract.
The interests of the two defendants in this case are so identical, the defendant Faulkner having no more rights than Beers, not being a bona fide purchaser without notice of the interest of the latter, that it may be discussed as if Beers were the actual purchaser, and the only defendant.
The propriety of the findings of fact contained in the decision of the court, and the case not being controverted, except as to the materiality of the fact misrepresented by Beers, the questions in this case are narrowed down to one of law, to wit: Whether the reliance, by a vendor of land, upon a representation made by a vendee or his agent, of the non-occurrence of a certain event, without any knowledge, on his part, whether it had taken place or not, after being informed by such vendor that he would, in case such event had not occurred, accept a far inferior price, would, in case such event had occurred, give such vendor a right to have any contract made in consequence of such misrepresentation, avoided, although the fact misrepresented did not directly affect the value or price of the land. That question may produce different results, according as the positive relief is asked for by the vendor to have the contract avoided, by the judgment of a court of equity, or specific performance is asked for by the vendee. Both might be refused in actions brought separately by both vendor and vendee, leaving the parties to seek relief elsewhere by actions for damages. As, therefore, in this case the court might have been warranted in refusing the
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affirmative relief asked for in the complaint, of a rescission of the contract, although not in adjudging a specific performance of it, I shall consider the latter question first.
Whatever influence the existence of sufficient reasons to induce a vendee honestly to believe that a representation made by him, although false in fact, was. true, may have upon the legal effect which such untruth produces on a contract of .sale, where the fact misrepresented, to the knowledge of the vendee, formed the only inducement to the vendor to make the contract, without having any evi- ' dent bearing upon the value or price of the subject matter of sale, no such question is involved in this case, as fraud is clearly established by the want. of knowledge, by the defendant, of whether the fact had occurred or not. In this case the fraud of Beers is a necessary legal consequence of the facts found by the decision, as was conceded by the learned judge before whom the case was tried, in a part of the opinion delivered by him on deciding it, to be presently cited. The only question is, whether it is such a fraud as the law will take notice of, and relieve the deceived party from its consequences. The sole grounds urged in this case why the law should not notice it, were, that the fact stated was immaterial, because it was not an ingredient of the value, did not influence the price of the subject matter of the contract, or induce a sale thereof at a sum materially less than its real value. The learned judge, before whom the cause was tried, conceded that, “ as a matter of strict natural justice, such a contract should not be allowed to stand, as against the owner,” but held that “it was an established principle of courts of equity not to interfere upon trivial causes of complaint, which was the whole scope of the doctrine that the misrepresentation must be material.” He further held that the court should not interfere, if, upon view of all the facts and circumstances of the case, “ it appears that the fact (misrepresented) does not, or is not likely to, affect the value of the property to any material extent, or has not induced a sale thereof at a sum
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materially less than its value.” I am compelled, however reluctantly, to dissent from both those propositions of my learned associate. Such a doctrine destroys all right of a vendor to fix his own criterion for the value of his property, and after'informing the vendee thereof, require the latter to disclose the truth, to the extent of his knowledge, in regard to facts material to or forming such criterion, and aids the vendee to profit by the betrayal of the confidence reposed in him by the vendor, unless the latter can satisfy a court or jury that such criterion was a just one.
The learned judge himself in this case laid it down as a general principal of law that any “ one owning real estate has a right to estimate what its value will become upon the happening of a certain event, and to set the price at which, on the happening of that event, he will hold his property. If another knowing that one has thus set a certain price, at which he holds his property upon a particular event happening, assert that the event has not happened, when in fact it has, and thus obtains the property at less than such certain sum, he must be deemed to have made the assertion either with full knowledge that the event has happened, and therefore with a deliberate intent to deceive, or to have made it without knowing how the fact really was, either from fear that the owner would decline to sell until he had made inquiries, which might result in ascertaining that the event had happened and a refusal to sell, except at the estimated value, or from a willingness, with a view' to obtain some expected benefit by closing the contract at once, to take the chance of the facts turning out to be as represented, and in case it does not,- to abide by the consequences of the misrepresentation. In either aspect, the owner has been beguiled into parting with his property at a less sum than that which, under the circumstances as actually existing, he asked for it, as the purchasing party well knew. As a matter of strict natural justice, such a contract should not be allowed to stand as against the owner.” And I tbinlr it will be found on investigation that the principles of law
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as administered by courts .of equity do not deviate from those of “ natural justice " in such cases. Neither the principle involved in the maxim “ de minimis non curat lex ” nor the rule of the civil law, “ lies bona fide vendita, propter minimam causam inempta fieri non debet” (Dig. lib! 18, tit. 1, l. 54. 1 Domat, B. 1, tit 2, § 11, art. 3,) are applicable in such a case. Equity does not embarrass itself with computing the amount of damages, when called upon to undo a fraud. (Bennett v. Smith, 16 Jur. 421. S. C. 10 Eng. Law and Eq. 272.) If the truth of the fact stated had been made expressly a condition of the performance instead of the execution of the contract, however trivial it might have been, and however imperceptibly connected with either the value or the price of the subject matter of the contract, every court would be bound to notice it. Why should not fraud in what constituted the inducement to the contract be as fatal as a breach of a condition in it ?
' But in fact the necessity of the connection of a fact falsely represented with the value or price of property, whose sale is procured by such fraud in order to make the contract void, rests solely upon the general presumption of law that such value or price forms the inducement to the sale. But that circumstance does not debar parties from agreeing that other considerations shall form the inducement, or rather from estopping themselves from denying that they formed it. The authorities also do not confine the materiality of the fact misrepresented to' its influence upon the value or price. Justice Story, in his Equity Jurisprudence, (vol. 1, § 195,) requires in -general terms the misrepresentation to be simply “something material, (i. el) constituting the inducement or motive to the act or omission of the other party by which he is misled to his injury." In a subsequent part (Id. § 210) of the same work, he defines what he includes under the head of inducement or motive, by dividing material circumstances into those which are “intrinsic” and form the very ingredients of the contract ; such as natural or artificial defects in the subject mat
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ter “ of the contract which belong to the nature, condition, title, safety use or enjoyment ” of it, and “ extrinsic,” which form no part of it but “ are accidentally connected with it, or rather bear upon it at the time of the contract.” Which latter are again subdivided by him into those which enhance or diminish its value or price, and “ those which may ereate inducements or operate as a motive to make or decline the contract;” and he gives as instances of the last “the occurrence of peace or war, the rise and fall of markets, the character of the neighborhood, increase or diminution of duties and the like.” Sir John Romilly, M. R. concedes that “ if on the purchase there is an express statement of fact on either side, which causes the contract to be made, and on the faith of which alone the contract is made, and that fact is * false * * it might render void the whole transaction.” (Dolmar v. Nokes, 22 Beav. 402, 407.) The “ injury ” to the party deceived, of which the learned author just cited (Judge Story) speaks, of course does not mean pecuniary loss, since no such qualification exists in the authority cited by him. (Phillips v. Duke of Bucks, 1 Vern. 227. S. C., Eq. Cas. Abr. 18, pl. 10.) In that case the plaintiff had procured from the defendant a contract for the sale of a manor under the false pretense that he bought it for persons whom the defendant declared his willingness to oblige. The opinion of the Lord Keeper, (Guilford,) who refused specific performance, puts his decision solely upon the ground of the misinformation, although' as he said, the party for whom the contract was professed to be made, might have sold the property next day to the plaintiff. In a note to that case (id.) another one (Harding v. Cox,) similar in character to that in the text was decided by Lord Hardwicke, who declared that if the defendants had been able to prove the fraud he would have dismissed the bill on the strength of the case contained in the text. Similar language was held in the similar case of Fellows v. Lord Goodyr, (1 Sim. 63; S. C. on appeal, 1 Russ. § M. 83,) although differently decided, because the vendor had no
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reason to know on what the vendee relied, a decree was refused dismissing the bill because there was no proof that the vendor knew that the vendee relied on a different ownership from his. It is true that in all these cases the fraud was unproved, but the learned judges, by whom they were decided, unhesitatingly recognized the doctrine as settled law. But a court of* equity has gone so far as to refuse specific performance of a contract, because the party seeking it refused to perform an entirely independent contract, which he had entered into, to induce ihe party against whom he was proceeding, to enter into the contract sought to be enforced. (Myers v. Watson, 1 Sim. N. S 523.)
•I think, therefore, we should adhere to the general principle already referred to, so admirably, ‘laid down and Sustained by the reasoning of my learned associate, but reject his qualification of it as not being sustained by reason or authority,-and hold that the fraud perpétrated by Beers in regard to what the plaintiffs declared to be their inducement in making the contract they did, sufficient to have warranted the refusal of a specific performance of the contract in question.
But it still remains to be determined whether such fraud is a good ground for rescinding the contract. Of 'course it would be if it is a good defense to an action at common law, because the contract, being recorded, is a cloud upon the title to the property. It will be well, therefore, to examine a few cases in which such doctrine has prevailed. In Sibbald v. Hill, (2 Dow’s Parl. 263,) which was the case of a contract of insurance procured by the assured from the underwriter by a fraudulent representation that another underwriter had previously insured the same risk at a less price, Lord JEldon;in delivering his opinion, held that “if a person meaning to effect insurance, exhibited a policy underwritten by a person of skill and judgment, knowing that this would weigh with the other party and disarm the ordinary prudence exercised in the common transactions of life, and it turned out that this person had not in fact
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underwritten the policy, or had done so under such terms, that he came under no obligations to pay, it appeared to him to be settled law that this would vitiate the policy.” The learned judge, (Grover, J.) who delivered the opinion in the Court of Appeals of this state, in the'case of Valton v. National Fund Life Insurance Co. ( 20 N. Y. Rep. 37 ,) in commenting therein upon the case last referred to, says: “ The court in this country would say that this was a fraud, not on the ground that the misrepresentation affected the nature of the risk, but because it induced a confidence without which ' the party would not have acted.” In the case last cited, which was an action on a policy of life insurance, there was evidence that the agent of the defendants during the negotiations for the insurance, stated that he would not take so large a risk on the life insured if he was only the porter of the' assured; and the latter represented that he was his partner and the moneyed man of the firm. On «the trial the counsel for the defendants requested the court, in substance, to charge the jury, that if such representation was made, and was untrue and “ if the defendants would not have issued the policy if the representations had not been made, "the policy was void.” "Which the judge declined, but charged the jury that if the assured untruly represented that the person, whose life was insured was a partner, or the moneyed man of his firm, and “ either or both of such representations were material to the risk,” the policy was avoided. The same learned judge, (Gfrover, J.) after stating Lord Eldon’s views, in the case before cited, (Sibbald v. Hill, ubi supra,) proceeds ' to say, “ The principle of this case when applied to the one under consideration, shows that the judge committed an error in refusing to charge as requested ” that it was “ clear that the circumstance of a party being engaged in commercial business, possessed of large means, might induce an insurer to make an insurance upon his life for a large amount, while where he was a mere porter, the risk would be rejected, although the chance of life would be as good in the latter situation, as the former.” These cases fully estab
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lish the principle, that the materiality of a representation whose falsehood affects a contract, does not depend upon its effect on the value or price, but its supposed influence upon the mind of the contracting party in entering into the contract. The ordinary case of a sale at auction rendered void by puffing, illustrates the same principle; the fictitious bids amount to representations that the bidders are willing to pay the price they offer. Such a statement does not relate to any thing affecting the actual value, yet the sale becomes void, because the purchaser is presumed to have been misled into making the contract he did. (Veazie v. Williams, 8 How. U. S. 153.) The following cases are also instances of a contract vitiated by a fraud as to a matter not affecting the value. In Hill v. Gray, (1 Stark. 435,) a mere failure by the seller to undeceive a buyer as to the prior ownership of the article bought, his reliance upon which, such seller had reason to believe, formed his inducement to the purchase, was held to vitiate the sale. In Culver v. Webb, ( 12 Conn. Rep. 443 ,) where a purchase had been made of one half of a patent right, to induce a third person to buy the other half, a secret agreement between the first buyer and seller to cancel such purchase was held to be fraudulent and void. In White Mountain Road v. Eastman, ( 34 N. H. Rep. 141 ,) a secret agreement between the directors of a corporation and a subscriber, to allow him to reduce his public subscription to its stock was held void, upon the ground that it formed an inducement for others to buy. Suppose that the vendor of half the patent in the first of the last two cases cited, (Culver v. Webb, ubi supra,) knowing that the person with whom he was negotiating to sell one half of his patent, would be induced to buy it, if the person to whom he had previously nominally sold the other half retained such purchase, should represent that there was no agreement to cancel it; or that the directors of the company, in the other case, (White Mountain Road v. Eastman, ubi supra,) informed every one desirous of subscribing to the stock of such company, that no previous
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subscriber was released from, taking the full amount of shares of stock which he had apparently agreed to subscribe; can it be doubted that the purchase of half the patent in the first case, or any subscription to stock in the second, would be rendered fraudulent and void, although the facts misrepresented did not affect their value ?
The learned judge in this case says: “ There is nothing in this case giving to the sale of Ludlam’s lots, any greater effect than can be ascribed to the mere transfer of the title from one to another,” and argues that “it is impossible to perceive how the mere fact ” of such transfer “ can in any way affect the value of a neigboring piece. Such is clearly not a necessary nor even an ordinary result of a mere change of ownership.” It is very true that such a change has no effect upon what are termed by Judge Story the intrinsic circumstances affecting the value of the land, but it is not difficult to perceive how it may have a great effect upon extrinsic circumstances affecting its price. The purchase of lots in a growing city in a particular locality by an enterprising capitalist, known to be in the habit of making improvements, will raise the price of property in the neighborhood; so the possession of a piece of property by an owner notoriously indisposed either to improve or sell property owned by him, will keep down the price in the same vicinity. It is true there may have been but slight evidence, in this case beyond the declaration of the plaintiffs at the time, upon which to base a presumption that Mr. Ludlam’s retaining his lots could have any legitimate effect upon the price they might expect to obtain for theirs; but in neither of the last two cases cited, (Sibbald v. Hill, Valton v. National Fund Life Assurance Co.) was there any evidence, beyond the declaration of the parties, as to the influence of the facts misrepresented upon the minds of the contracting parties. Each of the learned judges, who delivered the opinions therein, argued from his own knowledge and experience as to the probable effect of such facts upon any one about to enter into such contracts. In this case we have not only the
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declaration of the plaintiffs as to their inducement to take the less price and the immediate misrepresentation made to induce them to take it, thus estopping the defendants from denying that it was the inducement, but the finding of it as a fact, in the decision at special term. It is true, we have but slight evidence of the habits or disposition of Mr. Ludlam in regard to his property, but, it is proved that one of the plaintiffs told the defendant Beers, at the time of the negotiation, that “she didn’t wish- to sell until the improvements had commenced,’’ and that “ if Mr. Ludlam’s lots are sold, the price of ours is $30,000, for then the improvements have commenced." This was full notice how the plaintiffs considered the' sale of Mr. Ludlam’s lots to affect the price of theirs, and however absurd or illogical it may have been (if it were so,) the defendants had- no right to take advantage of the delusion by falsehood and fraud. But under such circumstances the possibility of a connection between the sale of Mr. Ludlam’s lots and an increase of price for those of the plaintiffs is all that is necessary; the plaintiffs having established their test of value,, which was recognized by the defendants, no court has a right to prescribe a different one. It would be very difficult for any court, however experienced in all the causes which affect the price of real estate, to prescribe the limits for them.
If there be any inquiry to establish that the plaintiffs lost any money by the bargain they made, it appears to me the evidence tends to establish that they did; for-the question was not merely whether they lost the $30,000 they asked, but whether they could have got more than the $22,000, since if the defendants had refused to give it, they would have had their lots still. It is true offers do not prove value, but they prove a demand and a possibility of loss. The quick succession of those offers, and the sales of other lots in the neighborhood at higher rates, immediately after the sale by Mr. Ludlam, leave room for the inference, at least, that it had something to do with such rise, and it is only by inference that it can be established; for the evidence of the
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purchasers of other property that they gave the price they did for that reason, would be inadmissible as not tending to establish the fact of the connection, per se.
The judgment should, therefore, for the reasons just mentioned, be reversed, and a new trial had, with costs to abide the event.
Cases cited
- Bench v. Sheldon 14 Barb. 66 at 74 p. 373
- Bradley v. Bosley 1 Barb. Ch. 125 at 148 p. 373
- Laidlaw v. Organ 2 Wheat. 178 p. 373
- Taylor v. Fleet 1 Barb. 471 p. 373
- Cassard v. Hinman 6 Bosw. 8 p. 374
- Sharp v. Mayor of New York 40 Barb. 256 p. 374
- Hutcheon v. Johnson 33 Barb. 392 p. 380