Bell v. Felt

Mr. Justice Waterman delivered the opinion of the court. Appellees urge that whatever deception or fraud may have been practiced upon appellant by Mason, they were neither parties to nor concerned in it; that Mason was never in any way their agent nor did they have knowledge or notice that he intended to practice any fraud upon or in any way deceive appellant; that they did not, nor did any one on their behalf, represent to appellant that the price of the patents was $25,000. We can readily understand how appellant, being told by Mason that the purchase price was $25,000, and acting under this belief, can have honestly cometo think that Felt and Tarrant so told him; while it seems impossible that if they did so state, either of them can have forgotten the utterance of such a falsehood. We therefore should, upon the testimony of Bell, Tarrant and Felt, alone, be inclined to believe that appellant is mistaken in this regard. Treating, therefore, the testimony of Felt and Tarrant as the true version of this affair, what is the position of the parties? Was their conduct such as to make them parties to the fraud? Appellees knew that the contract price was $7,000 cash; that this had been agreed upon between them and Mason; that Mason acted for himself and appellant. When at the factory, before going to the deposit vaults, appellant gave to them his note for $1,333.33; they had notice that Bell did not understand what the real bargain was, and the retention of such note, as well as other undisputed proceedings, tend to establish that they were aware that Bell was being deceived and defrauded by Mason. Arrived at the deposit vaults, appellant handed to them $7,000 in cash, the entire consideration; they not only make no comment upon his overpayment of $1,333.33 by way of his note, but received in his presence $900 from Mason and his check for $15,766.67, making no comment, evincing no surprise; as De Berard said, “Just kept quiet, that is all.” $25,000 instead of the expected $7,000 thus received, the parties separated, Mason, Felt and De Berard going in one direction, Bell in another. Representations may be made by conduct as well as by speech. Words could not have more clearly conveyed to Bell the understanding that Mason had paid $16,666.67 for his two-thirds; Bell knew that he had given $7,000 cash and his note for $1,333.33. Appellees knew that they were receiving from Bell seven one thousand dollar bills upon the understanding by him that the purchase was $25,000 and that of this Mason-had paid $16,666.67. As rational men they can not have "failed to know that appellant, if he knew the truth, would not give to them this $7,000 and his note for $1,333.33. It may be that appellees considered the fraud practiced by Mason upon Bell none of their affair; that it was enough for them that they said nothing. As a rule, at the time of action men feel that existing conditions justify what they then do. The effort of civilization is not to create conscience but to enlarge its scope; to make its influence ever present; that it be more than retrospective. The law imposes obligations neither felt by actors in the heat of conduct nor necessarily in hours of reflection. True it is, as is urged, that Mason did, in the negotiations, act as an agent of. Bell,-that is, he acted for himself and appellant; nevertheless, appellees can not take advantage of a fraud practiced by Mason. Hot only is a party committing a fraud precluded from deriving any benefit therefrom but so is every person, unless he has innocently acquired a subsequent interest. Story’s Eq. Jurisprudence, Sec. 193a. The cáse under consideration is not of a concealment or misrepresentation as to the character of the thing sold. The rule as to the silence which a vendor or vendee may observe in respect to the value, situation or nature of an object of sale has little application here. The question here is rather to what extent did the vendors conceal their knowledge of the fraud practiced by Mason ? How far did they assist therein % To what extent have they profited thereby ? Under what obligation were they to disclose the truth to Bell ? Were they justified in the suppressio veri they maintained ? A person who, by conduct, contributes to the misapprehension of another as to a material matter, and intentionally fails to correct the misapprehension, is guilty of a fraud. Yol. 14, p. 74, Second Ed. Am. & Eng. Ency. of Law; Mitchell v. McDougall, 62 Ill. 498-501; Endsley v. Johns, 120 Ill. 469-479; Kenner v. Harding, 85 Ill. 264-274; Fitzsimmons v. Joslin, 21 Vt. 129; Yeoman v. Lasley, 40 Ohio St. 190; DeWitt v. Van Sickle, 29 N. J. Eq. 209-215. The amount agreed to be, as well as that actually paid for the patents, was material to Bell; not only as determining his obligation to the vendors and to Mason, but as tending to show the actual value of the thing purchased. The amount agreed to by the vendors and Mason was $7,000; of this Bell’s part was $2,333.33; Mason’s $4)666.66. This the vendors knew; nevertheless they received from Bell his note for.................................... $1,333.33 and cash.................................... 7,000.00 $8,333.33 and in his presence went through the form and pretense of receiving from Mason cash................... $ 900.00 Check for.................................. 15,766.66 $16,666.66 returning the same to him two or three days thereafter. They kept the note of Bell and some two )rears after its reception, offered to give it to him in exchange for an option to purchase back the patents; finally, during the trial of this cause, disclaiming all right thereto and offering to surrender the same. They not only thus actively aided Mason in the perpetration of a fraud but participated in the benefits thereof. A third person, who, knowing thereof, seeks to derive benefit from a fraudulent transaction, becomes partieeps eriminis, however innocent of the fraud in its inception he may have been. Story’s Eq. Jurisprudence, Sec. 193a. Mor does the law permit one to assist in the cheating of another. Barker & Gay Furniture Company v. Theim, Supreme Court of Illinois, opinion filed April 16, 1902; Beidler v. Crane, 135 Ill. 92, 100, 101; same v. same, 22 Ill. App. 538; Green v. Tatum, 19 N. J. Eq. 105-110. Was appellant when, he began this suit entitled to rescind % While for some time prior to the filing of his bill, Bell had entertained a strong suspicion that Mason had not paid to the vendors two-thirds of $25,000, he had never been so informed nor in possession of any evidence so showing. Mason, in this case, called by the defendants, testified that there was no fraud and that he had paid $16,666.66 and received nothing back. Only when DeBerard testified did appellant learn that he had been defrauded as he had before conjectured. (See Veazie v. Williams, 8 Howard (U. S.), Curtis’ Ed., 527-535.) Appellant has in no manner transferred auglit of that he received. If the evidence establishes that the patents have, under the laws of France and Belgium, been forfeited, it is not because of action on his. part, but perforce of non-action by some one. Appellant was not bound to pay taxes or work the patents after the filing of his bill for rescission. (Bigelow on Fraud, Vol. 1, p. 430; Kerr on Fraud, 337.) He has never received anything from or on account of the patents; nor does it appear that he could have ever done anything by which he could have obtained aught therefrom; although he might have given appellees an option to purchase. What is contended by the vendors in effect is, that, having been induced by fraud to pay the entire purchase price for one-third of such entirety, appellant can not rescind unless he or some one has advanced money to keep from forfeiture, not merely the one-third he received, but the two-thirds never conveyed to him. See He^enmeyer v. Marks, 37 Minn. 6. The preponderance of the evidence is to the effect that the taxes had been paid up to the filing of the bill. March 15, 1894, appellant, upon his mere conjecture as to the perpetration of a fraud upon him, caused to be written to the vendors a letter demanding a settlement and threatening to begin suit to sét aside the assignments on the ground of fraud. So far as appears, there was then ample opportunity for the vendors to have protected these patents and their right in them. In Maurin v. Tredinnick, 12th Weekly Reporter, 740, the vice-chancellor, in reference to the rescission of a sale of stock forfeited after sale, because of non-payment of calls, said: “ The plaintiff, seeking to set aside a sale of property of a perishable nature, was not bound to preserve the property in statu quo till the hearing. His only duty was to do nothing with the property after the bill was filed, and in cases where damage was likely to occur, and might be prevented, a plaintiff ought, perhaps, to give intimation to the defendant, leaving him to do what he pleased.” “The letter of March 12th was admissible as evidence in an inquiry under what circumstances the shares were forfeited, for it went to show why the plaintiff did not pay the calls—viz., because he was about to assert his equitable rights.” In cases of rescission for fraud a court of equity proceeds upon the principle that as the transaction ought never to have taken place, the parties are to be placed as far as possible in the situation in which they would have stood if there had never been any such transaction. The court will not concern itself nicely as to adjusting the equities of those guilty of the fraud. Neblett v. McFarland, 92 U. S. 101, 103,105; Scott v. Perrin, 4 Bibb, 360; Van Dyke v. Walters, 88 Ill. 444-446; Masson v. Bovet, 1 Denio (N. Y.) 69. To entitle a defrauded vendee to rescission he must do equity, but it does not follow that he must be able to return the property in the condition in which he received it. Masson v. Bovet, 1 Denio, 69; Neblett v. McFarland, 92 U. S. 101, 103; Hegenmeyer v. Marks, 37 Minn. 6; Guckenheimer v. Angevine, 81 N. Y. 394. In Neblett v. MacFarland, supra, the Supreme Court of the United States in affirming a decree for rescission, said: “ Parties engaged in a fraudulent attempt to obtaina neighbor’s property are not the object of the special solicitude of the courts. If they are caught in their own foils, and are themselves the sufferers, it is a legitimate consequence of their violation of the rules of law and morality. Those who violate these laws must suffer the penalty.” To the same effect is Blake v. Mowatt, 21 Beav. 603, 613. It was open to the vendors as well as to appellant to have kept the taxes on these patents paid. The vendors knew the facts as to the sale; appellant did not. Before any forfeiture had taken place they were charged by him with fraud and rescission demanded. He offers to and can return all that he received; if the patents are not now what they were when he was, by the conduct of his vendors, defrauded, the present situation is the result of the fraud to which they were parties and from which they received benefit. The decree of the Superior Court is reversed and the cause remanded, with directions to enter a personal decree in favor of complainant against Tarrant, Felt and The Felt & Tarrant Manufacturing Company for $7,000, and a decree that the assignments of the Belgian and French patents made by Felt, Tarrant and The Felt & Tarrant Manufacturing Company to Bell and Mason, and the note by Bell made for $1,333.33 be set aside and forever held for naught, and that all assignment, patent and other papers received by Mason and Bell from Felt, Tarrant and The Felt & Tarrant Manufacturing Company be surrendered and delivered up to Felt, Tarrant and The Felt & Tarrant Manufacturing Company. Reversed and remanded, with directions.