Cochran v. Pascault

Miller, J., delivered the opinion of the Court. The main question arising on these appeals is presented in this way:—On the 5th of August, 1871, Francis R. Pascault and Catharine H. Pascault his wife, and Louisa Lusby, sold and conveyed two parts of a tract of land in Cecil County, called “ Greenfield,” to Henry S. Cochi’an for the sum of $40,000, and on the same day Cochran and wife executed a mortgage of the land to Mrs. Catharine Pascault to secure the purchase money, which, by the terms of the mortgage, was made payable in instalments, and on a long credit. Cochran having made default, the mortgagee, on the 20th of August, 1878, filed a bill for the sale of the mortgaged property to pay the instalments then due and unpaid. Instead of answering this bill, the mortgagors, on the 17th of October, 1878, filed a cross-bill, praying that the sale may be rescinded, and the deed and mortgage cancelled, and the question is, are they entitled to this relief? — 11 — • The ground of complaint is, that at the time of the purchase representations were made hy the vendors to the vendee as to their title to the land, which the latter, a few days before the filing of his cross-hill, had discovered to he untrue, and he charges that he made the purchase, accepted the deed and executed the mortgage, relying upon the truth of these representations, and was misled and deceived thereby. These representations are in the recitals of the deed, and are to the effect, that Mrs. Pascault was “seized in fee in her own right of,” one part of Greenfield, which is described and conveyed, “ which she acquired under the will of her late mother, Mary C. Lushy, deceased, which will was proved and recorded in the office of the Register of Wills for Baltimore City, in Liber I. P. C., No. 31, folio 336, &c., and which said lands were allotted to her in the partition of her mother’s estate, as set forth among the records of the Orphans’ Court, in Liber Proceedings, I. P. C., No. 38, folio 105, &c.; ” and that Mr. Pascault was “ seized of an equitable estate in fee of” the other part “which had been allotted to Augusta W. Lusby in the allotment aforesaid, and which comprises all her share of Greenfield, except the part thereof she sold to John P. Walmsley.” The deed also contains a covenant (and it is the only covenant in it) on the part of Pascault and wife, that they will execute and deliver, or procure to be executed and delivered, such other and further assurances as may be necessary and proper to secure the said lands. This will was admitted to probate in 1863, and the partition referred to was made in 1861, by the executors under the order and direction of the Orphans’ Court. It is conceded that that Court had no authority or jurisdiction in the premises, and consequently Pascault and wife did not by this partition acquire the legal title in severalty to the part thus allotted to the wife, and no deeds, at the time, were executed between the parties in pursuance of the — 12 — partition. It appears, however, from the statement of facts, that Pascault and wife, immediately after the partition was made, entered and held exclusive possession of the part thus allotted to the wife up to the date of the deed to Cochran, when they delivered possession thereof to him, in pursuance of the deed, and he has never been evicted or in anywise disturbed in that possession. Pascault and wife admit they made the representations as to title set out in the deed, and testify that they believed them to be true, and continued in that belief until a few days before the cross-bill was filed, when they were first made aware of the defect through information received from Cochran. On the other hand, Cochran and wife testify that they would not have accepted the deed, nor have executed the mortgage but for the fact that they relied upon and were misled and deceived by these representations. It is conceded there was no fraudulent intent or purpose on the part of the vendors, and from the fact that the source of title was disclosed to the vendee and stated on the face of the deed, it is evident that both parties supposed the partition referred to was valid and effectual to convey in severalty the parts allotted to the several devisees. It was, therefore, a case of mutual mistake as to a question of law. Shortly after the cross-bill was filed, and before they answered it, Pascault and wife obtained from all the other parties interested, (all of whom were of full age,) a conveyance, by which the legal title to this land was vested in them, and they then executed a deed, conveying the same to Cochran, and tendered it to him, but he refused to receive it, save upon conditions which they declined to accept. There can be no question but that this deed effectually cured all defects of title. This then is a case in which a vendee of real estate, after seven years of undoubted possession, seeks in a Court of equity the rescission of an executed contract of — 13 — sale, the annulment of the deed by which it was consummated, and cancellation of the mortgage given to secure the purchase money. And he seeks this relief without pretence or proof of any actual, positive or intentional fraud on the part of the vendors, or of any damage or injury to himself resulting from the alleged misrepresentations, and that too in a case where the source of the title in respect to which the representations were made and in which the defect existed, was stated on the face of the deed, and where, pending the suit for rescission, the vendors, in compliance with their covenant for further assurance, have, at their own cost, acquired the title which their deed recited, and have tendered to the complainant a conveyance which will make his title perfect. We have found no well considered case which has decided that under such circumstances it is competent for a Court of equity to rescind the contract. There is no question here of specific performance. The object is to rescind an executed contract for the sale of real estate, consummated and evidenced by the most solemn instrument known to the law. To do this is an exertion of the most extraordinary power of a Court of equity, a power that ought not to he exercised except in a clear case, and never for an alleged fraud unless the fraud he made clearly to appear; never for alleged false representations unless their falsity is certainly proved, and unless the complainant has been deceived and injured by them. Atlantic Delaine Co. vs. James, 4 Otto, 207; McShane vs. Hazlehurst, 50 Md., 107. Injury resulting from the misrepresentations, even when they are knowingly and fraudulently made, is as esseirtial to relief in equity where rescission of an executed contract is sought, as it is in an action at law for deceit. The case of Kimball vs. West, 15 Wallace, 379, (a case in one respect very similar to this,) affords a strong illustration of this doctrine. There a hill was filed to rescind a contract for the sale of lands — 14 — "which had been fully executed by a conveyance with a covenant of warranty, and payment of the purchase money. The bill averred that the vendor fraudulently represented to the agent of the purchasers that his title to the whole tract was perfect, and fraudulently concealed the pendency of an ejectment suit for the more valuable part of it, in which a recovery was subsequently had against him. On this question of concealment and fraudulent representations testimony was taken on both sides, which (as the report states,) did not leave the matter free from doubt. ‘But before the cause came to final hearing, the defendant purchased the outstanding and conflicting title to the part involved in the ejectment suit, and tendered 'to the complainants such conveyances as made their title perfect, and the Court therefore dismissed their bill. On appeal it was argued by the appellants’ counsel that there was confessedly misrepresentations by the vendor as to five-twelfths of the whole tract, and that he could not by coming in now at the • eleventh hour and offering a good title destroy their right to a rescission of the contract, or at least to compensation for the portion included in the ejectment suit, and to illustrate he puts this case: “ Suppose the purchasers bought for immediate re-sale on a high but falling mai'ket, obviously they are not made whole by the tender of a good title now, their opportunity of sale is gone and their lost time and pains is their profit.” But the Supreme Court speaking by Mr. Justice Mtt,t,utí. puts aside all consideration of the question of fraud, and expresses its views of the case briefly thus: “We are of opinion the decree of the Court below was clearly right. The plaintiffs had paid their money and accepted of the defendant his deed with a clause warranting the title. For any defect.in that title the law gave them a remedy by an action on the covenant. But when declining to pursue that remedy, they apply to a Court of equity to rescind the whole contract, thereby compelling — 15 — the defendant to repay the sum of $22,000, and receive back the title which he had conveyed to the plaintiffs, the necessity for such a decree to obtain the ends of justice must be very clear before it will be given. When therefore it appears that at the time of the hearing the defendant is able to remedy the supposed defect in his title, and in point of fact secures and makes good to the complainants, at his own cost, all that he conveyed to them originally, the complainants must show some loss, injury or damage by the delay in perfecting the title, before they can claim a rescission of the- contract. And even if this could be shown, which is not attempted in this case, the Court, as a general rule, would not be authorized to decree a rescission, if compensation could be made for the injury arising from the delay in making good the original defect in the title.” So again in Clanton vs. Burgess, 2 Dev. Eq., 13, (which is also a case in many respects similar to this,) there was a bill to rescind a contract for the sale of land consummated by a deed in fee, with covenant for quiet enjoyment, and also praying for an injunction to restrain execution of a judgment upon the bond given for the purchase money. The bill charged that the vendor represented he had a good title in fee, that the complainant made the purchase confiding in this representation, and that in truth the defendant had not an estate in fee simple in the land. Pending the suit the defendant obtained from the proper parties a deed conveying the land in fee simple to the complainant, and it was filed in the cause for his use. The Court held, that the vendor had the right to supply the defect at any time before the hearing, and dismissed the bill. ■ The propriety of allowing the vendors thus to cure the defective title pending the suit for rescission is peculiarly prominent in the present case, where the vendee has not only accepted a deed reciting the source of the title which it alleges to be a title in fee, but a deed in which he exacted — 16 — and the vendors gave a covenant for further assurance. Now whatever may he said of the inability of Mrs. Pascaul t, the wife, to enter into this covenant, there can be no doubt as to its binding obligation upon the husband, and there is no allegation or proof of his inability to respond in damages in an action at law thereon, nor can there be any question as to the right of the vendee to file a bill in equity as against him for its specific performance. This covenant is one of great importance, since it relates both to the title of the vendor and to the instrument of conveyance to the vendee, and operates as well to secure the performance of all acts necessary for supplying any defect in the former as to remove all objections to the sufficiency and security of the latter. Its use is obvious, particularly as respects relief to be given under it by a Court of equity upon a bill for its specific performance, to which recourse is more frequently had than to an action for damages in a Court of law. Rawle on Cov. for Title, 203, 204. “If the title prove bad,” says Sir Edward Sugdest, “ and the defect can be cured by the vendor, the purchaser may file a bill in equity for a specific performance of the covenant for further assurance. And a vendor who has sold a bad title, will, under a covenant for further assurance, be compellable to convey any title w-hich he may have acquired since the conveyance, although he actually purchased such title for a valuable consideration.” Sugden’s Vend. and Pur., ch. 15, sec. 4, pl. 14. In the present case, however, there was no demand for specific performance; but the vendors acting voluntarily under their covenant, and at their own cost, effectually cured the defect before the bill' for rescission could be brought to a hearing. It seems to us there is an element of mutuality in such a covenant, and that in this case the parties by giving and receiving a deed with these recitals, and this covenant must have contemplated this very action on the part of the vendors. The covenant while it secured — 17 — the vendee a right of action at law for damages for a breach of it, and a right to enforce in equity its specific performance, gave to the vendors the right, if they so chose, to act under it voluntarily as they have done, and to cure the defect in the recited title as soon as it was discovered. We have no doubt whatever as to their right so to act, and without considering other grounds of objection to the cross-hill, we hold that this curing of the defective title is a complete bar to the relief it prays for, unless the complainants have shown that they have suffered “some loss, injury, or damage by the delay in perfecting the title.” In the agreement of facts, it is admitted that the value of real estate generally in Cecil County has greatly depreciated since the 5th of August, 1871, and in consequence of this general decrease in value, the land conveyed by the deed of that date, as well as other real estate in the neighborhood, would not now sell for nearly as much as it would then. This is the only foundation for an argument that the purchaser in this case has suffered any loss by reason of his bargain. But this depreciation in values has no relation whatever to the title to the land sold, nor is it in any way connected with the alleged misrepresentations of that title. Even in a case for specific performance, it would furnish no excuse to the purchaser. If this were an executory contract in writing, and the vendors had filed a hill for its specific execution, and were ready when the hill was filed to convey a good title, depreciation in value between the date of the contract and the filing of the hill, where time was not material or of the essence of the contract, would not have sufficed to prevent a decree. In The Marble Co. vs. Repley, 10 Wallace, 357, it was said: “It is by no means clear that a Court of equity will refuse to decree the specific performance of a contract, fair when it was made, hut which has become a hard one by the force of subsequent circumstances,” and — 18 — Mr. Fry, in his work on Specific Performance, sec. 252, asserts, that “the question of the hardship of a contract is generally to he judged of at the time it was entered into; if it he then fair and just, it will he immaterial that it may, by force of subsequent circumstances or change of events, have become less beneficial to one party, except when these subsequent events have been in some way due to the party who seeks the performance of the contract.” So in Williard vs. Tayloe, 8 Wallace, 571, the Court, by Mr. Justice Field, says: “The question in such cases always is, was the contract, at the time it was made, a reasonable and fair one? If such were the fact, the parties are considered as having taken upon themselves the risk of subsequent fluctuations in the value of the property, and such fluctuations are not allowed to prevent the specific enforcement.” And before these decisions' of the Supreme Court, it was decided by this Court, that ’where a contract relating to real estate, is in writing, and is in its nature and circumstances unobjectionable, it is as much a matter of course for a Court of equity to decree a specific performance of it, as it is for a Court of law to give damages for a breach of it; that the fairness or hardship of a contract, like all its other qualities, must he judged of at the time it was entered into ; if it was then certain, mutual, fair in all its parts, and for an adequate consideration, it is immaterial that by force of subsequent circumstances it has become less beneficial to one party, unless such change is in some way the fault of the party seeking its specific execution. Smoot vs. Rea & Andrews, 19 Md., 405; Brewer vs. Herbert, 30 Md., 301. But here the contract was executed. The vendee accepted the deed, took possession under it, and for seven years has remained in the undisturbed enjoyment of the rents and profits of the estate. There is no proof that during all this period he ever offered to sell the land and was prevented from doing so by reason of the defect in the title. There is, therefore, — 19 — nothing to show that this defect ever prevented him from •obtaining a higher price for the land than he agreed to give for it, or compelled him to retain it after an attempt to sell, so as to throw upon him the loss resulting from •continued and increased depreciation. But more than this—he paid no portion of the purchase money in cash ■at the date of the deed, nor has he paid any part of the principal since, and he now confesses his entire inability to comply with the conditions of payment stipulated in the mortgage. Moreover, the mortgage itself, which was given to secure the whole purchase money, does not even -contain the usual covenant on the part of the mortgagor to pay the mortgage debt. So far then as the record •enables us to judge, the loss, as between these parties, ■arising from the depreciation in value, will fall on the vendors rather than on the vendee. But however this may be, it clearly appears that within less than ten days after the defect was first discovered, it was cured by the vendors and a perfect title tendered to the vendee, and we find in the record no proof whatever of any loss or damage resulting to him by delay on their part in perfecting the 'title. We are, therefore, of opinion that so much of the decree appealed from as dismisses the cross-bill was clearly right, and must be affirmed. But the decree further orders a sale of the mortgaged property for payment of the instalments now due. This part of the decree seems to have been passed, and could •only have been rightfully passed, upon the assumption that the case upon the original bill by the mortgagee stood ready for hearing and had been submitted for decree together with the case made by the cross-bill. In this we think the Court below fell into error. By an agreement as to pleading which appears in the record, it was •agreed that the cross-bill should be considered as if filed as an answer to the original bill, or as part of such answer as the said Cochran and wife may elect, “they — 20 — being at liberty to file such additional answer as they may think proper, within fourteen days after the passage of a decree in the cross-bill case.” And by the agreement of submission it was “agreed that this case,” (that is the cross-bill case,) “ shall be submitted on the cross-bill, demurrer, answer and replication, and the agreement of facts filed therein, and the written arguments also filed.” From this it seems to us very plain that the case made by the original bill was not submitted, and was not intended to be submitted until after a decree had been passed in the case made by the cross-bill. (Decided 2nd June, 1880.) ■ In fact the case on the original bill was not then at issue. No answer to that bill had then in fact been filed by the mortgagors in accordance with the right reserved in the agreement. It is true that so far as this .record is concerned we cannot see that the appellants have any valid defence against a decree under the original bill, and it is also plain that a purchaser at a sale under the decree now passed would acquire a clear title. But it is not for this Court to declare that these mortgagors have not defences which do not appear in this record, to make to that bill, nor can we deprive them of the right expressly reserved to them, to make such defences if any they have, apart from those set up in the cross-bill. It follows that this part of the decree must be reversed. A decree will therefore be passed by this Court, affirming so much of the decree below of the 11th of June, 1879, as dismisses the cross-bill, and reversing the residue of that decree and remanding the cause for further proceedings. Decree affirmed in part, and reversed in part, and cause remanded.