Parham v. Randolph

Mr. Chief Justice Sharkey delivered the opinion of the court. The extent to which courts of chancery will go in giving relief to the vendee of land by preventing the collection of the purchase money, and rescinding the contract, is a question which is much embarrassed by conflicting adjudications. It has been often litigated, but the numerous decisions seem to have increased rather than diminished the doubts. Chancellor Kent has given the subject a labored consideration in the 2d volume of his Commentaries, section 39, and he admits that it is “in asíate of painful uncertainty.” His conclusion, however, as to the general rule is “that in sales of land the technical rule remits the party back to his covenants in his deed, and if there be no ingredient of fraud in the case, and the party has not had the precaution to secure himself by covenants, he has no remedy for his money even on a failure of title.” This rule arises necessarily from the nature of the contract. The covenants are intended to secure an ultimate indemnity to the purchaser against incumbrances, or failure of title, in which case the purchaser may have recourse against the vendor. From the nature of the contract, the remedy, like a false warranty — 450 — in any other case, is at law. On the covenant, damages may be recovered commensurate to the injury. If there are no covenants nor fraud, there is no liability, for the law fixes the extent of the liability by the contract, and it will not suppose an engagement beyond that which is expressed, on the plain principle that the written contract is supposed to express all that the parties intended. The purchaser having an ample and complete remedy at law, he must pursue it in the proper forum. . But the reason of the rule proves that there are exceptions to it. I shall not attempt to enumerate the several grounds of exceptions. It is admitted on all hands that they do exist, and I apprehend that they may be most easily ascertained in each particular case by the capacity of a court of law to give ample relief. When there is fraud in the contract, it is always an exception. Chancellor Kent in laying down the general rule, predicates it on the supposition or condition that there is no fraud in the case. And although this might be ground of defence at law, it is also certainly a ground on which chancery will rescind the contract. For the complainant it is contended that there was fraud practised in this case, and that therefore, the relief ought to be granted. ■ On the other hand, it is contended that fraud is not directly charged in the bill, and cannot be inferred. If the facts stated obviously amount to fraud, it will be sufficient. The bill states that Randolph represented his title as being a good one; and it furthermore states that he knew it to be a defective title. Both titles are derived from Frederick Smith, so that the titles are traced to the same source. The validity of title must therefore depend on the conveyances from Smith. It appears that Smith conveyed to Jeremiah Jones, the ancestor of Mrs. Cowen, in 1811. Jones died, leaving two children, Mrs. Cowen and a son, who is also dead, and Mrs. Cowen is his sole heir. It also appears that Randolph acquired title to the 570 acres of land from Smith by deed, dated long subsequent to the deed to Jones, and that Smith at the time informed him thát he had no title, having previously conveyed to Jones, but that notwithstanding Randolph agreed to give him five hundred dollars for his right, whatever that might be, and risk the title, which Smith agreed to take, and conveyed to him his interest in the land. Jones’ title is set out and it is said was regularly recorded in the Parish of Concordia. All — 451 — this is of course admitted to be true, by the demurrer to the bill. This chain of facts certainly did amount to a fraud on the Brodnaxes. Randolph’s representations as to his title were false; and they were not only false, but he has not even the excuse of ignorance to rest on. He knew that he acquired no title from Smith, and the circumstances under which he purchased, the price he gave, the right he acquired, and the statements made to him, all lead to the conclusion that he intended a fraud on the rights of Cowen; and the sale to the Broadnaxes, without a disclosure of the cloud over his title, can be regarded in no other light than as the consummation of a scheme begim in fraud. Any intentional ¡ / misrepresentation or concealment in relation to land, either as to pi quality or title, by which the purchaser is imposed on, is frau- ij dulent; and it is immaterial whether the false representations'’' are intentional or not. If the vendor undertake to make state-i^ ments, he is responsible for them. 2 Story’s Equity, 202; 3 Cranch, 170. But it is insisted that although this representation was false, it is not a fraud, because Jones’s title was on record, and was therefore notice, and at all events that it might have been ascertained, with proper diligence. This is no answer to a fraudulent representation. The confidence with which the purchasers rested on the assertions of the vendor would be but poorly requited by treating it as culpable folly. The doctrine of notice can have no such application as between vendor and vendee. It is further insisted that there has been no eviction, and there is therefore no relief in chancery. It is laid down in 1 J. C. Rep. 213, and 2 J. C, Rep. 519, that if there is no eviction, in an executed contract, the purchaser must resort to his covenants, but this rule is certainly not without its qualifications. In the last mentioned case, Chancellor Kent reviewed the authorities fully, and his conclusion is, that if there be no fraud, the purchaser must resort to his covenants, if he fears a failure of title, and wishes relief before eviction. Now what is the irresistible inference from this decision ? It is plainly this, that if there be fraud, he may resort to chancery, even before eviction, for it is only where there is no fraud that he must resort to his covenants.— In the case cited, an outstanding title, but no fraud, was alleged, — 452 — and it did not appear that any steps had been taken, or claim made by the holder of the outstanding title; and it was only under such circumstances that the chancellor held that the remedy was on the covenants. And he puts the rule under such circumstances on condition that there be no fraud in the transaction.— The case before us differs from the one decided, in another respect. Although we do not know whether there has been a legal eviction, yet Cowen is in possession, asserting his claim. Here there is an outstanding title clearly shown and admitted by the demurrer, and the holder of that title making claim under.it. In such a case it seems to be admitted, in the case cited from 2 J. C. Rep. that this will be sufficient, even without fraud, to justify a resort to chancery. But there is .another ground taken in this bill, which brings it within another exception to the general rule. It is alleged that the main inducement to the purchase has failed. The contract was for six hundred and thirty acres of land, nineteen negroes, stock of-cattle and horses, farming utensils and growing crop, for the gross sum of sixty-six thousand dollars, without fixing a particular price on any one thing. This was an entire contract, with partial failure of consideration. It would be impossible, as it is presented to us, to consider it divisible, and if the main inducement to the contract has failed, the jurisdiction of the court of chancery is undoubted. That the main inducement to the contract has failed, is shown by the facts as well as by the averment in the bill. A farm of 630 acres was conveyed, of which 570 acres are covered by an outstanding title. As a farm, the balance could be of little use to a planter, and the residue, it is said, is mostly untillable. It is obvious that it was purchased for the purpose of cultivation, and it is also obvious that its value is wholly destroyed for that purpose. Suppose the complainants were to resort to then: covenants, the measure of recovery would probably be only the purchase money and interest, for the 570 acres, and the balance of the property could not be used as originally designed. But there is nothing in this contract by which the price of that 570 acres could be ascertained, and there can therefore be no reason for sending them to their covenants. This question was fully examined by the Lord Chancellor, in the case of Casa — 453 — major v. Strode, 8 Con. Eng. C. Rep. 516, and his conclusion is very satisfactory. It is this; that all the circumstances are to he inquired into to determine whether the contract is entire, and the two parcels complicated together, and upon the whole transaction the court will determine two questions, to wit: “ Did or did hot the party purchase the one with reference to the other?”— “Would he or would he not have taken one had he not reckoned on having the other ?” The language of Chancellor Kent is no less explicit. He says, “ the good sense and equity of the law on this subject is, that if the defect of title, whether of lands or chattels, be so great as to render the thing sold unfit for the use intended, and not within the inducement to the purchaser, the purchaser ought not to be held to the contract, but be left at liberty to rescind it altogether.” 2 Kent, 475. The rule cannot be made plainer. From these authorities, it is evident that if the contract is entire, and the portion lost is essential to the perfect enjoyment of the remainder in the manner intended, then the contract should be rescinded. It is not the quantity lost, so much as its importance on the whole contract, that is to be considered. It requires no argument to show the entire application of this rule to the case before us. But there is another reason which might be urged in favor of the jurisdiction of a court of chancery over the present case. It is not a total, but a partial failure, and certainly the weight of authority is, that in such cases the remedy is in chancery. This is the rule in England, and it was adopted by the supreme court of the United States in a case reported in 2 Wheaton, 13. As a defence, to prevent circuity of actions, in New York, partial as well as total failure may be relied on at law. To this I can perceive no great objection when it can be made effectual; but certainly when the defence cannot be fully made at law, there is nothing to preclude a resort to chancery. It is further insisted that the Planters’ Bank is an innocent holder, and cannot be affected by the failure of title. This position is however untenable. The statute gives the maker the same defence against the holder that he had against the payee of the note. These notes were made payable at the Agricultural Bank, and in regard to the note held by that Bank the decision — 454 — in Mandeville v. The Union Bank of Georgetown, 9 Cranch, would be an authority in favor of the right of the Bank to recover, notwithstanding the failure of consideration. I confess that I am somewhat at a loss to reconcile that decision with the statute of this state, and the practice under it, although it seems to have been made under the statute of Virginia, which is similar. Without overruling the decision, I am inclined to retain the injunction on the whole case until it can be further investigated, and for the reasons given, the decree of the chancellor dissolving the injunction must be reversed, and the cause remanded. Judge Turner gave no opinion.