Daniel v. Mitchell

STORY, Circuit Justice, delivered the opinion of the court to the following effect: The cross bill is founded upon an asserted compromise of settlement of the cause of suit, stated iu the original bill, pending the suit; and, of course, if established in point of fact, it puts an end to the whole controversy. It has, accordingly, been first argued by counsel; and we are of opinion, that the compromise and settlement are not sufficiently established by the proofs in the cause to overcome the full and positive denials in the answer, that any such transactions were ever agreed upon by the parties. The known rule in equity is, that an answer, whlcq, is responsive to the allegations and charges made in the bill, and contains clear and positive denials thereof, must prevail, unless it is overcome by the testimony of two witnesses to the substantial facts, or at least by one witness, and other attendant circumstances, which supply the want of another witness, and thus destroy the statements of the answer, or demonstrate its incredibility or insufficiency as evidence. There is no pretence to say, that this state of things exists in the present case, and therefore, the cross bill must be dismissed with costs. The original bill seeks to set aside a contract, made on the 18th of June, 1S35, between James Todd, one of the defendants, for himself, and as agent of several of the other defendants, with the plaintiff and several other persons, stated in the bill, for the purchase of ten undivided sixteenth parts of a certain tract of land in the state of Maine, containing about 16.000 acres of land, of which the plaintiff was to have three sixteenth parts, and his copartners certain other proportions, for the sum of $30,000, payable in certain instalments, a part in cash, and a part at future periods, for which the respective purchasers were to give their several notes and mortgages respectively. The bill mainly insists, that the agreement was entered into upon gross and fraudulent representations made to the plaintiff, and the other purchasers, as to the true character of the land, and especially as to the quality of timber thereon; and that, upon the faith of those representations, the purchases were completed, the conveyances taken, and the moneys paid, and securities given by them respectively; and that, therefore, it ought to bo set aside and cancelled: and that the plaintiff, who sues for his own separate right [1157] and interest in the premises, he having subsequently become a sub-purchaser of 1-32 more of the tract, and, therefore, being entitled to 7-32 parts thereof, ought to be restored to all he has paid; and the bill prays for other relief. We have said, that the bill mainly proceeds upon the imputation of fraud; but its allegations are sufficient to found a claim for relief, if the bargain was made upon material representations of matters of facts, constituting the basis thereof, which are untrue, even although innocently made by the mistake of the parties, or by the mistake of the sellers alone. Nothing is more clear in equity than the doctrine, that a bargain founded in a mutual mistake of the facts, constituting the very basis or essence of the contract, or founded upon representations of the sellers, material to the bargain, and constituting the essence thereof, although made by innocent mistake, will avoid it Mistake, as well as fraud, in any representation of a fact, material to the contract, furnishes a sufficient ground to set it aside, and to declare it a nullity. The Reports are full of cases to this effect; and many of them will be found collected in the elementary writers on equity jurisprudence.2 In the view, which the court are disposed to take of the bill and evidence, we do not deem it at all necessary to enter upon the consideration of the question of fraud, as we are entirely satisfied, that, if there has been no fraud, there has been such a mistake of both parties, as to a fact, not only material, but constituting the very basis of tho agreement, as requires the court to decree, that the agreement be rescinded and the conveyance made in pursuance thereof be set aside, and the parties be restored to their original rights and interests, antecedent to the agreement. Let us, in the first place, examine the written agreement between the parties, taking along with us the fact, that Todd was acting as principal, as to a portion of the land, and as agent of the other owners, as to other parts thereof, which were included in the sale. The agreement is in the following words: “Articles of agreement made this eighteenth day of June, A. D. eighteen hundred and thirty-five, by and between James Todd, of Portland, in the state of Maine, on the one part, and Otis Daniel, Josiah Daniel, Robert W. Mollineaux, E. F. Messenger, Jonathan A. Richards, and James H. Champ-ney, and Barnum Field, all of Boston, in the county of Suffolk, and commonwealth of Massachusetts, and Daniel A. Sigourney, and John F. Soren, of Roxbury, in the county of Norfolk, and state of Massachusetts, on the other part. The said Todd, in consideration of the agreement herein contained of said parties to the second part, hereby agrees with them respectively, to sell and convey to them by good and sufficient deeds, with warranty and a good and indefeasible title, in fee simple, ten undivided sixteenth parts of a tract of land situated in township No. 2, second range, Bingham Kenne-bec purchase, east of ■ the Kennebec river, in Somerset county, state of Maine, containing sixteen thousand acres, called the Ford tract, to be conveyed to said parties of the second part, as follows: Three undivided sixteenth parts to said Otis Daniel; two undivided sixteenth parts to said Josiah Daniel; one undivided sixteenth part to said Mol-lineaux and Messenger; two undivided sixteenth parts to Daniel A. Sigourney and Jonathan A. Richards; one undivided sixteenth part to John F. Soren and James H. Ohampney; and one undivided sixteenth part to Barnum Field; the said parties to the second part paying for their purchase their respective proportions of the sum of fifty thousand dollars, to be paid as follows: one quarter part in cash, and the remainder, one third in one year; one third in two years; and one third in three years, with interest annually, secured by their respective notes and mortgages on the premises, and the said premises are to be conveyed to said parties of the second part in the proportions above mentioned, at any time on demand within sixteen days from the date of these presents, which time is allowed to said parties of the second part to explore said tract. And the said parties of the second part, in consideration of said Todd’s agreement, hereby agree with said Todd to purchase and pay for their respective parts of said tract as before mentioned; and if they do not complete the purchase within the said term of sixteen days, they will respectively forfeit and pay said Todd their respective parts of the sum of three thousand dollars. Provided, nevertheless, that said parties of the second part shall be under no obligation to take said land, or to pay therefor, unless said Ford tract contains sixty millions of pine timber, and a stream runs through said tract, which will, with an ordinary freshet, carry logs from said tract to Kennebec river, without difficulty. In case said tract does not contain sixty millions of pine timber, and such a stream as is mentioned above, said Todd hereby agrees with said parties of the second part, to pay the expense of one person, to be sent from Boston, to examine said tract, and also, whatever may be paid to one other suitable person for exploring said tract for the time he is on the tract. It is understood, that if said parties of the second part, or their agent, notify said Todd of their agreement to take the said premises at any time within sixteen days, they shall be allowed till July. 9th, to make the payments and exchange the papers. In witness whereof, said parties have interchangeably set their hands and seals.” (Signed by the parties, and witnessed by S. E. Sewall and Thomas W. Haskins.) Now. we think it impossible to doubt, upon the reading of this agreement, that it was [1158] understood by all the parties, that the tract of land did contain sixty millions of pine timber, and that a stream ran through the tract, which would, with an ordinary freshet, carry logs from the tract to the river Ken-nebec without difficulty; and that these constituted the very basis of the contract, and were so fundamental, that if either did not exist, the bargain was understood not to be obligatory on the purchasers. The proviso, in our judgment, clearly imports this. The subsequent clause, as to the exploration of the tract, was not designed in any manner to waive or control this fundamental stipulation; but merely to afford to the purchasers more complete means of ascertaining the verity of the statements, and thus to secure the purchasers from loss in case of any fraud or substantial mistake. An exploration was accordingly made by an agent of the purchasers, accompanied by an agent of the vendors. How it was conducted, the evidence sufficiently discloses. A more complete example of credulity and delusion on one side, and of mistake and misrepresentation (whether innocent or designed is not material to be examined) on the other side, perhaps, cannot be found in the annals of our country. The survey was not, indeed, even made upon the tract, as it was actually bounded; but, by the mistake or ignorance of the guides, the exploration was in part off of the tract; so that hero again there was a fundamental mistake, which made it a new source of error in completing the bargain. The purchasers were further misled by the representations founded on that exploration, as to the nature of the land, and the quantity of the timber thereon, which they had no means of knowing were untrue and grossly exaggerated. The exploration being thus made, in part off of the tract, through mistake or ignorance. so far from strengthening the case for the defendants, furnishes of itself a strong ground of relief for the purchasers. But we do not dwell on this circumstance further than merely to show, that it cannot afford any substantial aid to the defence. It is unnecessary, also, to dwell on the question, whether the evidence shows, that there was any such stream on the tract, as the agreement vouched for, about which there might be some reason for doubt and hesitation. What we desire to place our opinion upon, is the other ground, that the quantity of timber on the tract was grossly mistaken, and extravagantly over estimated. What is the case made out by the entire evidence, with the exception of a single witness? It is. that the pine timber upon the tract does not probably exceed three millions, and at the farthest does not exceed five millions. One witness, indeed, seems to think, that it may contain more, and go to the extent, perhaps, of twenty-five millions. But he stands alone; and his testimony is of small weight, compared with the mass of intelligent witnesses, establishing the more limited quantity. Here, then, we have a tract, represented by the vendors in their contract as containing sixty millions of timber, and that supposed fact constituting the very basis of the bargain, when, in fact, it does not contain more than one twelfth part of that quantity. A court of equity would be unworthy of the name or character, if a contract, founded in such a gross mistake and fundamental error, were permitted to stand, and were not declared to be utterly invalid. We do not meddle with cases, where the error in quantity is of a slight nature, not going to the essence of the bargain. Here the error is vital. The purchasers have contracted to give fifty thousand dollars for a tract of land, represented to contain sixty millions of pine timber. It cannot be possible, that they ought in law, or in justice, or in common sense, to be bound to pay that amount for five millions only. There is a great deal of other evidence in the Cause, as to the representation of the quantity of timber on the tract, made by and through the agent of the owners to the purchasers, as well orally, as by certificates, produced and read in the cause. They confirm the conclusions deducible from the agreement itself; but it does not seem necessary to dwell on them. These short views exhaust the merits of the case, so far as they belong to the general character of the bill. We are of opinion, that the original contract ought to be set aside, as founded in gross error or mistake; that the conveyance made to the plaintiff, Daniel, ought to be rescinded, and that he ought to be restored to the purchase money, which has been paid by him, deducting whatever he may have been repaid out of any proceeds of the _ sales of timber, cut on the land. Todd, having received the purchase money from Daniel, ought to be hold primarily liable to repay it; and in his aid, such of the other defendants, for whom he acted- as agent, and such as have received any part thereof, with a full knowledge of all the circumstances, ought to be decreed to repay the proportions thereof respectively received by them. There is an agreement, found in the case, by which the defendants, who are the vendors. mutually agreed among them, in the division of the notes, taken for the purchase money, that they would, according to their respective interests, bear their respective proportions of any losses, which might arise from the insolvency or inability of the purchasers to pay the same. We have been asked by the plaintiff to give him the benefit of that agreement, in order that he might avail himself of it, in case he is not able, from the parties directly liable to him, to obtain back the purchase money decreed to him by the court. We are of opinion, that he is not entitled to any such aid or relief. That agreement is strictly res inter alios acta, with which he has no manner of connexion, by which he is not bound, and to which he cannot justly, in equity, claim any derivative [1159] title. There are some other circumstances, which may be proper for consideration before the master, under the interlocutory decree, which we propose to pass, for the purpose of carrying into full effect the present opinion. The decree will accordingly be drawn up, and will contain certain declarator}' clauses, and institute the proper inquiries necessary for a final decree in the premises. [NOTE. After the entry of the above decree, and after the cross bill had been dismissed, defendants applied for a rehearing of both the original and cross bill, and also for leave to file a supplemental bill. Both applications were denied. Case No. 3,5G3.] The decree was afterwards drawn up as follows: This cause came on to be heard at this term upon the bill, answer, exhibits, and proofs produced by the parties, and was argued by counsel, on consideration whereof, it is declared by the court, that the contract of sale, and the conveyance of the premises and the notes of the said Daniel thereupon, as set forth in the bill, were made by and between the said Otis Daniel and the said James Todd, and other parties, upon material misrepresentations and mutual mistakes as to the quantity of timber on the premises so sold, and therefore ought to be set aside, and held null and void; and the said Otis Daniel ought to be repaid the amount of the said purchase money, actually paid by him thereupon and therefor, by the said Todd, who received the notes for the same, and in his aid and for his relief, by such of the other parties, defendants to the bill respectively, for whom the said Todd acted as agent, or who, with a full knowledge of, and assent to, the said contract of sale and misrepresentations and mistakes, have received any of the said notes, or any part of the purchase money paid thereon by the said Daniel; but not for the part thereof received by any other party. And thereupon, in furtherance of the declarations aforesaid, it is further ordered, adjudged, and decreed, that the same contract of sale, and conveyance, and notes be and hereby are annulled, rescinded, and declared utterly void, and of no effect. And the said Otis Daniel is further ordered, adjudged, and decreed to reconvey the premises by such due and reasonable conveyance or conveyances as shall be devised and reported by a master, when and so soon as the purchase money actually paid by him shall be repaid as hereinafter mentioned. And it is further ordered, adjudged, and decreed, by the court, that the said James Todd be. and hereby is, held directly liable to the plaintiff for the whole amount of moneys' paid as aforesaid, deducting, however, therefrom the proceeds of timber sold, as well as the value of timber taken from said lands, by and under the authority of the said Otis Daniel, and remaining unsold, and making all due allowances for all proper charges and expenses incurred in regard to said timber, and for taxes paid on the said lands. And it is further ordered, adjudged, and decreed, that such of the other parties, defendants to said bill, as with a full knowledge of the premises, or for whom the said Todd acted as agent, or who assented to the said contract of sale and conveyance, with a full knowledge of the premises, shall be, and hex-eby are decreed to be liable in aid and .relief of the said Todd, to pay and deliver back to the said Otis Daniel, such parts or portions of the purchase money paid by the said Daniel for the said lands, as have been received by them respectively in the premises, or on the notes of the said Daniel so l’eceived by them; but no one of them to be liable for any pux--chase money or notes received by any of the other parties, defendants. And it is further ordered, adjudged, and decreed, by the court, that no damage or interest on the aforesaid moneys be allowed, except the proceeds of such timber, sold and unsold, as aforesaid, shall furnish a fund therefor; and in that event, interest upon said purchase money to be added thereto, as an offset pro tanto to the excess of said proceeds, and not exceeding the amount of such excess. And it is further ordered, adjudged, and decreed by the court, that it be referred to Stephen Longfellow, Esquire, as master, to ascertain the anxount due to the plaintiff on the basis of this decree, and also the particular notes and sums received by each of said defendants of said purchase money, so paid and secured as aforesaid, and to report the same to the court. And it is further ordered, adjudged, and decreed, by the court, that the master be clothed with full power and authorities to examine, as well the parties, as any other witnesses, orally or upon written interrogatories, under oath, in the premises, and to require the production of all vouchers, papers, and other documents pertinent and proper in the premises; and that he state a full account in the premises, upon the basis of this decree. And that he be and hereby is clothed with all the usual powers and authorities of a master, in all things touching the premises. And all further orders and decrees are reserved for the consideration of the court Footnotes [2] See 1 Sto?'y, Eq. Jur. §§ 140-152, and the cases there cited.