Gatling v. Newell

12 Ind. 118

• Court: Indiana Supreme Court
• Decided: May 26, 1859
• Status: Published

Opinion

PIanna, J.

This case was heretofore before this Court upon the pleadings (7 Ind. R. 147), and again after trial (9 Ind. R. 572); and a rehearing having been petitioned for, by the appellees, and granted, as to certain points, we again considered the case as to those points.

In regard to the points decided by -the opinion in 9 Ind. R., against the rulings of the Circuit Court, and upon which a rehearing was granted, we have experienced much difficulty in coming to a conclusion.

It will be remembered that it was alleged that certain false representations were made, as to the superiority of the patent and drill, and the great demand for the same. Whilst such representations were confined to general statements, or expressions of opinion upon facts equally within the .knowledge, or open to the reasonable inquiry of either party, we cannot see that a right of rescission could, as a matter of course, arise, because of the falsity of such statements.— Cronk v. Cole, 10 Ind. R. 485.

It is averred in the complaint, but denied in the answer, that certain false and fraudulent representations were made in regard to the existing circumstances connected with, and the terms of, contracts at Chicago and Urbana, for the manufacture and sale of the drill.

These facts were such as the law would presume the appellant to be fully cognizant of; and having relation to the income derived from that source, and to private contracts, in which the appellees were not parties, were not, in our opinion, open, as a matter of right, to their inquiry, pending the negotiation for a purchase, but were, nevertheless, such representations as they might rely upon.

It has been decided that a representation relating to the income or rent of an estate, does not fall within the rule, that the seller is not bound by representations respecting the value of property sold, because -it is a matter that may be equally known to both parties, for the reason that the knowledge of it may be, and usually is, confined to one party, and the other can be presumed to ascertain it accurately only from him, or from those standing in a confidential relation to him. Irving v. Thomas, 18 Maine R. 424.

In Dobel v. Stevens, the defendant was in- possession of a public house, under a lease, and represented to the plaintiff, who was negotiating to purchase the lease, that the receipts per month amounted to a certain sum, from various designated sources. Averment of the falsity of the representations, &c. The plaintiff proved that the representations were made as averred, and that they were false. The witness stated, on the cross-examination, that the books of the defendant were in the house, and might have been inspected by the plaintiff, and would have shown the truth as to certain of the representations, &c. It was held that if the vendor gave in a particular of his rents, and the vendee says he will trust him and inquire no further, then, if the particular be false, an action will lie. 2 Barn, and Cress. 623.

In the case at bar, there was evidence tending to sustain the averments of the falsity of the representations concerning the Chicago and Urbana contracts. The judge, sitting as a jury, must have found, before a decree could be entered in the form it was, annulling contracts following such representations, not only that they were false and fraudulent, but that they were, by the appellees, relied upon as true, and had induced them to make the contracts. If these were the only questions that pro]3erly arose in the case, we could not, under repeated decisions of this Court, disturb the finding. Bronson v. Hickman, 10 Ind. R. 3.— 2 Pars, on Cont. 268. Whether these were the only questions (other than those already passed upon by this Court) involved in the trial, depends upon whether the question of the value and utility of the patent right and drill, and representations in relation thereto, were necessary to be considered in arriving at a conclusion as to the validity of the contracts.

Much of the confusion in which the case appears to have been involved, and the conflict of opinions and arguments of counsel, so fervently advanced and zealously urged, were, doubtless, superinduced by the form of pleading adopted, looking first to a rescission of the contracts, or, if that could not be obtained, then asking damages. But this form of pleading has been, in effect, approved by this Court, in an opinion by Judge Stuart, in Colson v. Smith, 9 Ind. R. 8.

Under the issues formed upon this complaint, we are still of the opinion that evidence of the value of the right and' drill was important and relevant, if the question of damages was to be determined, and - perhaps, also, upon the question of rescission, though possibly not to the extent indicated in 9 Ind. It. upon the latter point.

It appears to us that the gravamen of the charge of fraud arises out of the alleged false representations concerning the Urbana and Chicago contracts. It is alleged that’the appellant represented that contracts had been entered into at those places for the manufacture and sale of a great number of the drills—the manufacturers agreeing to pay the appellant a fixed sum as premium for each one so sold;' that considerable numbers had been' sold under these contracts, and the demand was becoming so great that at least one manufacturer at Urbana, intended abandoning all other business, and enlarging his facilities for the construction of the drill. These representations presented to the mind a present and increasing income, arising from the patent, without finally disposing of the territorial rights therein, or incurring other expenses. We can very well perceive that, instances might arise in which aged or infirm persons, or others about to leave the country for a time, or engage in some pursuit in life in which it was not desirable to be distracted by pecuniary cares, might be induced to invest money upon such representations relative to the income arising, and likely to arise, therefrom, without reference to the intrinsic value of the patent, or of the territorial rights conveyed. In such instances, we can scarcely believe that the intrinsic value should, in determining the validity of the contracts, have so great weight as the opinion in 9 Ind. R. appears to indicate.

If we are correct in this, that each case must, to a great extent, be determined by its own circumstances (Chit, on Cont. 681.—2 Pars. 267), then another question becomes more important than it might otherwise be considered, and that is, as to the period of time to which inquiry should be directed to ascertain not only the value of the territorial right involved, but also the value of the patent itself. The invention might be useful and valuable, and at one period of time might not, for want of public appreciation, have any marketable or available price, and yet five years later, it might be estimated at a high rate by the public, because, in the meantime, information had been conveyed of such utility. If no information had been given, its estimated value might remain stationary. It will at once occur to the mind, that a man who should purchase a territorial right, when it was thus, in fact, of no available value in public estimation within that territory, without any expectation or intention of making expenditures of time or money, or otherwise using means to change that estimation, would have more cause of complaint if false representations should be made, of the character charged, than he who should purchase with the expectation, by great outlays and exertions, to fully develop its usefulness. If such a purchaser should be driven, by the circumstances of the case, from his original purpose, and compelled, to save his investment, to spend other larger sums of money, much time and attention, we do not think it would be a sufficient answer to a charge that representations, at the time of the contract, as to value and present available profits, were false—to say, “that may be so as to the profits of contracts, and may have been so, but as to value, it is now— five years having elapsed—of the full value then represented.” If such an answer should be held good, and evidence of that character suffered to go to the jury, it would be permitting inventors to avail themselves of the capital, time, and energies of others, to an extent which we think is at war with the principles of law governing somewhat analogous cases, to which reference will hereinafter be made.

As to a territorial right in a particular invention, the value of that right—the general utility of the invention being conceded—would depend much upon the condition of the territory. A shingle machine, or an improvement in a saw-mill, might have much value in a timbered coun‘try, and none in a prairie. Consequently, such inventions would depreciate in value in the first-named territory when the timber was exhausted. Upon the location of a railroad through a timbered territory, an inventor of such improvements'might well say, the right to that territory is of the value of 1,000 dollars, and will, perhaps, sell for that price.

At the end of five years, after the timber in the given territory had been exhausted, through the use of the improved machinery, ought the purchaser of the right to be permitted to make proof that it was then of no. value in that territory, as an answer to a demand for the purchase-money for such right?

We are not now combating the general propositions advanced in 9 Ind. R., but desire to carefully inquire into the correctness of the. application of the principles advanced, to the case at bar.

A patent for a limited time, say seven years, for an improved mode of manufacturing wine from grapes, might be of much value in a grape-growing country; and yet, within that time, it might not be of any great value in another region of country equally well adapted to the cultivation of the grape, for the reason that, in the last-named place, attention might not have been turned to such pursuits. Nevertheless, ultimately it would, upon the development of that branch of industry, become equally valuable there. But that might be after the expiration of the patent right.

It is difficult to distinguish the difference, in some respects, between the rights, and the rules of law applicable thereto, of a lessee of real estate for a given period of time; and the rights, &c., of the assignee of a patentee in designated territory, for the same time. In the one case, the landlord assumes to grant certain exclusive rights for the time agreed upon. So, in the other instance, the patentee assumes to grant certain exclusive rights, for, say the same length of time. If the landlord fails to comply with his contract, adjudicated cases have fixed the point of time to which attention should be called, and evidence directed, in an attempt to ascertain the damages to which the ten-" ant would be entitled.

In Trull v. Granger, 4 Seld. 115, a contract was made in September, 1849, by which certain premises were leased for a term of five years, commencing the next May, at which time possession was to be delivered, at an annual rent of 500 dollars. In May, when the agreement was to have been performed, the value of the premises had risen to the sum of 600 dollars per annum. The landlord failed to deliver possession. In a suit by the lessee against the lessor for such breach, the plaintiff had a verdict for 415 dollars, 99 cents. The Court of Appeals say: “The rule of damages adopted in this case was correct. * * The difference between the yearly value of the premises and the rent, was the true measure of damages.” In that case, it will be noticed that the yearly value of the premises had advanced 100 dollars, from September until May following, assuming the price agreed upon to have been the reasonable value at,the time of the contract. At the same rate of increase for every eight months, until the expiration of the five years, the sum would be much more than the amount of the verdict. There is no indication that any attempt was made to claim the increase, if there was any, of the annual value of the premises after the breach of the contract, although some time had elapsed before trial. The language of the Court would preclude the idea that such a proposition, if made, could have been entertained. The judgment was for the difference between the price agreed upon and the yearly value at the time of the breach of the contract, deducting interest.

Under the acts of congress of 1830 and 1834, preemption rights were granted to certain settlers, to be located any place in the land district, &e., and were called floats. In an action on an agreement by which two eighty-acre floats were to be transferred at a fixed price; this Court held that the measure of damages was the value of the' article at the time of the breach, and not “the advance or advantage to be derived from land reasonably well located as a float of preemption in the land district,” or damages for the fancied goodness of the bargain which was lost. Ward v. Burr, 5 Blackf. 116.

It is also a well known principle of law, that the measure of damages for the breach of an executory contract for the delivery of a specific article of personal property, at a fixed time and place, is regulated by the difference between the contract price and the market value of such articles, at such time and place. Hopkins v. Lee, 6 Wheat. 109, 118.—Dana v. Fiedler, 2 Kern. 41.—Mc Knight v. Dunlop, 1 Seld. 537.— Clark v. Moore, 3 Mich. it. 55.—Barnard v. Conger, 6 McLean, 497.—Rawdon v. Barlon, 4 Texas R. 289.—Smith v. Dunlop, 12 Ill. R. 184.— Ccmnon v. Holson, 2 Iowa R. 101.— Van Vleet v. Adair, 1 Blackf. 346.—Id. 296.-4 id. 260.—Lucas v. Heaton, 1 Ind. R. 264.—10 id. 20.-2 Greenl. Ev. 272.

So in actions for the breach of special agreements or contracts, for the construction of public works, it has been held that, although profits upon such contracts may be recovered to a certain limit, yet such profits must be calculated and based upon the difference between the contract price, and the price at which the performance of the work could be procured, at the time of the breach. The Philadelphia, &c., v. Howard, 13 How. 307.—Story v. The New York, &c., 2 Seld. 85.—Seaton v. The Second, &c., 3 La. R. 45.— Cunningham v. Dorsey, 6 Cal. R. 19.—Masterton v. The Mayor, &c., 7 Hill. 62. In the latter case, the plaintiffs, at the time of the breach of the contract, had near five years to complete it; and yet the Court instructed the jury that, “ In fixing the damages to be allowed the plaintiffs, the jury are to take things as they were at the time the work was suspended, and not allow for any increased benefits they would have received from the subsequent fall of wages, or subsequent circumstances.” But even to that extent, the correctness of the measure of damages adopted, in this class of cases, appears to be incidentally doubted by our own Court. Jones v. VanPatten, 3 Ind. R. 107. In that case it is also decided, in effect, that in actions for breach of ordinary contracts between individuals, the measure of damages is not the price stipulated to be paid on full performance, but the actual injury sustained in consequence of the defendant’s default; and that the sum which ought to be recovered is what would make the plaintiff reasonably whole at the time of the breach, all the circumstances of the case being considered.

These cases are cited as being, in our opinion, based upon principles somewhat analogous to those that should govern in arriving at a conclusion as to the correctness of the rulings now under consideration in the case at bar.

Without stopping to critically examine and nicely weigh the facts and circumstances of this case, to ascertain whether the question of the value of the patent and of the territorial rights, was one necessarily to be considered by the Court, to the extent indicated in 9 Ind. R., in determining upon the prayer for a rescission of the contracts, we are of opinion that, even if evidence should have been heard upon that question, that offered and rejected was not admissible. The contracts sought to be rescinded were entered into in November, 1850, and February, 1851, and had reference to territorial rights in Ohio, Michigan, and Minnesota. The evidence offered and rejected, was as to the amount for which territorial rights had been sold in certain counties in Illinois in 1856, and also as to the value of the right in Illinois at the latter date. Such evidence should have been confined to a period of time nearer the execution of the contracts. The Circuit Court permitted proof upon those points, up to, and for a year after the time the contracts were made. We think this was as much as the appellant could ask—as extended a margin as he could rightfully claim to make proof in; and much more so than has been, by other Courts, permitted in the several classes of cases above cited.

Perkins, J.

I take no part in the decision of this cause upon the present (its third) examination here; and I should ■not have said a word at this time in reference 1o it, did not some remarks of counsel, in their argument -upon its present submission, render it imperative, considering the part .heretofore taken by me in the case, and the subsequent change in the bench, that I should briefly review its past history.

The remarks of counsel spoken of relaté to—

1. The decision reported in 7 Ind. R. 147.

2. The construction of the 4th rule of this Court.

It is said the decision in 7 Ind. R. was out of time and wrong in law.

The case was in chancery, instituted to obtain the rescission of a contract and damages. The bill was demurred to, and the demurrer sustained so far as the application for rescission was concerned. Other rulings, also, were made. An appeal was taken from those rulings to this Court. Both parties assigned errors, filed briefs, and asked a decision of this Court upon those rulings. They did not object to the jurisdiction. The Court considered the case, and decided, besides other questions of practice, these two material points:

1. That the appeal was prematurely brought, as the final judgment in the cause had not been rendered.

2. That the bill, upon its face, made a case for rescission.

The Court had jurisdiction of the cause. The appea.. came to it in the usual form from the Court below; and. no motion was made to dismiss it. It was submitted by both parties. The Court had jurisdiction, necessarily, to entertain it so far as to determine the question whether the judgment below, appealed from, was such a judgment, as could, at the then stage of the case, be reviewed on appeal ; and, being legally in possession of the case for that purpose, it was, it strikes me, a less departure from propriety in the Court, to express, at the solicitation of both parties, an opinion upon a further point argued, than it is in one of those parties now to assail the Court for having complied with the request.

And tos that decision wrong in law ?

The bill charged that the contract sought to be rescinded was obtained by fraudulent representations which the plaintiffs believed to be true, relied upon as so, and that they were induced to enter into the contract by them. They were representations upon which the purchasers had a right to rely. Were any of those representations of such a character as, being fraudulent, vitiated the contract? Was any one of them such? Did any one of them go to a fact constituting a material part of the consideration of the contract? One of the representations charged in the bill was that he, Gatling, had a contract with Minium, Allen 8f Co., in Champaign county, Ohio, a county included in the sale of the patent right in question to Neioell and Beach, together with the benefit of said contract, by which contract said Mintwn, Allen Sf Co. were to manufacture drills for the supply of that section of country, and were to pay to Gatling, and thenceforth to his assignees, Newell and Beach, 10 dollars for each drill sold; that they had already paid 300 dollars, pursuant to the contract, for drills sold; that they were unable to supply the demand, so great was it, for the drill, and were about to enlarge their establishment, &c., to enable them to do it. Now, were not these facts going to a material part of the consideration ? Here was the sale, by representation, to -the purchasers of the patent, of a valuable income from the very day of purchase. Yet, the bill averred that the representation was utterly false. I have no hesitation in now saying that the decision of this Court upon that bill was right. Whether such representations were made, whether they were relied on, or had been waived, &c., were questions to come up afterwards upon a trial.

Next as to the construction of the 4th rule of the Supreme Court. That rule reads:

“Eehearings must be applied for during the term in which the decision is made, and by petition in writing, setting forth the causes for which the judgment or decree is supposed to be erroneous. The Court will consider the petition without argument, and direct the rehearing, if granted, to one or more points, as the case may>require.”

In this case, the petition asked for a rehearing upon two points, setting forth causes as to those points, and no more. The Court granted the rehearing as to those points, and what more could it, consistently with the rule, upon such a petition, have done? Yet, in thus acting, the Court is charged with adopting a “new reading” of this rule. But the Court might ask the counsel to' cite a case where, upon a petition for a rehearing upon given points, any other reading was adopted. No such citation has been furnished.

The Court decided to grant the rehearing in accordance with the prayer of the petition. This was proper; but that act did not determine the question as to the legal effect of the grant. And it seems to be the rule in chancery practice, in which alone rehearings are granted in England, that a rehearing as to particular points, granted upon the application of one party, opens up the whole case for argument to the opposite party, so far as anything in it might influence action upon the points on which a rehearing is asked. Consequa v. Fanning, 3 Johns. Ch. 394.—Dale v. Roosevelt, 6 id. 255.—3 Dan. Ch. Pr. (Perk. ed.) 1632. To this rule, counsel have conformed in their argument of this cause. By the English practice, new trials are granted at law, and rearguments in Courts of error; but we have met with no case where a rehearing was granted after final decision in a Court of en’or and appeals at law. They are common in chancery, and are analogous to new trials at law. For good reasons, without doubt, they have been incorporated into the practice of the Supreme Court in this state, as applicable to cases both at law and in chancery. But the practice in granting them, in this Court, is governed by our statute, and the rule of the Court. By them, either party may petition for such rehearing at any time within sixty days from the first decision. The rehearing may be applied for as to the» whole case, or particular points. The cause remains uncertified for the period named. Hence, both parties must take notice of petitions; and if the filing of a petition by one should render it expedient for a petition, also, by the: other, he must file it, if he wishes alleged errors as against-himself considered. Such we consider the better practice: in the Supreme Court under the rule.

W. Z. Stuart and J. A. Liston, for the appellant (1). S. C. Willson, J. E. McDonald, S. Judah, and U. O’Neal, for the appellees (2).

per Ouriam.

The judgment is affirmed with 1 per cent. damages and costs.