Hazard v. Irwin

35 Mass. 95

• Court: Massachusetts Supreme Judicial Court
• Decided: July 2, 1836
• Status: Published

Opinion

Shaw C. J.

delivered the opinion of the Court. Much of the argument on the part of the plaintiff, is founded, we think, on a misapprehension of the force and effect of the plea. The argument is, that whether the defendants, upon the facts shown, are to be deemed either sureties or .guarantors, in either character they are strangers to the contract of purchase and sale between the plaintiff and Penman, and cannot by their plea avoid that contract, or avail themselves of any fraud in it. This aigument would certainly be very strong, and if the state of the pleas would warrant it, would be entitled to great consideration. Fraud in the terms of a contract of sale, renders it not absolutely void, but voidable at the election of the party defrauded. The rule is designed for his security and protection. If he is desirous to retain the commodity, and carry the contract into effect, although he has been imposed upon and cheated in the terms of it, he undoubtedly has a right so to do. He may be so situated, that although conscious that he has been grossly defrauded, vit so urgent may be his necessity for the immédiate use of the article purchased, that he would rather submit to the imposition, than repudiate the contract. In such case, neither the other contracting party nor a stranger, can avoid the contract on that ground.

But we think this argument is not warranted by the pleas; but the pleas do state, not perhaps in the most precise and formal manner, but with a certainty sufficient after verdict, that the principal, Penman, did repudiate and rescind this contract. The general tenor of the averments in the pleas is, that-the plaintiff, falsely and fraudulently, made certain representations, as to the age, condition, weight, power, and other circumstances of the steam engine, and by reason thereof, the contract between the plaintiff and Penman was void, and, Penman refused, that is, and by reason thereof, or in consequence thereof, Penman refused, &c. The term “ refused,” though often used with the term “ neglected,” when it is intended to aver the breach of a contract to pay money, and is properly used in that sense, yet has a more active meaning, and taken in its connexion here, may well mean, not merely a passive non-payment of money, but a refusal on demand, or a determination not to pay, and that determination signified to the party claiming to recover. Whatever must have been the construction of the plea cr demurrer, after verdict we think it is sufficient, and it must be taken that the language was thus understood, considered and applied upon the trial.

The Court are also of opinion, that there was no necessity of making an express averment, that the engine was returned by Penman to the plaintiff, the vendor, because it does not appear by the record, that the engine was ever delivered to the vendee, or removed from the custody of the vendor, by the order. The averment of the plaintiff in the declaration, is, that by the contract, the plaintiff sold and conveyed the engine ; .and though the execution of the contract of sale, and the delivery of an order to take the engine, might be a good constructive or symbolical delivery to vest the property in the vendee, yet it did not constitute such an actual change of possession and removal of the property into the custody of the vendee, as to render it necessary to aver a return to the custody and possession of the vendor. And for the same reason, it was not ne cessary to aver a return and restoration of the order. The order was merely to be used as a means of obtaining a delivery ; and the averment that the vendee, by reason of the fraud and imposition practised on him, refused to perform and fulfil the contract, and to make any further payment thereon, is equivalent to an averment, that he repudiated and rescinded the contract. This being the case, the order became inoperative and void, and the engine not having been removed from the actual custody of the vendor, it remained subject to his own control.

We are then brought to the material questions in the present case, whether the matter set forth in the pleas, is sufficient to avoid the defendants’ contract. It is argued upon two grounds, first, that the fraud was not such as would enable Penman to avoid his own contract were the action against him ; but, secondly, if otherwise, the defendants cannot take advan toge of it, because they are strangers, because there is no fraud sho'wn in the contract between the plaintiff and them, because they are estopped by their deed, to deny that there was a debt due from Penman to the plaintiff. As to the matter of estoppel, it does not apply, because the stipulation is, that they will stand as sureties for the debt due, as recited in the deed of trust. Estoppels are not to be extended by construction. The deed would estop the defendants, perhaps, from denying the existence of such a contract and deed of trust, but not from showing either that it was voidable, and afterwards avoid ed, or otherwise invalid from some intrinsic vice, so that no debt was due upon it. Suppose it was discharged by payment, release or other matter subsequent, the defendants would not be estopped from showing it. Repudiating a contract, voidable on the ground of fraud, is matter subsequent precisely of the same character. The effect of the plea therefore is, not that'the contract between the plaintiff and defendants is void, on the ground of fraud, but that taking it to be valid and in full force, there is nothing due upon it from the defendants, as sureties, because the original contract between the plaintiff and Penman having been justifiably repudiated by the principal, there is nothing due from him.

The question then recurs, whether the fraudulent misrepresentations set forth in the present case, are such as to warrant Penman, the purchaser of the steam engine, in repudiating and rescinding his contract. We take it to be a well settled rule, that in the case of a false and fraudulent representation by a vendor, in matter of fact, within his own knowledge, or which he affirms to be within his own knowledge, not as to matters of opinion, judgment, probability, or expectation, in a matter essentially affecting the interests of the other party, a matter in which he reposes confidence in such affirmation, and is in fact deceived by it, the party thus deceived may repudiate and rescind the contract at his election ; and .if the litigant parties are so situated in regard to the subject matter, that the rule can be practically and effectually applied, it shall avail as well in a court of law, as in a court of equity. Many cases may arise where, in consequence of an execution of the contract, in whole or in part, or by other means, the parties are so situated that by a mere repudiation of the contract, they cannot be placed in statu quo, in which case the party injured must seek his redress either in a court of law or court of equity, accord ing to the circumstances of the case, and the nature of the redress sought. Where, however, the party committing the fraud, in an executory contract, is himself seeking to enforce such contract, proof of the fraud of the nature described, by a party having a right to set it up, is a good defence in an action at law. In the case of Bates v. Graves, 2 Ves. jun. 295, it is said by Lord Loughborough, upon the question, whether a reconveyance should be directed on setting aside deeds, as fraudulent, that “ when the court has declared a deed to be set aside for fraud and imposition, it must suppose it would be equally set aside at law upon pleading it. In that case, I apprehend no estate passes. It is otherwise, if the estate has been conveyed to a third person,” &c.

But it was contended in the present case, that the misrepresentations relied upon to invalidate the contract of sale, were of matters of judgment, or opinion, or matters of which the parties had equal means of inquiry and knowledge, and that, therefore, there was no such fraudulent misrepresentation as to constitute a fraud in law. It is undoubtedly true, that it is not every misrepresentation, every false or exaggerated statement, relative to the subject matter of the contract, which renders the sale void. It must be as to a matter of fact, substantially affecting the interests of the vendee, a matter in which he may be presumed to repose confidence, and one by which he is in fact deceived. The rule is cautiously stated by Lord Ellenborough. “ A seller is unquestionably liable to an action of deceit, if he fraudulently misrepresent the quality of the thing sold to be other than it is, in some particulars, which the buyer has not equal means with himself of knowing, or if he do so in such a manner as to induce the buyer to forbear making the inquiries, which for his own security and advantage, he would otherwise have made.” Vernon v. Keys, 12 East, 637.

The difference between a false averment in matter of act, and a like falsehood in matter of judgment, opinion and estimate, is well illustrated by very familiar cases in the books.

If the owner of an estate affirm, that it will let or sell for a given sum, when in fact such sum cannot be obtained for it, it is, in its own nature, matter of judgment and estimate, and so the parties must have considered it. Harvey v. Young, Yelv 21; 1 Rol. Abr. 801, pl. 16; Leachins v. Chissel, 1 Sid. 146 But if an owner falsely affirm, that the estate is let for £ 30, when in fact it is let for £ 20, it is fraud, because the owner knows the fact, and on inquiry, by the vendee, the teni.ni might refuse to inform him, or give him false information.

In looking at the misrepresentations set forth, and which under the instruction of the Court, in matter of law, must, after verdict be taken to have been proved, we think, they were of matters of fact, not of opinion, that they were material to the interests of the vendee, that they had a tendency to prevent that inquiry and examination into the condition of the engine which the vendee would have otherwise made, and that the vendee reposed confidence in them. Of this character, peculiarly, was the representation as to the age of the machine, and the length of time which it had been in operation, a fact known to the vendor, which could not be known to the vendee, except by the information of others ; and that information might not be obtained, or might not be correct. Of the same character, in a great measure, were the representations, that il was in good order, and fit for immediate use, and had been so certified by engineeis; because in so complex a machine as a steam engine, it cannot be known whether it is in good order and fit for immediate use, by bare inspection, without being taken down, and the interior carefully examined by persons of skill.

It was, however, argued on the part of the plaintiff, that whatever might be the effect of the alleged fraud in defence of a suit on a simple contract, such a fraud is not pleadable in bar of an action on a deed or specialty. Several cases are cited in support of this position, from the decisions of the courts of New York, and the point seems to be there so settled by a series of cases. It is a little remarkable, however, that the original case, which constitutes the commencement of this series, is hardly an authority for the point. Dorlan v. Sammis, 2 Johns. R. 179, note. The case was debt on bond, for the price of a slave ; the defendant relied on the fact, that the negro was free and rot the property of the plaintiff, when he sold her ; a mere failure of consideration, and with no averment of fraudulent representation. The court ask, “ can a defendant in a court of law get rid of a bond, given on a sale of a chattel, on the ground of failure of consideration ? There is no allegation that the plaintiff sold the chattel fraudulently and knowing that he had no title. There is no case in which a bond can be set aside, but where the consideration was void in law, or where theie was fraud.” But it was afterwards ruled, that fraud cannot be pleaded to a specialty in a court of law, not affecting the execution of the bond itself; but these decisions are founded mainly on the consideration, that a more adequate remedy and one better adapted at once to discover the fraud, and to relieve against it, is afforded in equity. In one of the late cases on the subject, Chief Justice Savage says, “ I confess I can see no very good reason why this defence should be excluded from a court of law, and the party sent into a court of equity ; but so the point has always been decided.” Stevens v. Judson, 4 Wendell, 473.

But whatever may have been decided elsewhere, we think it has long been a settled rule in Massachusetts, that such a fraud as that set forth in this case, is a good defence as well to an action founded on a deed, as any other ; it is rather acted on as a settled rule, than discussed and decided in any particular case. The cases cited on the argument, are cases in which the judgment of the Court, upon great consideration, proceeded upon this as a settled rule of law. Bliss v. Thomson, 4 Mass. R. 492; Somes v. Skinner, 16 Mass. R. 348; Somes v. Brewer, 2 Pick. 191. The second of the above cases was a real action, involving a question of title, and the deed, by which the plaintiff conveyed to the defendant, being shown to have been obtained by imposition and fraud, it was held that no title passed.

The last of the above cases assumed the same rule to be a settled rule of law ; but the case was distinguishable in this, that the first grantee, who obtained the deed from the plaintiff by fraud and imposition, had conveyed the land to a bona fide purchaser without notice, and so it was held, that as against him the rule did not apply.

The general doctrine was also settled in a case in which the opinion was given by Parsons C. J. It is directly in point. It was on covenant, and the defendant pleaded that it was obtained by fraud and imposition, and the defence was held good. The question as to the relative jurisdiction of courts of law and sanity is there considered. The learned judge concludes this part of the case thus : “ But when a court of law has regularly the fact of fraud admitted or proved, no good reason can be assigned why relief should not be obtained there, although not always in the same way in which it may be obtained in equity.” Boynton v. Hubbard, 7 Mass. R. 119.

The Court are all of opinion, that in an action on a contract, though under seal, in which a party is seeking to enforce a contract against the other contracting party, a plea and prooí that such contract was obtained by fraud and imposition, would constitute a good defence at law, and of course, that had this been a suit against Penman, he might have made this defence at law.

A question was made as to the competency of Penman as a witness. The Court are of opinion, that he was a competent witness, that the interest which he had was in the question and subject matter, that he had no interest in the event of the suit If the defendants were to be considered as sureties for Penman, and so that there was a privity between him and them, if the plaintiff were to recover against them, they would have their remedy for a contribution only, and not for the costs, against Penman. It is not, as if they held an indemnity from him against costs as well as debt. If the plaintiff does not recover against the defendants, he is not barred of his action against Penman, and so Penman’s interest is balanced. Considering them as guarantors to the plaintiff, upon an independent collateral contract, made on a distinct consideration, and so there being no privity between the defendants and Penman, the result we think would be the same. A recovery by the plaintiff against the defendants would be no bar to an action by the plaintiff against Penman, but such an action could still be sustained by the plaintiff against him, which might, perhaps, enure to the benefit of the defendants; or the plaintiff might make an equitable assignment of his right of action to the defendants, to recover the amount against Penman, for their own relief and indemnity. In either event Penman has no legal interest in the event of this suit, and whatever objection lies against his testimony, it is to his credit and not to his competency.

Some objections were made to the instructions of the court in point of law, all of which I believe have been substantially considered, except perhaps this, that if Hazard made the representations, as of his own knowledge, to be true, and they were in fact untrue and material, and Penman was deceived thereby, the contract would be void, although the plaintiff did not know whether they were true or not. The Court are of opinion that this was correct, because in fact such an averment has all the elements and all the consequences of a fraudulent representation. To represent that he knows facts, which he does not know, and which in fact he cannot know, because they are not true, for the purpose of deception, is substantially false, and produces all the ill effects of falsehood.

I am aware that in one case it was held, that where a party affirmed that he knew a thing of his own knowledge, which subsequently turned out not to be true, it was held to be no fraud which would sustain an action. Haycraft v. Creasy, 2 East, 92. There was a difference of opinion among the eminent judges who decided that case. It was a case upon which the defendant was charged as having fraudulently recommended a third person as one entitled to credit. He had given the strongest evidence of his own belief, by trusting the same person to a large amount. Those who decided that he was not liable, as upon a fraudulent representation, put it upon the ground, that from the subject matter of the affirmation, that of the ability and solvency of a third person, it could only be a matter of opinion and judgment, and though he said he knew it of his own knowledge, nothing more could be understood, than that he had the strongest belief of, and confidence in the assertion.

But this case is entirely distinguishable, being one, where the subject matter is one of fact, in respect to which a person can have precise and accurate knowledge, and in respect to which, if he speaks as of his own knowledge, and has no such knowledge, his affirmation is essentially false.

Judgment on the verdict, for the defendants