Law v. Grant

37 Wis. 548

• Court: Wisconsin Supreme Court
• Decided: January 15, 1875
• Status: Published

Opinion

LyoN, J.

The cases cited by the learned counsel for the defendant abundantly demonstrate the rule of law to be, that if Bichard S. Law acted as the agent of the plaintiff in negotiating the sale of the mortgaged premises, the latter is responsible for all the means employed by his agent to effect the sale. If the agent effected it by means of false representations or fraud of any other description, although without authority from the plaintiff to do so, and although the plaintiff was entirely ignorant that he had done so, the legal status of the plaintiff is precisely the same as it would have been had he made the false representations or committed the fraudulent acts to the same end, in person.

Again, if the plaintiff knew, when he sold the premises to -the defendant, that the latter was induced to make the purchase by the false representations of Bichard S. Law, and failed to inform him that they were false, he is in like manner responsible for tbe fraud, although Richard S. Law was not his agent. But it is claimed (and the circuit court seems to have adopted that view), that although R. S. Law was not the agent of the plaintiff in negotiating the sale, and although the plaintiff made no false representations in respect to the premises, and did not know at the time of the sale that R. S. Law had done so, still, on being informed, nearly a year and a half after the sale, of the fraud committed by the latter, the plaintiff could not thereafter be permitted to assert any further rights under the contract of sale, and hence is not entitled to a foreclosure óf the mortgage in suit. Cases to support this doctrine were cited, which, together with many others of like character, have been carefully examined and considered. But they are all cases of wills or settlements, or other voluntary conveyances not founded on valuable considerations, and hence are unlike the present case. The correct doctrine is briefly and clearly stated by the Yice Chancellor Sir Wl. Page Wood, in Scholfield v. Templer, Johns., 156. He says : “ This case is brought within the broad principle, that no one can avail himself of fraud. As it was held in Huguenin v. Baseley, 14 Ves., 273, and the other cases cited in argument, where once a fraud has been committed, not only is the person who has committed the fraud precluded from deriving any benefit from it, but every other person is so likewise, unless there has been some consideration moving from himself. Where there has been consideration moving from a third person, and he was ignorant of the fraud, there such third person stands in the ordinary condition of a purchaser without notice ; but where there ha3 been no consideration moving from himself, a third person, however innocent, can derive no sort of benefit or advantage from the transaction” (p. 162-3).

In the present case there was a valuable consideration moving from the plaintiff, to wit, the conveyance of the mortgaged premises to the defendant; and hence, within the rules above stated, the plaintiff (being himself free from fraud) cannot be held answerable for the fraud of R. S. Law, and the defendant cannot successfully allege sucb fraud as a defense to the mortgage unless R. S. Law was the agent of the plaintiff, or, be not being such agent, unless the plaintiff knew at the time of the sale that the defendant was making the purchase on the strength of the fraudulent representations made to him by R. S. Law.

It only, remains to determine what facts were proved on the trial, and to apply the foregoing principles thereto. And it should be here observed that, the action being an equitable one, the verdict of the jury on the question of fact submitted to them is merely advisory, and we must determine the case upon the weight of evidence, as all other equitable actions are determined, giving no more weight to the verdict than should be given to a finding of the same facts by the court without the intervention of a jury. Jackman Will Case, 26 Wis., 104; Chapin Will Case, 32 id., 557. If sustained by the evidence, the verdict is not vitiated by erroneous instructions; if not so sustained, correct instructions will not save it. Hence the instructions given to the jury become quite immaterial, and it is unnecessary to review them, or to make further reference to them.

The first question of fact to be determined is, Was the defendant induced to purchase the mortgaged premises at the agreed price by any false representations respecting the same made to him by R. S. Law, either directly or through his friend and adviser, McDougall ? The defendant testified that he made the purchase on the strength of McDougall’s letter to him of December 4th, which it will be remembered was read and approved by R. S. Law before it was forwarded to the defendant. That letter contains no positive statement that R. S. Law found mineral when he bored near the spring; but he told McDougall that he then struck a sheet of lead, and it is very evident that the letter was intended to, and did impress the defendant with the idea that the' boring had disclosed the existence of mineral in the land in large quantities. Whatever ambiguity there may be in the phraseology of the letter in this respect, it was removed by the statement made by R. S. Law to the defendant when he came to Wisconsin to make the purchase, that mineral was found by the forme r in the hole which he bored near the spring. We have no difficulty in finding from the evidence that one of the inducements which led the defendant to make the purchase was the representations of R. S. Law that he had found mineral in the land which indicated the presence there of a valuable mine. That this representation was false is not disputed. It is unnecessary to determine whether R. S. Law made any other fraudulent representations, or committed any other frauds, to induce the defendant to purchase the land.

The next question of fact, and the most difficult one in the case, is, Was R. S. Law the agent of the plaintiff in negotiating a sale of the land to the defendant ? If he was, it necessarily follows, as has already been stated, that the plaintiff is responsible for the false representation made by his agent.

There is no positive testimony of the existence of such agency, and the plaintiff in his testimony denies it fully. One Russell testified chat the plaintiff told him, that if his land was mining land, R. S. Law could sell it for $50 per acre. He does not give the date of this conversation. The plaintiff testified that the conversation took place in 1885 or 1866, and gives a different version of it. He says, “ I told Russell'that R. S. Law had said to me if I could find mineral on my land, I could sell it at $50 per acre.” The plaintiff also testified as follows: .“ Not one dollar of this money (the purchase money) was paid to R. S. Law directly or indirectly. There was no understanding that he was to get, any of this money. I had no knowledge that he was trying to sell the land ; no knowledge of any representations he made about it. I only know that he wanted to buy the land himself.” It was also proved thatR. S. Law paid out $250 a day or two after the sale, and $40 several months thereafter, but there is no competent evidence showing •or tending to show from wbat source he obtained these sums of money.

This is all of the testimony bearing directly upon the question of agency, except that Dr. Lee, a witness for plaintiff, testified, under objection, that R. S. Law told him (the plaintiff not being present), that he had negotiations pending about the sale of the place, and that he was to have all he could make over $14,000 or $16,000. Also, that after the sale was made, he told the witness that he was to have half of the excess of the purchase money over a certain sum. This testimony of Dr. Lee was clearly inadmissible, and must be disregarded. The rule on this subject is thus stated in Hazleton v. The Union Bank of Columbus, 32 Wis., 34 : “ The admissions or representations of an agent, while engaged in any particular transaction for his principal, made in regard to such transaction, may be received in evidence against the principal in a controversy concerning such transaction. But, to be received, they must constitute a part of the res gestee in the course of the agent’s 'employment about the matter in question ; they must accompany the transaction or the doing of the business, and must be within the scope of the delegated authority ” (p. 48)'. Thé alleged admissions to Dr. Lee were not made in the course of the employment (if there was an employment or agency), were not part of the res gestas, and hence cannot be received in evidence.

But it is argued that R. S. Law had no adequate motive to deceive the defendant and mislead him into the purchase of the land at an exorbitant price, unless he was acting in the interest of the plaintiff, and pursuant to some understanding with the plaintiff that he was to be paid largely out of the proceeds of his fraud. If this proposition is true, it goes far to establish the relation of principal and agent between the plaintiff and R. S. Law. If we can find from the evidence no other reasonable hypothesis of the motives which prompted R. S. Law to perpetrate the frauds, than that he was to profit by the sale in the manner claimed, we shall probably be justi-fled in finding tbe proposition true. But if there is any other reasonable hypothesis sustained by the evidence, consistent with the innocence of the plaintiff — one which satisfactorily explains the conduct of R. S. Law, without implicating the plaintiff in his fraud by raising the presumption of agency, — it should be adopted. The proposition demands careful com sideration. To discuss it, and other questions in the case, intelligently, a statement of some facts not before mentioned, which we think are established by the evidence, is necessary.

At the time the defendant purchased the mortgaged premises, and before, there was much activity, perhaps excitement, in mining operations in the mineral regions of Wisconsin and elsew'here. Lands supposed to contain mineral were held, and some such lands in the vicinity of the mortgaged premises were sold, at prices which now seem exorbitant. Such activity or excitement was doubtless increased by the fact that a class of people made their appearance in the mining regions, who claimed to possess the power or faculty to discover the presence of mineral in the earth by means of certain mental or physical impressions or phenomena produced upon them by passing over the place where the mineral is deposited. A notable member of this class was Fox, who is mentioned in the letter from McDougall to the defendant. Doubtless very many persons honestly believed that he possessed this faculty or power to a remarkable degree. To such persons, his assertions that mineral products existed in certain specified places, imported absolute verity. We see no reason to doubt that R. S. Law was one of these. It is in proof that he is a strong believer in spiritualism, and there was much in his conduct to show that at the 'time of the sale he fully believed that Fqx possessed this power to discover the location of mineral deposits with unerring accuracy. It is very apparent that the defendant was strongly indoctrinated in the sáme belief. Substantially (although cautiously and with qualifications), he admits it in his testimony. Tet there is sufficient evidence to satisfy us, that bis belief in tbe existence of sucb faculty or power, and that Eox and .others possessed it, was strong enough to control his actions, or at least to influence them to a considerable extent. If such belief did' not blind his judgment, it certainly greatly impaired his prudence and discretion. McDougall also, to a greater or less extent, entertained the same belief.

Before the plaintiff knew the defendant or had ever heard of him, Fox went upon the mortgaged premises and pronounced them rich in mineral deposits. He pointed out to the plaintiff the precise location of those deposits. Fox and R. S. Law (and perhaps Storey) thereupon proposed to buy the land on credit, and to pay therefor $25,000. The plaintiff declined the offer, without naming a price for the land. A day or two afterwards he offered to sell to R. S. Law for $100 per acre, $15,000 of the purchase money to be paid at the time of the sale. R. S. Law was unable to comply with the terms, and thereupon opened negotiations with the defendant, through McDougall, to become interested with him and McDougall in making the purchase. On his way to Wisconsin to conclude the purchase, the defendant passed through New Orleans, and there consulted a woman who professed to be a clairvoyant (and whom he had consulted on other subjects), concerning his proposed purchase. This woman seems to have favored the purchase of the Law farm rather than the $44,000 tract mentioned in McDougall’s letter. In his testimony, however, the defendant disclaims that he was .influenced by what the woman said to him.

The defendant reached Shullsburg, in the vicinity of the mortgaged premises, on Saturday, December 21, 1867, and found there R. S. Law and a "woman from Chicago named Allen, who, the defendant says, was a medium. It is probable that R. S. Law procured the attendance of this woman on that occasion. A number of persons, among whom were the parties, R. S. Law and Mrs. Allen, went upon the land. Mrs. Allen verified tbe statements of Fox by walking over the land. In answer to a question by tbe defendant, when tbe parties were near tbe bole which had been bored by R. S. Law near the spring, the plaintiff told him that no mineral was found in that hole. This is proved by the testimony of several witnesses, although the defendant denies any recollection of such conversation. Indeed, so thoroughly impressed was the defendant with the idea derived from McDougall’s letter (but not from anything said by the plaintiff), that the plaintiff desired to withdraw his offer to sell the land at $100 per acre, that he would not (as he testified) have paid any attention to anything the plaintiff might have said against the value of the land. He subsequently testified, however, that had he heard the plaintiff say that no mineral was found in the hole, he would, have given some attention to the statement. The defendant avoided conversation with the plaintiff concerning the land; he did not exact or call for any statements from the plaintiff relative to it; neither did he require the plaintiff to verify the representations made by R. S. Law, or inform him what those representations were. Referring to a time when the negotiations were still pending, the plaintiff testified as follows: lt Grant said he understood my price was $100 per acre, and remarked, that was a high price for land not proved to be mineral land. I said it was high, but it had other qualities. I had proved it was a good stock farm. Water power on it, and stone quarry. I said there was a possibility of mineral, from my ideas of mineral in that section of the country. I said I would not sell it for mineral land, not having proved it, and not being a miner. He said it made no difference about my not having proved it; that he believed he knew more about f?ke land than I did. Said he bought the land on his own judgment.” The above testimony, or the more material portion of it, is corroborated by other witnesses, and must be token to be true, notwithstanding the denial thereof by the defendant. The sale was completed, the deed, notes and mortgage executed, and tbe $15,000 paid, on tbe same day that tbe above transactions occurred.

Subsequently, R. S. Law went to Chicago and assisted tbe defendant to select a pump to be used in mining on the land. Sometime afterwards (but at wbat particular time does not appear), McDougall informed tbe defendant that, because of losses in oil speculations, be would be unable to take an interest in tbe mortgaged premises. Tbe defendant replied that if Mc-Dougall could not go into tbe enterprise, R. S. Law could not. McDougall communicated such reply to the latter, who expressed bis regret, but said there were other chances as good; and never thereafter applied to the defendant for an interest in the premises.

It is believed that tbe foregoing are all of tbe facts necessary to be considered to enable us to determine whether there is any reasonable hypothesis consistent with the innocence of the plaintiff of knowledge of the frauds perpetrated by R. S. Law on the defendant, or of such participation in the acts of R. S. Law or connection therewith as will establish the relation of principal and agent between them.

.'After most careful consideration of the evidence, we are impelled to the conclusion that such a hypothesis may reasonably be predicated upon it. We think there are as good reasons for believing that R. S. Law perpetrated the fraud upon the defendant for his own purposes, entirely irrespective of the plaintiff, as that he did so pursuant to an understanding with, and to advance the interests of, the plaintiff. It is a reasonable theory of the case, that R. S. Law really believed that the land contained rich deposits of mineral, that he was anxious to obtain an interest in it, and that his frauds upon the defendant were for the purpose of obtaining such interest by inducing the defendant to become the purchaser, and not because he had any agreement with the plaintiff to share in the proceeds of the sale.

The faith of the defendant and R. S. Law in the powers of Pox, Mrs. Allen and others of the same class, may reasonably be considered the key to the whole transaction. It may explain the conduct of R. S. Law and the marvelous credulity and want of discretion of the defendant, without impeaching the honesty of the plaintiff. It is our unmistakable duty to accept the explanation, because it is reasonable and because it is in favor of innocence. We conclude that the proofs fail to show that R. S. Law acted as the agent of the plaintiff in negotiating the sale of the mortgaged premises to the defendant.

The remaining question to be determined is, whether the plaintiff, at the time of the sale, knew that the defendant was induced to purchase the land by the false representations of R. S. Law. This question requires no extended discussion. Much that was said in the consideration of the question of agency, is applicable to it, and need not be repeated. It is sufficient to. say here, that the denial by the plaintiff, in his testimony, of any such knowledge or notice has not been successfully controverted by the defendant Aside from the mere fact that the plaintiff demanded and received what now seems to have been an exorbitant price for his land, the case seems entirely destitute of evidence tending, even remotely, to prove that the plaintiff then had any knowledge or suspicion that R. S. Law had perpetrated a fraud of any kind upon the defendant. Under all of the circumstances of the case, we are not authorized to reject the positive denial of the plaintiff.

A few observations, not pertinent to the discussion of the questions of fact above considered, but relating rather to the personal connection of the plaintiff with the contract of sale, will conclude this opinion. The plaintiff doubtless thought that R. S. Law and the defendant had extravagant notions of the value of his land; he probably knew that their valuation was based on their belief in the power of Eox and others to detect the location of mineral deposits; and he fixed a high valuation on his land in view of those facts. But it does not appear that he did any act on spoke any word to cause or strengthen such opinion. On the contrary, be frankly told the defendant that no mineral had been found in the land except a little piece found in. the spring (and the proof is that some mineral was found in the spring), and he expressly declined to sell the land as mineral land.

It frequently happens that the market values of stocks and other kinds of property are temporarily inflated, by means of the grossest frauds, far above intrinsic values. Yet no one will claim that contracts for the sale and purchase thereof at such inflated prices, by parties not concerned in the fraud, can be successfully impeached. This seems to be a case within the same principle. The defendant was made to believe that he knew the value of the land better than did the owner. He acted upon that belief, and bought the land at an exorbitant price. His opinion was based partly upon false assertions of fact made by R. S. Law, and for which the plaintiff was in no manner responsible, but mainly, in our opinion, upon his absurd belief in the powers of Fox. Neither was the plaintiff responsible for that belief, but sold his land for the price the defendant was willing to pay for it. It turns out that the belief of defendant is unsound ; that he spent his money and incurred obligations upon the strength of a false theory or doctrine, being incited ^thereto by the false statements before mentioned. On what principle can a court of equity relieve him from the consequences of his gross folly and want of common discretion and prudence ? The question has already been answered. In order to entitle himself to relief, we have seen that he must connect the plaintiff with the alleged fraud by showing that it was perpetrated by the plaintiff or his agent, or, if by a person not the agent of the plaintiff, that the latter had notice of the fraud at the time of the sale. The defendant has failed to prove either of these propositions, and, however reluctant we may be to do so, we must hold that he has failed to establish his counterclaim.

A new trial will be of no service to the defendant, unless he can produce additional evidence of agency or notice of the fraud, as the case may be. If he satisfies the circuit court, by affidavit or other competent proof, that on another trial he will be able to prove a defense to the action, we think that court should grant a new trial. Otherwise, the plaintiff should have the usual judgment of foreclosure and sale.

By the Court. — The judgment of the circuit court is reversed,, and the cause remanded for further proceedings in accordance with this opinion.