Where false steps are taken to enhance the price of property
sold at auction, a court of equity will relieve the purchaser from
the consequences and injury caused by these unfair means.
Therefore, where the owners had instructed the auctioneer to
take $14,500 for the property, and the real bids stopped at $
20,000, and the auctioneer, even without the consent or knowledge
of the owner, continued to make fictitious bids until he ran it up
to $ 40,000, this was a fraud upon the purchaser.
These sham bids could not have been made by the auctioneer upon
his own account. Even if they had been so, it is very questionable
whether they would have been valid.
Being the general agent of the owners, the latter are
responsible for his acts if they receive the benefit of them. By
bidding or puffing by the owners, or caused by or ratified by them,
is a fraud and avoids the sale.
The sale being made on 1 January, 1836, but the fraud not
discovered until 1840, and the bill being filed in 1841, there is
no sufficient objection to relief owing to lapse of time.
A release given by the purchaser to the auctioneer, for the
purpose of making him a competent witness, did not operate as a bar
to a recovery against the vendors. He would have been a competent
witness without it.
There was no necessity for making the auctioneer a defendant in
the suit.
The various modes of relief examined.
The complainant, Veazie, resided at Bangor in the State of
Page 49 U. S. 135
Maine, and the defendants in Massachusetts,
viz.,
Nathaniel L. Williams at Boston, and Stephen Williams at
Roxbury.
The facts of the case were these:
On 1 January, 1836, Nathaniel L. Williams and Stephen Williams
were the owners of two mill privileges, situated on Old Town Falls
in the Town of Orono and State of Maine. On that day, they offered
the property for sale, at public auction, in the Town of Bangor.
The whole controversy in the case having arisen respecting the
manner in which the sale was effected, it is necessary to state the
circumstances as they were disclosed by some of the witnesses. The
owners employed Mr. Stephen H. Williams to proceed to Bangor and
attend to the sale, who hired an auctioneer by the name of Head to
effect it. The most material parts of the transaction are thus
stated by Head, who was examined as a witness on the part of the
complainant.
"I was employed, in the winter of 1836, by a son of one of the
Messrs. Williams, to sell certain real estate in Orono, as an
auctioneer. The estate sold was mill privileges, situated in Old
Town, near Old Town Falls. It was put up at a minimum price of
$14,500, but it is my impression that the minimum price was not
fixed or named at the sale, but it commenced at a much lower sum,
which I have now forgotten, and run on up to about eighteen
thousand dollars; it might have been more or less. I then received
from Samuel J. Foster bids, who was the only person that bid, to my
recollection, after the sum last named. Foster bid a hundred
dollars, and I then advanced upon him; he then bid again, another
hundred dollars, or some other sum; I again advanced upon him, and
so on, till the bid got up to forty thousand dollars, when it was
struck off to Samuel J. Foster. I don't recollect the terms of
sale. A certain percent was to be paid down, but what it was I
don't recollect."
To the third interrogatory.
"I don't recollect that said sale was conditional, except as I
have stated. I don't recollect the sum first offered, but it is my
impression that it was something like five thousand dollars. I
don't recollect what the bids were from that sum. My impressions
are that Samuel J. Foster, Ira Wadleigh, John B. Morgan, and, I
think, James Purrington were the bidders. There might have been
others. The highest sum bid by any person other than the purchaser
was somewhere in the vicinity of eighteen thousand dollars, to the
best of my recollection."
To the fourth interrogatory.
"I have already answered, as near as I can recollect, as to the
highest sum offered as a bid,
Page 49 U. S. 136
except that at which it was struck off. After other bidders
stopped, he, Foster bid a hundred dollars, or so. I then advanced
upon him, and he then again bid, and so on up to forty thousand
dollars."
To the fifth and a half interrogatory,
viz.,
"What was the highest sum offered as a bid at said sale, which
you received as a bid, except the bids offered by said Foster? --
It was somewhere about eighteen thousand dollars, as I have already
answered. The actual bidders were about to that sum, as near as I
can recollect. It is my impression that I advanced from that sum,
or thereabouts. I cannot say for a certainty from what sum I so
advanced. But I think it could not have exceeded twenty thousand
dollars at which the actual bidders stopped, and my impression is
that they ceased to bid beyond eighteen thousand dollars."
To the sixth interrogatory.
"I never communicated said facts to said Veazie, to my
knowledge. I cannot recollect when I first communicated them to
anyone who would have been likely to have communicated them to
Veazie. About six months ago, J. P. Rogers, Esq., came to me, and
said that he had knowledge of certain facts that I knew. I did not
know what he meant. He then referred to the sale of this property.
I did not tell him anything about it at that time. He called on me
again; I refused, as I did not know but I might implicate myself.
Afterwards, he called again, and I then told him, if Veazie would
give me a writing holding me harmless, I would state the facts. He
said he would give me such a writing, as attorney for Veazie, which
would be good. He did so, and I then went forward and gave my
deposition in a case between the parties, as to the facts of the
case."
To the ninth cross-interrogatory.
"Said defendants, nor any agent of theirs, did not request me to
employ any by-bidder at the sale, nor to use any other than fair
and lawful means to enhance the price of the said property."
Samuel J. Foster who was the person employed by Veazie, the
complainant, to bid for him thus testified:
To the second interrogatory.
"I did attend said auction sale in the winter of 1836. It was
held on 1 January, 1836, at the Penobscot Exchange, in Bangor.
Certain mill privileges and appurtenances, situate near or on the
Old Town Falls, was the property sold."
To the third interrogatory.
"The highest sum bid for said property was forty thousand
dollars. I bid it, and was acting and bidding for Samuel
Veazie."
To the fourth interrogatory.
"Previous to the sale, I was
Page 49 U. S. 137
instructed by General Veazie to bid to the amount of twenty
thousand dollars. At the time of the sale, after the bidding had
gone up to twenty thousand dollars, Mr. Veazie came to me, under
considerable excitement, and told me to advance and bid it off. I
have no distinct recollection what my first bid was, but my
impression is that I commenced with about five thousand dollars. It
advanced pretty rapidly till it amounted to fifteen or sixteen
thousand dollars. I think, between that point and twenty thousand,
the bidding was not very prompt, but it went on finally from twenty
thousand till it was struck off to me at forty thousand dollars. I
think I did not communicate my relation to General Veazie to
anyone, until the property was knocked off. I then notified Mr.
Bright, the agent of the defendants, a Mr. Williams, the son of one
of the defendants, and Mr. Head, the auctioneer, that I bid for
General Veazie, and the parties made arrangements to meet, the
afternoon of the same day, at the office of William Abbott, Esq.,
in Bangor, to settle and close the business."
To the fifth interrogatory.
"John Bright, who acted as agent, and a Mr. Williams, son of one
of the defendants, were present, apparently acting for them. I have
no recollection of their making any remark at the time of sale, nor
that they did anything, at that time, about the sale."
To the fifth and one-half interrogatory.
"My impression is that I saw or heard no bidding after it got up
to sixteen or eighteen thousand dollars. The biddings, audibly, or
by signs, then ceased to be known to me. I observed Mr. Wadleigh,
and believe he was present from the beginning to the close of the
sale. My impressions are very strong that I noticed Mr. Wadleigh's
biddings till it reached to sixteen or eighteen thousand dollars.
After that, I am positive that there were no signs, or open bids,
that would enable me to discover who, or that anyone, was bidding
against me. I endeavored to discover if Wadleigh was doing so, and
could find no sign or nodding from him, or from anyone else."
Ira Wadleigh, also a witness on the part of the complainant,
thus testified:
To the second interrogatory.
"I know the property, and that it was sold to Samuel J. Foster
at forty thousand dollars. About a month before the sale I was in
Boston, and called on Nathaniel L. Williams to see if he would sell
me the property. He said they thought of putting it up at auction,
and would let me know in a few days, as soon as he could see his
brother Stephen. I advised him to sell, so that mills could be
built that winter. On coming out of Boston, I met Stephen
Williams'
Page 49 U. S. 138
son, Stephen H. Williams, who was coming down to see to selling
the property, and after he reached Bangor, I saw him here, and
talked with him about the property, and asked him if he would sell
it at private sale. He told me he would sell it for fifteen
thousand dollars or thereabouts -- I think he told me so.
Afterwards it was advertised to be sold at the Exchange in Bangor.
Stephen H. Williams appeared to be acting for the defendants."
To the third interrogatory.
"The property was sold at auction; I was present at the sale,
and bid I cannot say how many times, nor what sums I bid; but
somewhere from fifteen to twenty thousand dollars. I don't remember
bidding over twenty thousand dollars, although I might have done
so. Nicholas G. Norcross bid; I think Myrick Emerson bid, and
Samuel J. Foster and some others; but I do not recollect who. I
cannot tell how much they bid, but from where it started up along,
but how far I cannot say."
To the fourth interrogatory.
"When they first commenced, the bids were audible, and properly
made; but after they got up to twenty thousand dollars and over, it
was by signs."
To the fifth interrogatory.
"I saw General Veazie at the auction; he was about the room
there; and was walking back and forth in the long entry part of the
time. I did not see anything very particular in his manner. I did
not mind much about it."
To the sixth interrogatory.
"I talked with Head before the sale, and told him I wanted to
buy it. He asked me how high I would go. I told him to seventeen
thousand dollars, if I could not get it for less. I agreed with
Norcross to take it at that sum, and told Head that I would hold my
pencil between my thumb and forefinger, and turn it for a bid. I
soon went up to twenty thousand and upwards, and stopped. I found
the bidding was going on without my nodding, turning my pencil, or
making any sign, and stepped up to Head, and asked him if he was
bidding for me. He made no answer, and I said, 'For God's sake,
don't bid any more for me,' and went and sat down and bid no more.
After the sale, I had a conversation with young Williams, and, I
think, told him how the bidding went on; but he must have seen it,
as he was sitting behind, and close to Mr. Head. He said he was
surprised at the sale; that the property sold for much more than
they expected."
To the seventh interrogatory.
"There were four privileges; and they were not then actually
worth more than two thousand dollars a privilege. I don't believe
it would sell today
Page 49 U. S. 139
for four thousand dollars at auction -- the whole property, that
is, the four privileges."
Four other witnesses,
viz., Myrick Emerson, Levi Young,
Richard Moore and Isaac Smith, who were present at the sale, were
examined on behalf of the complainants, whose evidence corroborated
that of the preceding witnesses, as far as mere spectators could
have any knowledge of the transaction.
Ten witnesses were examined on the part of the defendants.
Stephen H. Williams, the authorized agent of the owners of the
property, thus testified:
"My name is Stephen H. Williams. I am thirty-four years old. I
am a merchant, and reside in Roxbury; I know the said parties. Mr.
Veazie resides in Bangor, and is the president of a bank; I don't
know his occupation. Mr. Williams resides in Boston, and is retired
from business; he is my uncle."
"To the second interrogatory he says:"
" In the winter of 1835-1836, I was employed by the defendants
to go to Bangor, and act as their agent in selling at auction
certain mill privileges, at Orono or Old Town; I went to Bangor;
the sale took place, January 1, 1836; the property was sold by
Henry A. Head, as auctioneer, and was knocked off to a man named
Foster but Mr. Veazie was the purchaser. The price was forty
thousand dollars."
"To the third interrogatory he says:"
" On arriving at Bangor, being a stranger, I made inquiries of
Mr. John Bright as to who was the most respectable auctioneer in
the place, and he referred me to Mr. Henry A. Head, as the person
employed in disposing of the government lands, and in his opinion
the most desirable auctioneer. I accordingly applied to him to
dispose of the property, and he consented to do so. On the day of
the auction, previous to commencing the sale, he asked me what
amount was to be paid to him for his services; being unacquainted
with the amount of commissions usually paid to an auctioneer, I
told him that he should be paid what was customary. Nothing further
was said respecting his fees previous to the sale."
"To the fourth interrogatory he says 'I have already answered
this interrogatory in my reply to the third interrogatory.'"
"To the fifth interrogatory he says:"
" I did not authorize, or request, or in any way suggest to the
said auctioneer, to bid himself on the said property, or employ any
other person to do so, or to do or permit anything unfair, unusual,
or in any way improper, to be done at the said sale to enhance the
price of the said property, and I did not know, nor had I any
reason to believe, that he intended to do so. "
Page 49 U. S. 140
"To the sixth interrogatory he says 'I did not, nor did anyone
authorized by me, make any bid on the said property at the said
sale.'"
"To the seventh interrogatory he says 'I knew the said Wadleigh,
at the time of the sale, so as to speak to him; he was present at
the sale.'"
"To the eighth interrogatory he says:"
" I did see the said Wadleigh, while the sale was going on, go
up to the auctioneer and speak to him; the bid had then gone to
thirty-nine thousand dollars. He did not go up and speak to him
more than once; I am distinct in my recollection on this
point."
"To the ninth interrogatory he says:"
" I did ask the auctioneer immediately after the sale what Mr.
Wadleigh had said to him, when he came up to him during the sale,
and he replied to me that, on going into the room immediately
previous to the sale, Mr. Wadleigh gave him unqualified authority
to purchase the property for him, or, in other words, had told him
that, when the property was knocked off, it was to be his
(Wadleigh's). He (the auctioneer) also told me that when Wadleigh
came up to him on that occasion, he said to him 'For God's sake
stop, and bid no more for me.'"
"To the tenth interrogatory he says:"
" The property was knocked off to a Mr. Foster but after the
sale, much to my surprise, I found that Mr. Veazie was the
purchaser. He had told me previous to the sale, that he would not
give more than twelve thousand dollars for it. He immediately
desired a bond for the delivery of the deed. The bond was
accordingly drawn, with a penalty of fifty thousand dollars, for
the delivery of the deed, at Bangor, within ten days or a
fortnight. After receiving the bond, and while he was folding it
up, he said to me that he thought it proper to state, now that he
was secure himself, that an express had been fitted out for the
purpose of purchasing this property before the news of the sale, by
auction, could reach the owner, and it is my impression that he
said that Mr. Wadleigh was engaged in it, but of this I am not
positive. I left to go to Boston and obtain a deed and return to
Bangor. I remained in Boston a day or two to complete the deed,
which having been done, I set out to return to Bangor. Between
Boston and Portsmouth I found, by some conversation with the
passengers, that Mr. Veazie had passed us on the road going to
Boston. I accordingly made arrangements to return to Boston and
meet him, and thus save my journey to Bangor. On returning to
Boston, I found he had left there an hour or two previous to my
arrival. A day or two after, I started for Bangor again and
overtook Mr.
Page 49 U. S. 141
Veazie at Portland. We then traveled together to Bangor. During
the journey, he told me that he had made up his mind to give forty
thousand dollars for the property; that it had been canvassed in
his family, and arrangements been made to that effect, and that he
had secured this Mr. Foster to hold him harmless to that amount,
and that the journey he had made to Boston was to obtain knowledge
that I had a deed for him, as he was suspicious, on the return of
those who went on the express, that they had succeeded in their
design. And by way of showing his anxiety, he told me that he had
left Bangor for Boston on the evening of a large party given by his
wife. He said that the value of this property to him was caused by
a quarrel and law suit between him and Wadleigh, which rendered it
of vast importance to either of them to obtain the property. He
also said that he had traced the person who conducted the express
as far as the Tremont House, and there all trace of him was
lost."
"To the eleventh interrogatory he says:"
" Previous to and on the morning of the sale, Mr. Veazie
manifested much indifference as to the purchase of the property,
observing that he would give twelve thousand dollars for it, and no
more. Of course I was surprised when I found he had given forty
thousand dollars for it."
"To the fourth cross-interrogatory he says:"
" Immediately after the sale, I was informed by the auctioneer,
that, when Wadleigh stopped him at thirty-nine thousand dollars, he
(the auctioneer) then bid the remaining one thousand dollars on his
own responsibility, alternately with Foster. On my return to
Boston, I related this (with everything else that had transpired)
to the defendants, my employers."
John Bright, who was the agent for the owners of the property
prior to the arrival of Stephen H. Williams, thus testified to the
fourth interrogatory:
"I did not, nor did anyone to my knowledge or belief, request or
authorize, or in any way suggest to the auctioneer, or any other
person, to bid at said sale, in behalf of the defendants, or to
make any fictitious or pretended bid at the said sale, or to do
anything, or permit anything to be done, unfairly, to enhance the
price of the said property."
To the fifth interrogatory:
"I did attend the sale. I did not bid on the property, nor did I
then know, nor had I cause to believe, that said auctioneer was
himself bidding on the said property, nor that anyone was bidding
on said property for the defendants, or was using any unfair means
to run up said property, or to enhance the price thereof. "
Page 49 U. S. 142
The witnesses all concurred, that there had been a great
depreciation in the market value of mills and mill privileges since
January 1, 1836.
The terms of sale were ten percent of the purchase money payable
immediately, and twenty percent more upon the delivery of the deed.
These two sums together made $12,000, all of which was paid by
Veazie. The balance, being $28,000, was divided into two notes of
$14,000 each, payable in one and two years. The first was also
paid, and the interest upon the second up to 1 January, 1840. The
amount still due was therefore one note of $14,000, with interest
from 1 January, 1840. Upon this note suit was brought against
Veazie, prior to the filing of the bill in this case.
These were the circumstances attending the sale, as stated by
the principal witnesses.
On 21 July, 1841, the following release was executed by Veazie
to Head,
viz.:
"Know all men by these presents, that I, Samuel Veazie, of
Bangor, in the county of Penobscot, and State of Maine, Esquire, in
consideration of one dollar to me paid by Henry H. Head and
Nehemiah O. Pillsbury, both of said Bangor, auctioneers, and late
co-partners in the auction business, under the firm and style of
Head and Pillsbury, the receipt whereof I do hereby acknowledge, do
hereby release and discharge said Head and Pillsbury, jointly and
severally, from all damages by me sustained, or supposed to be
sustained, and from all action, or causes of action, to me accrued,
or accruing in consequence of any misfeasance, nonfeasance, or
malfeasance, or any illegal management by them done, performed or
suffered, at the sale at auction of Nathaniel L. Williams and
Stephen Williams' real estate, situated in Old Town, in said County
of Penobscot, on or near Old Town Falls, so called, which was sold
at auction on or near January 1, 1836, by the said Head and
Pillsbury, as auctioneers; hereby, also, releasing the said Head
and Pillsbury from any claim for damage, by or in consequence of
any of their proceedings relating to said sale of said
property."
"In witness whereof, I have hereto set my hand and seal, this 21
July, A.D. 1841."
"SAMUEL VEAZIE [L.S.]"
This release was introduced into the cause by agreement of
counsel, filed at a subsequent stage of the proceedings, by which
agreement it was admitted that neither the respondents nor their
counsel had any knowledge of the existence of the
Page 49 U. S. 143
release until after the publication of the evidence in the suit,
and also further admitted, that the release and circumstances under
which it was given might be referred to and made use of in the
cause with the same effect as if the same had been put in issue by
a cross-bill and admitted by the answer. It will be seen by
referring to the third volume of Story's Reports, page 66, that Mr.
Justice Story did not consider this agreement as a proper mode of
introducing the release into the cause, when it came up before him
for argument. According to his suggestion, the proper steps to do
so were immediately taken by filing a supplemental bill. These
remarks are here made for the purpose of connecting the report of
the case in 3 Story 54, with this statement.
On 23 July, 1841, Veazie filed his bill of complaint on the
equity side of the Circuit Court of the United States for the
District of Maine.
The bill stated that on January 1, 1836, defendants owned two
mill privileges in Maine, and on that day offered them for sale, at
auction, at Bangor, in Maine, employing one Head as auctioneer,
and, by themselves or agent, instructed Head to put them up,
beginning with $14,500, minimum, and prescribed certain conditions
of sale as to payment; that the complainant, relying on the good
faith of defendants and of Head, attended the sale, and bid, by one
Foster as agent, and, the minimum having been offered, Head
continued to announce a still higher sum, and Foster supposing it
fair and honest, made a still higher bid, and so on until said
property was struck off to Foster for the plaintiff, at $40,000.
And thereupon the complainant, supposing the sale had been
conducted and the bidding made in good faith, complied with the
conditions of sale, paid $4,000 in cash, $8,000 more on delivery of
the deed, gave his note for $14,000 in one year, with interest,
which he has since paid, and his other note for $14,000 in two
years, with interest, on which he has paid the interest annually to
January 1, 1840. And defendants executed a deed to complainant, and
complainant a mortgage of same to defendants to secure said notes,
and another of $1,900, received as part of the $8,000
aforesaid.
The bill further alleges, that there was no real bid at said
auction for more than $16,000 or $18,000; but that the auctioneer,
by sham bids, run up said Foster from about $16,000 to $40,000,
Foster's being the only real
bona fide bids over about
$16,000; by means of which pretended bidding and management of the
auctioneer, defendants have received from the complainant a large
sum of money which they ought not
Page 49 U. S. 144
to have received, and so the complainant has been deceived and
defrauded.
The bill further alleges, that complainant discovered the fraud
since January 1, 1840, and notified defendants of it, and hoped
they would have refunded the money; but they not only refused to
rescind, but have commenced a suit on the unpaid note, which is now
pending in this Court, and attached complainant's property.
The defendants are requested to answer specifically:
1. Whether they authorized the sale, and employed Head as
auctioneer.
2. Whether the land was put up at the minimum stated, and if
Head was directed not to sell for less, and authorized to bid for
defendants to that extent.
3. What sum they agreed to pay Head, prior to the sale; what
they did pay; was he to be paid any sum if there was no sale; how
he was to be paid.
4. What amount, principal and interest, complainant has paid
defendants.
5. Whether the note on which defendants have brought a suit is
one of those given for said purchase.
6. Whether the whole purchase money was not paid and secured by
complainant, and the deed given directly to him, and whether it was
not stated and understood, at that time, that Foster acted simply
as complainant's agent at said sale.
The prayer of said bill is that said suit may be enjoined, the
note delivered up, the sale rescinded, and the money paid back with
interest.
The answer admitted the ownership, and that defendants employed
one Bright to advertise the property for sale at auction on January
1, 1836. That a few days before the sale they sent Stephen H.
Williams, a son of one of the defendants, to Bangor, to employ an
auctioneer and make all necessary arrangements. The defendants
denied having instructed, intimated, or suggested to Williams,
Bright, or any other person, that there should be any by-bidding or
other unfairness; or that, before said sale, said Williams, Bright,
the auctioneer, or any other person, received from defendants any
instruction or suggestion that said property should be run up by
fictitious bids, or that anything unfair should be done.
They admit that they did fix $14,500 as a minimum, but aver that
they gave no instructions to keep the same secret; that they
believe the fact was well known at the sale; that they have been
informed, and believe, that no bid was made by any agent of theirs
in consequence of the fixing of the said minimum price, bids far
exceeding that amount being immediately made by those desiring and
intending to purchase.
The conditions of sale, as to payment, are admitted to have been
as stated in the bill.
Page 49 U. S. 145
The answer admitted that Stephen H. Williams employed Head as
auctioneer, who was said to be duly licensed, skillful,
experienced, and believed to be honest. The defendants aver their
belief that said Williams did not authorize or suggest any
by-bidding or other unfairness by Head, but employed him as a
public officer, duly empowered by the laws of Maine. They further
aver that they have been informed and believe that said Williams
did not authorize Head to bid up to the minimum, or to make any bid
on their account.
The defendants aver that they were not present at the sale, but
deny that there was no real bid above $16,000 or $18,000, or any
such sum, or that the auctioneer run up Foster by sham bids, from
$16,000, or any such sum, to $40,000, or that there was no real bid
above $16,000, or any such sum.
Defendants admit that complainant informed them, after the sale,
that Foster was his agent, and allege that complainant exhibited
great anxiety to have the conveyance made, and they have been
informed, and believe, that there was great competition at the
sale, both on account of the intrinsic value and the local position
of the property, and that complainant authorized Foster to bid as
high as $40,000.
Defendants completed the sale, gave a deed, received payment of
all but the last note, and interest on that to January 1, 1840, but
complainant did not notify defendants that he considered the sale
invalid until January 14, 1841, and they then brought a suit, as
alleged.
That more than five years and six months have elapsed since said
sale, and defendants have lost the benefit of evidence as to
occurrences at said sale, and there has been a great depreciation
in such property, owing to an increase in the number of mills, the
scarcity of timber, and financial difficulties in that region, by
which mill sites have much depreciated in value; and defendants
believe that changes have been made in the property by building or
altering.
The defendants do not know when in particular the complainant
pretends to have discovered the alleged fraud, but whatever was
done at the sale might have been known, on inquiry, at any time,
and they pray for proof of diligence.
They believe that complainant, since the changes in value, would
gladly annul the bargain, and compel defendants to repay the price,
and pay for his expenditures, but they submit that this ought not
to be, after such a lapse of time and the changes in condition and
value, especially as they deny the fraud alleged, and any
concealment, on their part, of anything done at the sale.
Page 49 U. S. 146
That S. H. Williams agreed to pay Head for his services what was
customary, and did pay him $200, after the sale, which defendants
think was reasonable, and there was no agreement that Head was to
receive nothing if no sale was effected.
It has been before mentioned that when this cause came up for
argument before Mr. Justice Story as reported in 3 Story 54, he
suggested that a supplemental bill should be filed, for the purpose
of properly introducing the release to Head into the cause.
The supplemental bill alleged that Head paid no consideration
for the release, and made no satisfaction; that it was not intended
as a discharge of any claim against the defendants, and if such was
its effect, it was a fraud and a mistake; that it was given because
Head refused to disclose the facts, on the ground that complainant
might sue him, and complainant wished to obtain proof with a view
to institute proceedings in equity against defendants; that the
whole agreement with regard to it was between Head and
complainant's counsel, and it was signed by complainant without
inquiry, and without any negotiation between Head and complainant,
and no indemnity against Head's liability to defendants was asked
or intended. The supplemental bill then prayed that said release
may be reformed and restrained to the true intention of the
parties.
The answer to this supplemental bill stated that the existence
of the release was not discovered by defendants until after the
testimony had been taken in the original case; that defendants now
insist on it as a bar; do not know whether any consideration was
paid for it; and as to the intentions of the parties, or any
understanding as to its legal effect, no fraud was practiced to
procure it to their knowledge, or any language used that was not
intended by complainant, by whom it was signed by the advice of
counsel and under no mistake of fact, and it is not competent for
him to control or alter it by extrinsic evidence. They have no
knowledge of the intentions of the parties to it, or what
inducements or agreements led to it. They have been informed by
Head that Veazie's counsel promised him an indemnity, and this was
accordingly given. They deny that Head expected that, after said
release, he would be liable to any action by defendants, or any
construction given to the release which would prevent his being
held harmless against them.
To this answer there was a general replication.
On 3 August, 1844, a bill of revivor was filed against Louisa
Williams, the widow and executrix of Stephen
Page 49 U. S. 147
Williams, deceased, and at May term, 1845, the bill was revived
by consent of counsel, and the cause set down for hearing.
At the same term it came on to be heard upon the bill, answer,
pleadings, and evidence, when the judges of the court, being
divided in opinion on the merits of the cause, ordered and decreed
that the bill be dismissed, without costs to either party.
This decision is reported in 3 Story 612.
An appeal from it by the complainant below brought the case up
to this Court.
Page 49 U. S. 149
MR. JUSTICE WOODBURY delivered the opinion of the Court.
This was an appeal from a decree of the Circuit Court in the
Maine District dismissing a bill which was brought originally by
Veazie, the appellant.
As to the contents of the bill and the evidence in its support,
it may suffice to say here that the bill asked the rescission of a
sale at auction, made about 1 January, 1836, of certain mills,
owned by the respondents, and a return of the money paid, and the
notes still held by them for a part of the purchase money. It asked
this on the alleged ground of imposition in
Page 49 U. S. 150
the sale by means of puffing or by-bidding, so as to advance the
price about $20,000 above what it otherwise would have been. In
their answer, the respondents denied any such bidding by their
procurement, or that it avoided the sale if happening; and further
contended that they had been discharged from any liability which
might have existed by a release to the auctioneer, one of the
persons implicated in the by-bidding. The answer insisted, also,
that the auctioneer should have been made a party to the bill, and
that any claim to relief by the plaintiff is barred by the lapse of
time since the sale.
The leading point arising in this case involves so difficult
questions both of fact and law, that they have, in some degree,
divided this Court, as well as the court below, and great care and
discrimination will be necessary in order to reach conclusions that
can be satisfactory.
The relief here is not sought, as has been objected, on account
of inadequacy of price -- though that may at times be so gross as
to show fraud, and might here very well raise some presumption of
it.
Warner v. Daniels, 1 Woodb. & M. 111;
Coles v.
Trecothick, 9 Ves. 234; 2 Ves.Sr. 155. But it is sought for a
fraud practiced in augmenting the price, or in other words for
taking false steps to enhance it, and it is the consequence and
injury caused by these unfair means that the plaintiff would
avoid.
How far, then, in point of fact, was the price increased above
the real bids? and by what means? A minimum price of $14,500 is
clearly proved to have been fixed by the owners. The weight of the
testimony is that the real bids went only $3,500 to $5,500 higher.
There is no pretense that Wadleigh -- the rival or competitor of
the plaintiff -- bid or authorized others to bid for him above
eighteen or nineteen thousand dollars, though a statement of the
auctioneer to one person has been relied on to the contrary.
Wadleigh denies it -- nobody testifies to it -- and nobody is
produced who bid or employed others to bid higher, unless the
auctioneer himself did it. The true value, also, as fixed by the
owners at $14,500, tends to confirm the idea that no real, fair bid
would be likely to go above $20,000 -- or over $5,000 or $6,000
beyond the owner's own estimate.
It is, then, a leading feature in this case that should not be
overlooked, as it gives a stamp and character to the whole equity
as between these parties in favor of the plaintiff, that the
respondents fixed the minimum bid for the sale of their property at
$14,500, and authorized the auctioneer to dispose of it for that
amount, when in truth, by some means or other, and
Page 49 U. S. 151
without any real rival bids above $20,000, they obtained for it
$40,000. Whether this extraordinary result was effected by any
improper conduct on their part or that of any agent for whom they
may in law be responsible is the next prominent inquiry.
In the outset, the probability certainly is that property like
this could not be sold at auction for from $25,000 to $26,000 more
than the owner asked for it unless under some imposition or great
mistake. And the further presumption seems at first to be
reasonable that the respondents, whose property was thus sold, and
by an auctioneer employed by themselves, and who have benefited by
the large excess in the price given by taking the money and
securities, were either instrumental in causing the excess, or,
having availed themselves of it and all its advantages, should be
answerable
civiliter for any wrong and error connected
with it.
It is conceded, in point of fact, that some other bids than
Veazie's went nearly to $40,000, and as no person is shown to have
made them but the auctioneer, it follows that they must have been
real bids by him for himself, or fictitious ones by him, with a
view to increase the price to be obtained by the respondents and to
increase his own commissions on a sum so much larger than had been
anticipated when the sale began.
Looking to the supposition that the bids were real and for
himself, that idea is not supported, but rather disproved, by the
testimony. The auctioneer does not appear to be a man of wealth,
able to buy so valuable property for investment, nor was such a
purchase in the line of his business or profession, nor does he
seem to have had the means or disposition for speculation, and
especially on so large a scale, and he must have well known that
the true value of this property was not considered by the owners
above $14,500, nor its value to Wadleigh as enhanced by its
locality in his dispute with Veazie, as above $18,000.
The weight of the testimony, then, is decidedly against the
correctness of the supposition that the bids above $20,000, except
the plaintiff's, were by the auctioneer for himself and on his own
account.
Had it been otherwise, it would be very questionable whether, in
point of law or equity, an auctioneer can be allowed to bid off for
himself the very property he is selling. It has been laid down that
he cannot.
Hughes' Case, 6 Ves. 617;
Oliver v.
Court, 8 Price 126; 9 Ves. 234; 8
id. 337; Long on
Sales 228; Babington on Auctions 164. The principles against it are
stronger, if possible, and certainly were enforced earlier in
courts of equity than of law. An opposite course
Page 49 U. S. 152
would give to an auctioneer many undue advantages. It would tend
also to weaken his fidelity in the execution of his duties for the
owner. He would be allowed to act in double and inconsistent
capacities, as agent for the seller and as buyer also, and the
precedents are numerous holding such sales voidable, if not void,
and at all events unlawful as opposed to the soundest public
policy.
See Michoud v.
Girod, 4 How. 554; 15 Pick. (Mass), 30; 1 Mason
344; 2 Johns.Ch., 51;
Tufts v. Tufts, Mass.Dist. 1848, and
cases there cited; Long on Sales 228; 9 Paige 663; 1 Stor.Eq.Jur.,
§ 315; 3 Story 625. That an auctioneer is a general agent for the
owner usually, though questioned in the argument, cannot be
doubtful.
See Howard v. Braithwaite, 1 Ves. & B. 209;
Stor. on Agency §§ 27, 28; 4 Burr. 1921; 1 H.Bl. 85. He is so till
the sale is completed. Long on Sales 231;
Seton v. Slade,
7 Ves. 276; Babington on Auctions, 90; 20 Wend. 43. And though he
may be agent of the buyer after the sale for some purposes, such as
to take the case out of the statute of frauds, Williams v.
Millington, 1 H.Bl., 84; 3 T.R. 148; Cowp. 395; Long on Sales, 228,
60, 63;
Emerson v. Heelis, 2 Taunt. 38; 1 Esp. 101, yet
this does not affect the other principle that till the sale, and
before it, he acts for the vendor alone. Nor is an auctioneer a
public officer in Maine, and a license required to him. 2 Laws of
Maine 390, ch. 134. But whether a public officer or not is a
circumstance that does not generally appear to have changed the
liability of the principal for his acts, if taking the benefit of
them.
Treating his bids, then, as made by the auctioneer, not for
himself, and the proof having failed to show that they were for a
stranger, the only remaining hypothesis is that they were made by
him while agent of the owners, with a view to their benefit
particularly, though with hopes of some incidental gain to himself
in increased commissions. How does this view accord with the
evidence of the transaction taken as a whole? It is the only
plausible aspect of it existing. The auctioneer found Wadleigh
willing, on account of his quarrel with Veazie and his interests
near the property, to go about $5,000 higher than the owners'
estimate, and then found Veazie, for like reasons, willing to go
still higher rather than let Wadleigh purchase the premises, for
whom he supposed the auctioneer was bidding. In the eagerness of
competition and with ample capital, Veazie seems in this way to
have been induced to go even as high as $40,000, under the exciting
but delusive and false impression that he thus was obtaining the
property against the efforts of Wadleigh or others, real bidders
and real competitors. That
Page 49 U. S. 153
impression the auctioneer sought to create, and did create, by
deceptive means.
Residing on the spot and acquainted with the character of the
parties, he doubtless suspected that Veazie, rather than let the
property go to Wadleigh, might bid very high -- and perhaps, by
rumor, even to $40,000 -- and proceeded, after the real bids were
over at about $20,000, to make by-bids, either on his own judgment,
to benefit his employers and increase his own commissions, or on
the suggestions or signs of Stephen H. Williams, who was present as
agent of the respondents, and is proved to have sat behind and near
the auctioneer at the sale.
Veazie being thus situated so as to be more easily duped by
either of them, and his condition and fears and anxieties being
probably known to Head, if not to Stephen H. Williams, the
auctioneer, by the means before described, procured for his
employers nearly treble what they expected or what had been agreed
on as the minimum price. The next inquiry is if such a transaction
renders the sale in point of law void, either for fraud or mistake.
In some countries, under the civil law, a buyer of immovables is of
right entitled to a rescission of the sale if it turn out, though
without fraud, that the price was more than fifty percent above the
true value. Pothier on Contracts of Sale, part 5, ch. 2, § 2,
and see Domat, tit. 6, § 3. Here the price was at least a
hundred percent above -- yet there must in this country be fraud
also, or a mistake.
Though no evidence is seen of fraud practiced by the respondents
in person, nor by their express directions, yet a fraud was
evidently perpetrated by the auctioneer, as agent for the
respondents, or by him in connection with Stephen H. Williams, and
the respondents have taken and still retain the benefit of it. This
conclusion is indisputable, whatever obscurity or concealment may
have been flung over the case by the auctioneer.
Does this state of things, then, in point of law, require the
sale to be relieved against, on sound principles of equity and
public morals?
By-bidding or puffing by the owner, or caused by the owner, or
ratified by him, has often been held to be a fraud, and avoids the
sale. Cowp. 395; 6 B.Mon. 630; 11 Serg. & R. 86; 4 Har. &
M. 282; Babington on Auctions 45; 3 Bing. 368; 2 Carr. & P.
208; 6 T.R. 624;
Rex v. Marsh, 3 Younge & J. 331; 11
Moor 283. He may fix a minimum price, or give notice of by-bids,
and thus escape censure. Ross on Sales 311;
Howard v.
Castle, 6 T.R. 642.
Page 49 U. S. 154
But this shows that, without such notice, it is bad to resort to
them.
Crowder v. Austin, 3 Bing. 368; 3 Younge & J.
331. "The act itself is fraudulent," says Lord Tenterden.
Wheeler v. Collier, 1 Moo. & M. 126.
The by-bidding deceives, and involves a falsehood, and is
therefore bad. It violates, too, a leading condition of the
contract of sales at auction, which is that the article shall be
knocked off to the highest real bidder, without puffing. 2 Kent
Com. 538, 539. It does not answer to apologize and say that
by-bidding is common. For, observed Lord Mansfield, "Gaming,
stockjobbing, and swindling are frequent. But the law forbids them
all." Cowp. 397. In
Bexwell v. Christie, Cowp. 396, the
pole-star on this whole subject, it is said --
"The basis of all dealings ought to be good faith. So more
especially in these transactions, where the public are brought
together in a confidence that the articles set up for sale will be
disposed of to the highest real bidder."
Even in a court of law, Lord Kenyon has, with true regard to
what is honorable and just, said -- "All laws stand on the best and
broadest basis, which go to enforce moral and social duties."
Pasly v. Freeman, 3 T.R. 64.
See also Bruce v.
Ruler, 2 Man. & Ry. 3. And in
Howard v. Castle, 6
T.R. 642, he held that Lord Mansfield's doctrine that all sham
bidding at auctions is a fraud, was a doctrine founded "on the
noblest principles of morality and justice."
Nor does it lessen the injury or the fraud if the by-bidding be
by the auctioneer himself. He, being agent of the owner, is equally
with him forbidden by sound principle to conduct clandestinely and
falsely on this subject. Cowp. 397. All should be fair --
above-board.
Indeed, in point of principle, any fraud by auctioneers is more
dangerous than by owners themselves. The sales through the former
extend to many millions annually, and are distributed over the
whole country, and the acts accompanying them are more confided in
as honest and true than acts or statements made by owners
themselves in their own behalf, and to advance their own interests.
Great care is therefore proper to preserve them unsullied, and to
discourage and repress the smallest deviations in them from
rectitude.
Here the auctioneer virtually said to his hearers, when he made
a fictitious bid -- "I have been offered so much more for this
property." But he said it falsely, and said it with a view to
induce the hearers to offer still more. He averred it as a fact,
and not an opinion, and as a fact peculiarly within his knowledge.
Now if, under such an untrue and fraudulent assertion,
Page 49 U. S. 155
persons were persuaded to give more -- relying, as they had a
right to, on the truth of what was thus more within the personal
knowledge of the auctioneer, and was publicly and expressly alleged
by him, and being of course more willing to give higher for what
others had offered more, who probably were acquainted with such
property and had means to pay for it -- they were imposed on and
injured by the falsehood. It is said "A naked, willful lie, or the
assertion of a falsehood knowingly, is certainly evidence of
fraud." 1 Const. 8. The following authorities support the views
here laid down. 3 Younge & J. 331; Moo. & M. 123; 2 Carr.
& P. 208;
Bexwell v. Christie, Cowp. 395;
Howard
v. Castle, 6 T.R. 642; 1 Hall 146; 1 Dev. 35; 6 Cl. & F.
444, 329.
Some cases, and some reasoning found in them, attempt to
sanction a contrary doctrine, if the by-bids were made merely to
prevent a sacrifice of the property -- a "defensive precaution,"
but not otherwise.
Connolly v. Parsons, 3 Ves. 625, note;
Smith v. Clarke, 12
id. 477;
Steele v.
Ellmaker, 11 Serg. & R. 86;
Woodward v. Miller, 1
Collier, 279; 5 Madd. 34.
These exceptions still concede that the by-bidding, when an
artifice to mislead the judgment and inflame the zeal of others --
"to screw up and enhance the price," in the language of Sir William
Grant -- is fraudulent and makes the sale void. 12 Ves. 483; 2 Kent
Com. 537.
Some cases hold, too, that the by-bidding will not vitiate, if
real bids besides those of the vendee occurred after. 3 Ves. 620.
But neither of these excuses or apologies existed here. These
by-bids were made after some thousands of dollars had been offered
over the value of the mills, as estimated by the owners themselves,
and were palpably made
"to screw up" or enhance the price.
Any other excuses, which have ever availed, either are anomalies,
or rest on a false analogy. Thus, at one time in England duties on
auctions were remitted, if the property was bought in by the owner.
3 Ves. 17, 621; 1 Fonbl.Eq. 226. This, however, was founded on the
theory that no sale had taken place, and hence no duty should be
paid, rather than that a sale under such circumstances was valid.
It therefore strengthens rather than impairs the view taken of the
present case.
It is no answer to this reasoning to say, as has been done, that
Veazie bid voluntarily, or expressed satisfaction with his
purchase, and was in haste to close it up. Because, in all this, he
was laboring under a misapprehension that others
Page 49 U. S. 156
had honestly valued the property near the same price, and been
in truth as anxious as himself to bid it off -- and because he
believed that he had thus succeeded against a real rival in
securing the mills and some incidental advantages -- when in
reality there had been no such honest bids over $20,000, and he had
been contending against a man of straw falsely set up by the
auctioneer. In short, he had been imposed on by the agent of the
respondents; and that by virtual falsehood, and in a point
material, and in a manner likely to mislead. He was not allowed to
exercise his judgment, and bid higher or not on the truth -- on
facts -- but on falsehoods. 6 T.R. 644. He was not the highest
bidder at $40,000, except through deception wrought on him
fraudulently.
Id. Secrecy was practiced -- privacy as to
the real offers -- stratagem -- which, as already seen, is in the
teeth of the great principles of a valid public sale.
Bexwell
v. Christie, Cowp. 396; 2 Kent Com. 539.
A technical objection to the quantity rather than weight of the
evidence has been urged, which it may be well to dispose of here.
It is said that fraud is denied as to the defendants, and is not
proved against them by two witnesses. It is conceded that the
denials that the respondents were personally guilty of fraud, or
expressly directed falsehood and fraud, are not overcome, nor are
they in controversy. But it is the puffing or by-bidding of the
auctioneer, their agent, which is in controversy as a fact. As to
that they can make no denial from any personal knowledge
pro or
con -- not having been present, and hence
their answer furnishes no evidence in respect to it, as an
independent fact. But this fact being substantiated by the agent,
and the matter proved by others, as to no real bids being made over
$20,000, and by various other circumstances in the case, the amount
of evidence for it is ample. It is true, they deny that they
ordered it. It is to be remembered, however, that they are not held
liable here merely by declarations of their agent, when not ordered
by them or perhaps known to them at the time -- though it is a
sound doctrine that the verbal declarations of an agent at a sale
often bind the principal. 1 Ves. & B. 209; 6 Cl. & F. 448,
449; Story on Agency § 107. And that the agent is bound to disclose
all and to act as the principal is when present, and selling. 1
Metc. 560;
Hough v. Richardson, 3 Story 698; 3 Hill 260; 1
Woodb. & M. 353. And that a principal so acting in person
cannot be justified in asserting what is false, and by which
another is injured.
Pasly v. Freeman, 3 T.R. 51;
Vernon v. Keys,
12 East 632; 2
id. 92. And that what the
Page 49 U. S. 157
vendor may not do in person, or may not employ others to do in
his absence -- that is, make by-bids to enhance the price -- his
agent, the auctioneer, cannot rightfully do.
But they are held liable on ground beyond and apart from all
this, and as well settled in England as here, that if a principal
ratify a sale by his agent, and take the benefit of it, and it
afterwards turn out that fraud or mistake existed in the sale, the
latter may be annulled, and the parties placed
in statu
quo; or they may, where the case and the wrong are divisible,
be at times relieved to the extent of the injury.
The principal in such case is profiting by the acts of the
agent, and is hence answerable
civiliter for the acts of
the agent, however innocent himself of any intent to defraud. 13
Wend. 513; 1 Vt. 239; 1 Salk. 289; 7 Bing. 543;
Mason v.
Crosby, 1 Woodb. & M. 342, and cases there cited;
Doggett v. Emerson, 1
id. 1; Story on Agency §
451;
Doggett v. Emerson, 3 Story 700;
Olmsted v.
Hotaling, 1 Hill 317;
Taylor v. Green, 8 Carr. &
P. 316. Whether the principal knew all those acts or not, is not
the test in this case, as in 2 East 92 notes, and 13 East 634,
note, though it may be in some others, as in 5 Bing. 97; 6 Cl.
& F. 444.
But the test here is was the purchaser deceived, and has the
vendor adopted the sale, made by deception, and received the
benefits of it? For if so, he takes the sale with all its burdens.
Wilson v. Fuller, 3 Ad. & Ell. (N.S.), 68.
The sale thus made here, was adopted and carried into effect by
the respondents, and hence, on account of the fraud involved in it,
they should either restore the consideration, and take back the
mills, or indemnify the purchaser to the extent of his
suffering.
Some miscellaneous objections to these results are yet to be
considered. It is said to be justly deemed an extraordinary power
in a court of chancery to rescind contracts at all, instead of
leaving parties to a suit at law for their damages. Sugden on
Vendors 392;
36 U. S. 11
Pet. 248. And that a fraud or mistake must be very manifest to
justify it. 10 Price 117; 13
id. 349;
11 U. S. 7
Cranch 368; 2 Johns.Ch. 603; 12 Ves. 477. And that the burden of
proof to show these grounds for a rescission rests on the
plaintiff, and not on the defendant. Grant this. Yet all
requirements appear fulfilled here. On satisfactory proof, also,
executed, as well as executory, contracts may in such cases be set
aside. One case is reported of its being done after twenty years. 8
Price 125. And a defendant is likely, in most cases,
Page 49 U. S. 158
to suffer no more by a rescission in chancery, than by damages
adequate to the loss or injury.
There is next the objection, that too long a time had elapsed
here before seeking redress. More force would attach to this if
Veazie had discovered the imposition sooner. The sale happened
January 1, 1836; the discovery of the fraud was after January 1,
1840, and this bill was filed July 23, 1841, after demanding
redress of the respondents in January, 1841.
Having effected his object in the purchase -- to obtain the
property rather than let his rival get it, who, he doubtless
supposed, was bidding against him -- and being a man of ample
means, Veazie submitted, as feeling bound, to the excess of price.
Nor did he suspect any imposition till informed of it within a few
years, and then he seasonably applied for relief, and should not be
barred from obtaining it by any lapse of time while the fraud or
mistake as to the bids not being real remained undiscovered.
Doggett v. Emerson, 3 Story 740;
Daniels v.
Warner, 1 Woodb. & M. 90;
Doggett v. Emerson,
id., 1; 8 Cl. & F. 651; 1 Russ. & M. 236.
It is said that after this lapse of time, the plaintiff is not
in a proper condition to restore the mills. 16 Me. 42. He is less
likely to be, if they are ordered to be restored, but that is the
fault of the fraud, and the concealment of it, rather than his
fault. The defendant, too, if the property has deteriorated in
value, is in no worse a condition than he would be where an
avoidance of the sale takes place at law for fraud.
If the plaintiff has sold the property or disabled himself from
restoring it when ordered by a decree, then the evil consequences
will light on himself, and not the defendants. That is what is
meant by inability to restore the property in
12 U. S. 8
Cranch 476. Nor is there any need he should aver substantively in
his bill that he can restore it, this being presumed as a usual if
not necessary, consequence, when he applies to have the contract
rescinded, and everything placed
in statu quo.
The last exception to a recovery here by the plaintiff is that
the release to Head, the auctioneer, should be considered as
discharging the respondents also. Neither the design of the parties
to the release, nor the agreement or consideration to make it,
extended beyond the auctioneer. It was suicidal for the plaintiff
to pay for a release to get a witness in a case, which release
would destroy the case itself. 2 Ired. 219. Sitting as we do in a
court of equity, we cannot, without an open and gross departure
from equity, give to the release any effect beyond the design in
making it, and the literal words of it, reaching
Page 49 U. S. 159
only to the discharge of the release. It is a strict rule at
law, and not of equity, which goes further in any case. 7 Johns.Ch.
207; 18 Wend, 399; 22 Pick. 308. The operation was meant to be like
a covenant not to sue him, and such a covenant is no bar to suing
others when jointly liable.
Ferson v. Sanger, 1 Woodb.
& M. 138.
Again, in the present instance, there was no joint liability at
law by the respondents and the auctioneer. Their accountability was
separate, and resting on different grounds; his on actual falsehood
-- theirs on the adoption of the benefits of it, and the
accountability thus arising for it. The release of one, therefore,
is not like the release of a joint contractor or joint trespasser.
1 Anstr. 38. And in equity it may well be limited to the person
released, and the person paying the consideration for it. Hopk.
251, 334.
Beside this, Head was in law a competent witness for Veazie,
without any release, his interest being against Veazie. This
conclusion as to the release is an answer, likewise, to the
objection, that Head ought to have been made a party to this bill.
His liability resting on a separate ground, and not joint, he could
not be united at law, nor is it always done in equity under like
circumstances.
See Mason v. Crosby, 1 Woodb. & M. 342;
Ferson v. Sanger, id., 138;
Jewett v. Conrad, 3
id. ___;
Small v. Atwood, 6 Cl. & F. 352,
466.
All that remains is to decide upon the most equitable course to
carry these views into effect, consistent with sound principles.
One mode is to set aside unconditionally the whole sale, for the
fraud practiced in it, and have the mills reconveyed by Veazie, and
the money, notes, and mortgage returned by the respondents. Another
mode is to treat as unjust only so much of the proceedings as was
fraudulent; that is, the excess of price over $20,000 obtained by
by-bidding, and to cause that excess only to be refunded.
To attain this last result in some way is preferable,
considering the length of time which has elapsed here, and the
probable deterioration in value of the mills by use and the fall of
prices in the market since the inflation of 1836, and, though
objected to by the respondents, is likely more than the other to
secure them against loss.
To restore the excess of consideration, or to restore all and
have back the mills, has in other respects much the same effect.
The plaintiff in either way will obtain nothing which did not
belong to him, nor the respondents lose anything which was theirs
before the falsehood or mistake. It is, at the same time,
Page 49 U. S. 160
gratifying to find, that, by either of these courses, on
incidental loss or inconvenience will fall on the respondents,
except what has been occasioned by the misbehavior of their own
agent, and the fruits of which they accepted, and which they cannot
in
foro conscientiae retain against those injured by that
misbehavior.
But there is one equitable operation before named, in relieving
only as to what is fraudulent, which makes it most desirable, if
legal. It is objected, first, that it will be giving damages, like
a court of law, to the extent of the wrong, rather than rescinding
the whole contract on account of fraud or an evident mistake.
We are inclined to think, unless under peculiar circumstances,
that damages cannot be given in a court of equity, but the parties
must be left to a court of law to recover them. 17 Ves. 203; 1
Russ. & M. 88; 2 Keen 12; 1 Cow. 711; 5 Johns. 193. The
exceptions of damages in part, under certain circumstances may be
seen in the following cases, and the authorities there quoted. 2
Story Eq.Jur. §§ 711, 779, 788, 794; 4 Johns.Ch., 460; 14 Ves. 96;
9 Cranch 456.
But the course we propose, to have the sale stand so far as not
fraudulent, and to make the defendants restore only what was
obtained by the puffing and fraud, is not giving damages either
eo nomine or in substance. It requires to be surrendered
merely the money and interest on it, and the notes and mortgage
unpaid, which were obtained by the deception of by-bidding. This,
among other things, is prayed for in the bill. This course will
only carry out the established rule on this subject, laid down in
elementary treatises -- that
"the injured party is placed in the same situation, and the
other party is compelled to do the same acts, as if all had been
transacted with the utmost good faith."
1 Story Eq.Jur., § 420; 1 Madd.Ch.Pr. 209, 210; Fonbl.Eq., book
1, ch. 3 and 4, notes.
Everything is thus relieved against, to the extent to which it
is wrong or fraudulent, but nothing beyond it.
Jopling v.
Dooly, 1 Yerg. 289.
It is suggested, however, secondly, that this course does not
set aside the whole sale, or whole contract, which ought to be
done, if intermeddled with at all. It is true that, generally, a
part of a deed, or contract, or sale, cannot be avoided without
avoiding the whole. 2 Ves. 408; 1 Madd.Ch., 262. Though at times
there may be a division or break in them where fraud begins and
good faith ends, and where beyond that line only it would seem just
to annul them. 1 Yerg. 289.
Page 49 U. S. 161
But if the whole must be annulled or none, it can be here, and
yet equitable terms imposed on the plaintiff to let such part of
the transaction remain undisturbed as is consistent with equity and
good faith. This is justified, not only by the general principle
that he must do equity who asks it,
29 U. S. 4 Pet.
328, but that it is one of the leading principles on this
particular subject in a court of chancery, "if it should rescind
the contract, to allow it only upon terms of due compensation, and
the allowance of countervailing equities." 2 Story Eq.Jur. § 694;
Harding v.
Handy, 11 Wheat. 126;
Bromly v. Holland, 5
Ves. 618.
So it is said that,
"when the judgment debtor comes into court asking protection on
the ground that he has satisfied the judgment, the door is fully
open for the court to modify or grant his prayer upon such
condition as justice demands."
Mechanics' Bank of
Alexandria v. Lynn, 1 Pet. 384.
This Court, on its equity side, says Chief Justice Marshall, is
"capable of imposing its own terms on the party to whom it grants
relief."
Mar. Ins. Co. v.
Hodgson, 7 Cranch 336, 337. And it will not grant
relief even in fraud unless the party "wishing it will do complete
justice."
Payne v. Dudly, 1 Wash. 196;
semb., 1
Johns.Ch. 478;
Scott v. Nesbit, 2 Cox 183. Here, then, in
the decree we can set aside the whole sale and contract; but
instead of doing it unconditionally, the plaintiff should be
required first to do equity, and to allow any countervailing
equities on the part of the respondents -- which are to let the
sale itself stand at what was fairly bid for the property and
require only the residue of the consideration, being entirely
fraudulent, to be restored. 1 Story Eq.Jur., §§ 344, 599, and cases
there cited;
McDonald v. Neilson, 2 Cow. 139, 192.
Thus, a borrower of money on usury will not be allowed relief in
chancery, except on the payment of principal and legal interest.
Scott v. Nesbit, 2 Cox 183; 2 Bro.Ch.Cas. 649; 2 Story
Eq.Jur. § 696;
Stanly v.
Gadsby, 10 Pet. 521;
Jordan v. Trumbo, 6
Gill. & J. 106; 3 Ves. & B. 14;
Fanning v. Dunham,
5 Johns.Ch. 143. Like terms are imposed on borrowers under void
annuity bonds,
see same cases. So, by analogy, the cases
of specific performance frequently exhibit the enforcement of a
part only, when just.
Pratt v. Law,
9 Cranch 456;
Hargrave v. Dyer, 10 Ves. 506;
Harnett
v. Yielding, 2 Sch. & L. 553; 1 Madd.Ch. 431. So, in
respect to injunctions, one may issue against a judgment for land,
and stay execution for a part and allow it to stand for the
residue.
Dunlap v. Stetson, 4 Mason
Page 49 U. S. 162
364.
See other illustrations and cases, Com.Dig.,
chancery Appendix, 6 and 18;
Fildes v. Hooker, 2 Meriv.
427; 14 Ves. 91;
Wharton v. May, 5 Ves. 27.
The form of a decree nearly adapted to this case may be seen in
Fanning v. Dunham, 5 Johns.Ch. 146.
The last real bid here being in some doubt as to its amount,
whether eighteen or twenty thousand dollars, we think the weight of
evidence is in favor of the last sum, and the computations are
therefore to be made on that basis. The judgment below must
therefore be
Reversed and a mandate sent down directing the proper decree
in conformity to these views to be entered for the
plaintiff.
MR. CHIEF JUSTICE TANEY, MR. JUSTICE McLEAN, and MR. JUSTICE
GRIER dissented from this opinion.
Order
This cause came on to be heard on the transcript of the record
from the Circuit Court of the United States for the District of
Maine, and was argued by counsel. On consideration whereof, it is
the opinion of this Court that the pretended sale of the two-mill
privileges, at and for the sum of $40,000, as set forth and
described in the pleadings and proofs in this cause, was
fraudulent, and should be set aside, but as equitable terms imposed
on the complainant, he is to let the sale stand for the sum of
$20,000, fairly bid by him; and that the balance of the moneys paid
by the complainant over and above the said $20,000 should be
refunded to him by the defendants, with legal interest thereon, and
that the notes and securities given for the payment of any part of
such excess should be cancelled and given up by the defendants to
the complainant; that the defendants should pay the costs in this
Court, upon this appeal, and all the costs which have accrued in
this cause in the said circuit court, or which may accrue therein,
in carrying out the decree of this Court.
Whereupon it is now here ordered, adjudged, and decreed by this
Court, that the decree of the said circuit court dismissing the
complainant's bill be, and the same is hereby, reversed and
annulled. And this Court, proceeding to render such decree as the
said circuit court ought to have rendered herein, doth now here
order, adjudge, and decree, that the aforesaid sale, as above set
forth be and the same is hereby rescinded and set aside; that the
said complainant shall, as equitable terms, retain the said
property at and for the said sum of $20,000, part of the moneys
paid by him to the said defendants, and that
Page 49 U. S. 163
the said defendants shall, on or before the third day of that
term of the said circuit court next ensuing the filing the mandate
of this Court in said circuit court, refund and pay to the
complainant all such sums of money over and above the said
last-mentioned sum of $20,000, as they or either of them shall have
received from the said complainant on account of the purchase of
said property, together with legal interest thereon from the time
or times at which they were so received by the said defendants, and
that the said defendants shall, on or before the same day of the
same term of the said circuit court, cancel and deliver up the
notes and securities given for the payment of any and every portion
of the excess over and above the said $20,000. And this Court doth
further order, adjudge, and decree, that the said defendants do pay
the costs in this Court upon this appeal, and all the costs which
have accrued in this cause in the said circuit court, or which may
accrue therein, in carrying out the decree of this Court. And this
Court doth further order, adjudge, and decree that this cause be
and the same is hereby remanded to the said circuit court with
instructions to carry this decree into effect and with power to
make all such orders and decrees as may be necessary for that
purpose.
