A bill was filed in the Circuit Court of the Southern District
of New York praying that a contract for the purchase and sale of a
portion of a tract of land in Goochland County, in the State of
Virginia, on which there was a gold mine should be rescinded. The
purchaser alleged fraudulent misrepresentations as to the gold mine
and other arts of the seller by which he was induced to make the
purchase. The court affirmed the decree of the Circuit Court of the
Southern District of New York by which the contract was ordered to
be rescinded.
It is an ancient and well established principle, that whenever
suppressio veri or
suggestio falsi occurs, and
more especially both together, they afford sufficient ground to set
aside any release or conveyance.
The party selling property must be presumed to know whether the
representation which he makes of it is true or false. If he knows
it to be false, that is fraud of the most positive kind; but if he
does not know it, then it can only be from gross negligence, and in
contemplation of a court of equity, representations founded on a
mistake resulting from such negligence is fraud. The purchaser
confides in them upon the assumption that the owner knows his own
property and truly represents it. And it is immaterial to the
purchaser
whether the misrepresentation proceeded from mistake or fraud.
The injury to him is the same whatever may have been the motives of
the seller. The misrepresentations of the seller of property to
authorize the rescinding a contract of sale by a court of equity
must be of something material, constituting an inducement or motive
to purchase and by which he has been misled to his injury. It must
be in something in which the one party places a known trust and
confidence in the other.
Whenever a sale is made of property not present, but at a remote
distance, which the seller knows the purchaser has not seen but
which he buys upon the representation of the seller, relying on its
truth, then the representation in effect amounts to a warranty; at
least the seller is bound to make good the representation.
The case is fully stated in the opinion of the Court.
In the Circuit Court for the Southern District of New York, a
bill was filed by Guy Richards for the purpose of rescinding a
contract made by the appellee with William R. Smith for the
purchase of a part of the Goochland gold mine in the State of
Virginia, the contract being alleged to be fraudulent. It was
agreed by the counsel for the parties that a decree should be
entered in the circuit court,
pro forma, against the
complainant, and accordingly, on 22 April, 1837, a decree was
entered rescinding and annulling the contract in relation to the
purchase of the Goochland mine, ordering that it be given up to
said Guy Richards, that the appellant Smith repay all moneys
advanced by said Guy Richards upon said contract and upon the
promissory notes made by complainant and delivered to the
defendant, so far as said notes had been paid by complainant,
&c. From this decree an appeal has been prayed and allowed to
this Court.
Page 38 U. S. 30
MR. JUSTICE BARBOUR delivered the opinion of the Court.
This was a suit in equity brought by the appellee against the
appellant, to set aside a contract for fraud.
It appears that in December 1832, a tract of land embracing a
gold mine, called the Goochland mine, lying in the County of
Goochland, Virginia, was purchased by the appellant, one-third for
himself and two-thirds for Nathaniel Richards, of the City of New
York, at the price of about $14,000. In May, 1833, the appellant
sold one-half of his third to Nathaniel Richards for $15,000. In
June, 1833, he sold five-sixths of the other half to the appellee
and others at the rate of $45,000 for the whole of that half.
The interest which the appellee acquired in this property was
one-eighth part of one-sixth, at the price of $5,625, as evidence
of which he received from Nathaniel Richards, who acted as the
appellant's agent in making the sale, a writing dated July 4, 1833,
acknowledging the receipt of the purchase money in cash and several
notes of hand. This paper described the property thus sold and
bought as one-eighth part of one-sixth of four hundred and
fifty-six acres of land, and of one hundred acres purchased of
David Moss, the deeds bearing date 17 May, 1833, both parcels lying
in the County of Goochland and State of Virginia and called the
Goochland mine.
It declares that the receipts (that is of the cash and notes)
entitle Guy Richards (the appellee) to the one-eighth portion of
one-sixth
Page 38 U. S. 31
part of said property, and it assumed that form, as the paper
shows, because the title to all was in Nathaniel Richards, although
one-sixth part belonged to the appellant.
In the same paper is contained the following provision:
"It is hereby expressly understood and agreed to by the said Guy
Richards that he is to contribute his full proportion of any
expenses already incurred or which may be incurred hereafter on the
said premises in searching for or developing any mine or mines, in
the erection of buildings, the purchase of machinery, and any other
expenses for the above general object which I may deem necessary.
Signed by Nathaniel Richards."
This is the contract which the bill seeks to set aside; it
alleges that the appellee was induced to make it by various
representations and declarations of the appellant, especially those
contained in certain letters, particularly referred to in the bill,
written by the appellant to Nathaniel and Charles H. Richards,
which the bill charges to have been false, fraudulent, and
deceptive, and made for the purpose of deluding and deceiving the
appellee and other persons and inducing them to purchase at an
exorbitant and unconscionable price, and by specimens of washings
of said gold mine, which were exhibited to the appellee as fair
specimens and samples of the Goochland mine, which the bill charges
were not fair samples, and that the appellant knew that they were
not fair samples and that he caused them to be exhibited to the
appellees as fair specimens and samples of said mine for the
express purpose of defrauding him by inducing him to purchase a
part of his interest in said mine upon the faith of said specimens
as well as the false, fraudulent, and deceptive representations.
The bill further charges that one of the letters of the appellant
to Nathaniel Richards, dated January 21, 1833, containing a
description of the Goochland mine, was read to him and the specimen
exhibited to him at the express request of the appellant by
Nathaniel Richards in the month of June, 1833, a short time before
his purchase.
It further charges that the appellant had represented to the
appellee that he was well skilled in the business of mining, having
been employed in that business in South America; that he understood
the directions of veins in a mine and the cost and expense of
extracting gold from the foreign materials by which it is
surrounded and in which gold is most usually found. That the
Virginia Mining Company, relying upon the fitness of the appellant
for the business aforesaid and his skill in the principles and
process of mining, employed him as their agent, and that during the
whole time of the negotiations and representations concerning the
Goochland mine, he was the agent of the Virginia Mining Company.
That the appellee never was at the Goochland gold mine, nor did he
ever visit the tract of land in which it was represented by the
appellant to be situated, but that in the months of June and July,
1833, believing the appellant to be a man of strict honor, honesty,
truth, and veracity, he reposed the most implicit faith in his
declarations
Page 38 U. S. 32
with regard to said gold mine, and relied exclusively upon his
representations, especially his letter of 21 January, 1833, to
Nathaniel Richards, and his several letters to Charles H. Richards
as containing accurate, fair, and correct descriptions of the
Goochland mine.
The bill then proceeds to charge certain specific
misrepresentations in the following particulars, to-wit:
1st. That there are not and never have been any veins of gold
whatever in the Goochland mine, and that that fact was well known
to Smith at the time when he wrote the letters and made the
representations before stated, and that neither one hundred nor any
other number of feet on a vein in said mine was or were at the date
of the letter from the appellant to Nathaniel Richards or at any
other time opened or developed.
2dly. That so far from there being rich veins of gold in the
mine, as the appellant in the last mentioned letter (that is, as we
understand it, of 21 January, 1833, to Nathaniel Richards) asserted
that there were cuts, and searches which had recently, and since
his purchase been made, at the said mine in various directions, and
no veins of gold whatever could be discovered, and that the
purchasers thereof, including the appellee, had been compelled,
after many searches, sinking shafts, making cuts and experiments,
and expending a great deal of money in the enterprise, to abandon
the search after gold in said mine, to dismiss their workmen and
give up the project of mining altogether.
3dly. That there are and were at the time of the appellant's
representations in relation to said mine fine particles of gold to
be found on the premises, included within the bounds of the
Goochland mine. But that such particles are and were so minute, so
few, and so mixed up with sand and other foreign substances that
the cost of extracting the gold from such materials would far
exceed the value of the gold when extracted, and that the four
hundred and fifty-six acres and the one hundred acres of land
specified in the receipt of Nathaniel Richards, before stated, are
utterly worthless as a gold mine, and the appellee's interest
therein is of no value whatever.
4thly. That the specimens of washings of said gold mine
exhibited to the appellee and others by the order and direction of
the appellant as fair specimens and examples of said gold mine are
not, and were not at the time when they were forwarded by the
appellant to Nathaniel Richards, fair samples or specimens of said
mine, and the appellee expresses his belief that they were not
taken from the Goochland mine.
5thly. That the Goochland premises do not contain veins of gold
nor any considerable deposits of gold, nor are they rich in gold or
of any value whatever for any purpose of mining, either for gold or
any other metal.
The answer of the defendant, in various parts of it, utterly and
unqualifiedly denies any intention or purpose to deceive or
delude
Page 38 U. S. 33
the appellee, or that he had ever done or permitted to be done
anything to produce that effect. It denies that he ever made any
inflated representations or false descriptions of the mine to
induce any person to give an inordinate price for his interest
therein. It insists that in the letter of 21 January, 1833, to
Nathaniel Richards, his object was to give a true and accurate
account of the Goochland mine so far as the facts could be
ascertained by his own observation and from the information of
others on whom he could rely, and that in those addressed to
Charles H. Richards, no fact was stated as being known to him which
was untrue so far as facts are given in reference to the Goochland
mine, and that as well in the before mentioned letter to Nathaniel
as in those to Charles H. Richards, as far as opinions were
expressed, they were honestly entertained, without any intention,
motive, or purpose to deceive the appellee or any person whatever.
It insists that the specimens of gold ore sent by him to Nathaniel
Richards were fair samples of the mine, and denies that these
specimens were directed by him to be exhibited to the appellee or
any other person with a design of deceiving or defrauding any
person to whom they might be shown.
It insists in general that in all the statements he ever made at
any time to any person concerning the Goochland mine, whether in
writing or verbally, so far as facts were given within his
knowledge, they were strictly true; so far as the information
derived from others was given, he believed it to be true; and so
far as his opinion has been expressed on the subject of the
Goochland mine, such opinion was honestly entertained, without any
interest, motive, or view directly, or indirectly to deceive the
appellee or any other person. It insists that there are and were
veins of gold in the Goochland mine, and that from personal
examination before any representation was made, he knows that the
Goochland mine contains veins of gold of extraordinary richness and
of great intrinsic value. It insists that at the time he wrote the
letter to Nathaniel Richards, there were an hundred feet or
upwards, according to his best judgment, developed on the vein in
said mine.
The answer admits that the appellant may have been informed by
Nathaniel Richards that he had shown or read the letter of 21
January, 1833, to the appellee and others, but at what time he is
unable to state; that he was informed by Charles H. Richards that
said letter had been read to him and others, including the
appellee, before the purchase made by him and them of his interest
in the Goochland gold mine; that he had been informed and believes
it to be true that about the month of June, 1833, Nathaniel
Richards did exhibit to the appellee and others the specimens or
washings of gold ore, forwarded by the appellant, as specimens of
the Goochland mine and its productions of gold; that in June, 1833,
the appellant wrote several letters to Charles H. Richards; that in
describing the Goochland mine in those letters, he used language of
a very decided character, as being the very richest mine in
Virginia
Page 38 U. S. 34
or in the United States; that the appellant esteemed himself
well skilled in the business of mining, and that the appellee
relied on such skill in making the purchase; that during the whole
time of the negotiation and representations concerning the
Goochland mine, he was employed as the agent of the Virginia Mining
Company; that the appellee did not visit the mine, or the tract of
land on which it was before he bought an interest therein; that the
negotiation for the purchase of the mine was carried on principally
through Nathaniel and Charles H. Richards; that he believes the
appellee, when he purchased an interest in the gold mine, fully
believed the declarations and representations and letters of the
appellant to be true so far as he may have been informed thereof;
and that he purchased an interest therein in the full reliance that
whatever this defendant had said, declared, or written on the
subject of the Goochland mine was strictly true, but does not admit
that the appellee purchased solely on the faith of his
representations, declarations, and letters.
Having thus stated the material allegations in the bill and as
well the denials as the admissions in the answer, we are enabled to
see what the questions are which we are called upon to decide. But
before we state them, we will present in a condensed form those
parts of the representation the alleged falsehood of which
constitutes the gravamen of the appellee's bill. In the letter from
the appellant to Nathaniel Richards, under date of January 21,
1833, in which he professes to give an account and his views of the
Goochland mine, amongst other things, he states that there has been
upwards of one hundred feet on the vein developed, which proves to
be very rich indeed, much richer than anything yet discovered in
the United States, and the quantity of the gold surpasses any
heretofore discovered in any country; that the surface is rich in
gold. In regard to the formations in which the ore is found, he
says
"It is quite wide, a distance in one place of twelve feet has
been cut, and the veins are disseminated throughout the whole
formation, in threads of from two to six inches wide, and in many
have several concentrated together; at another point it has been
found to be several feet wider; and that there is ore from this
mine that will, without doubt, give several hundred pennyweights of
gold to the hundred pounds."
This letter was written after the appellant had, as he himself
says, made a careful personal examination of the vein as far as it
had been developed, which he says was for a distance of one hundred
feet lengthwise.
On 11 June, 1833, the appellant wrote to Nathaniel Richards,
requesting him to show all the specimens, washings, plat, and
description of the mine, to Guy (the appellee) and others. This
letter and these specimens, washings, &c., were shown to the
appellee in compliance with this request. The representations in
relation to the mine, then, consist in part of the statements
above, extracted from the letter of 21 January, 1833, which was
shown or read to the appellee, and in part of the specimens,
washings &c.,
Page 38 U. S. 35
exhibited to him at the appellant's request whilst a negotiation
was going on between the appellant and Charles H. Richards for the
purchase of the appellant's interest in the mine for himself and
others, of whom the appellee was one, and but a very short time
before the purchase was made.
The first question in order is were these representations true
or untrue?
We have examined the evidence in the record on both sides with
much care. And we think it unnecessary to go into a detailed
examination and comparison of that evidence here, inasmuch as it
would extend this opinion to a useless length. We therefore will
only state the conclusions of fact at which we have arrived. They
are these:
We think it not true that there was one hundred feet developed
on the vein which proved to be very rich indeed. We do not mean to
say that a continuous exposure of the vein for one hundred feet was
implied by the use of the term developed; on the contrary, we are
of opinion from the evidence that the sinking shafts or making cuts
at intervals for that distance would satisfy the meaning of this
expression, and that we think was done. But we mean to say that
although there was a small quantity of ore found in part of this
vein, which was rich, yet in any one of the pits it was relatively
a small proportion; that in some there was but little, and in one
we think the weight of evidence is that there was none at all.
We think it not true that the surface was rich in gold.
We think it not true that the formation was at any point twelve
feet wide, or that the veins were disseminated throughout the whole
formation in threads of from two to six inches wide and in many had
several concentrated together.
We think it not true that there was ore from that mine that
would give several hundred pennyweights of gold to the hundred
pounds. We will not say that there might not be a small piece
selected which would yield at that rate, but we think that this
representation was calculated to produce the impression and justify
the belief that an hundred pounds of ore might be gotten together
which would produce several hundred pennyweights of gold. Any other
interpretation of this language would, in our opinion, impute to
the appellant the grossest deception.
We think that the specimens and washings which were forwarded to
Nathaniel Richards were not fair samples of the mine.
The only proper purposes for which they could have been
exhibited was to enable purchasers to form an estimate of the
richness of the mine; the appellant, therefore, in our opinion,
ought to have caused to be exhibited either specimens of the
richest and poorest quality, so as to show the extremes, or some of
an average quality, knowing that the persons to whom he requested
them to be exhibited, and amongst them the appellee, had never seen
the mine. Any other course, under the circumstances, could not fail
to produce a false estimate of its value.
Page 38 U. S. 36
Having come to these conclusions in relation to the facts of
this case, the next inquiry in order is what is the law of the
case?
It is an ancient and well established principle that whenever
suppressio veri or
suggestio falsi occur, and
more especially both together, they afford a sufficient ground to
set aside any release or conveyance.
This ancient principle, thus expressed with so much sententious
brevity, is laid down in terms somewhat more comprehensive, and
having a direct bearing on the present case, by a modern text
writer on equity.
In 1 Maddock's Chancery 208, it is thus stated.
"If, indeed, a man, upon a treaty for any contract, make a false
representation, whether knowingly or not, by means of which he puts
the party bargaining under a mistake upon the terms of bargain, it
is a fraud, and relievable in equity."
The doctrine thus laid down is almost in the very words used by
the chancellor in the case of
Neville v. Wilkinson, 1
Brown's Chan.Cases 546, with the exception of the words "whether
knowingly or not," and the part of the proposition embraced by
these words is founded upon the case of
Ainslie v.
Medlicot, 9 Vesey 21, which fully sustains Mr. Maddock. In
this latter case, the following strong language is used.
"No doubt, by a representation a party may bind himself just as
much as by an express covenant. If, knowingly, he represents what
is not true, no doubt he is bound. If, without knowing that it is
not true, he takes upon himself to make a representation to
another, upon the faith of which that other acts, no doubt he is
bound though his mistake was perfectly innocent."
But the doctrine is laid down with more comprehensiveness and
precision by a still more modern writer on equity, who gives us, in
the form of distinct propositions, what he considers the result of
the various cases on the subject, and marks with particularity the
modifications which belong to it.
In 1 Story's Equity 201, 202, it is thus stated.
"Where the party intentionally or by design misrepresents a
material fact or produces a false impression in order to mislead
another or to entrap or cheat him or to obtain an undue advantage
of him, in every such case there is a positive fraud in the truest
sense of the terms; there is an evil act with an evil intent;
dolum malum, ad circumveniendum. And the misrepresentation
may be as well by deeds or acts as by words; by artifices to
mislead as by positive assertions."
Whether the party thus misrepresenting a fact knew it to be
false or made the assertion without knowing whether it were true or
false is wholly immaterial, for the affirmation of what one does
not know or believe to be true is equally, in morals and law, as
unjustifiable as the affirmation of what is known to be positively
false. And even if the party innocently misrepresents a fact by
mistake, it is equally conclusive, for it operates as a surprise
and imposition on the other party. Or, as Lord Thurlow expresses it
in
Neville v.
Page 38 U. S. 37
Wilkinson, "it misleads the parties contracting, on the
subject of the contract."
The author of the treatise last cited thus states the
modifications of the doctrine:
"The misrepresentation must be of something material,
constituting an inducement, or motive to the act, or omission of
the other, and by which he is actually misled to his injury."
In the next place, the misrepresentation must not only be in
something material, but it must be in something in regard to which
the one party places a known trust and confidence in the other. It
must not be a mere matter of opinion, equally open to both parties
for examination and inquiry and where neither party is presumed to
trust to the other, but to rely on his own judgment.
The doctrine of these text writers is illustrated by the cases
in the books, some of which present very strong applications of it,
for it is held to extend not only to the parties to the contract,
but also to others who, from gross negligence, are guilty of
misrepresentation. Thus, for example, in the case of
Pearson v.
Morgan, 2 Brown's Ch.Cases 385, where A, being interested in
an estate in fee which was charged with �8,000 in favor of B, was
applied to by C, who was about to lend money to B, to know whether
the �8,000 was still a subsisting charge on the estate. A stated
that it was, and C lent his money to B accordingly. It appeared
afterwards that the charge had been satisfied, yet it was held that
the money lent was a charge on the lands in the hands of A's heirs
because he either knew or ought to have known the fact of
satisfaction, and his representation was a fraud on C.
Of a similar character was the case of
Hobbs v. Norton,
1 Ver. 136, where one entered into an agreement for the purchase of
an annuity charged on the lands of a third person, and was
encouraged in the course of the transaction by the latter, who
suggested his own title, and it afterwards appeared that such title
was of a nature to have enabled the owner to avoid the annuity; yet
he was, as to the purchaser, held under an obligation to confirm
it.
Cases of this class present the principle in its strongest
aspect, because in these cases the parties making the
representation were bound by it to prevent a loss to others
although they themselves derived no advantage from it, whereas in
those instances in which the parties to the contract made the
representation, they would receive benefit to the amount of the
loss which the misrepresentation would produce to the other party,
who acted on the faith of it if the court did not relieve against
it.
This principle has been adopted in the courts of our own
country. In
Fulton's Executors v. Roosevelt, 5 John.Ch.
174, the case was this:
Fulton was induced by the representations of Roosevelt that he
had discovered a valuable coal mine on the bank of the Ohio River
to contract for the purchase of a tract of land, stated by
Roosevelt to embrace the mine, and besides giving to Roosevelt
$4,400. Fulton covenanted to pay him $1,000 annually for twenty
Page 38 U. S. 38
years, but the annuity was to cease if, after the mine was
faithfully worked by Fulton, it should not produce at least
$12,000, &c. And the land was accordingly conveyed to Fulton.
It appeared that there was no coal mine within the boundaries of
the land conveyed, although there was coal adjoining it in the bed
of the river, which was navigable, deep, and rapid; but the working
of the mine, if practicable, would be very hazardous, expensive,
and unprofitable. The contract on the part of Fulton was held to be
founded in mistake and misrepresentation, and Roosevelt was
perpetually enjoined from bringing any suit against Fulton to
recover the annuity agreed to be paid him.
In that case the chancellor says
"Whether the defendant made the statements in his letter to
Fulton through mistake or under the delusions of his own
imagination or by design I am not able to say. It is sufficient for
the decision of this case that the representations are not
supported, but are contradicted by proof, and that the claim of the
annuity upon such a state of the case is unconscientious and
unjust. And this decree was affirmed in the court of errors, 2
Cowen 129."
In the case of
McFerran v. Taylor & Massie, in this
Court in
7 U. S. 3 Cranch
281, the Court, after remarking that there was a material
misrepresentation and that the defendant had contended that it
originated in mistake, not in fraud, said
"From the situation of the parties and of the country and from
the form of the entry it was reasonable to presume that this
apology is true in point of fact, but the Court does not conceive
that the fact will amount to a legal justification of the person
who has made the misrepresentation. He who sells property on a
description given by himself is bound to make good that
description, and if it be untrue in a material point, although the
variance be occasioned by a mistake, must still remain liable for
that variance."
The principles of these cases we consider founded in sound
morals and law. They rest upon the ground that the party selling
property must be presumed to know whether the representation which
he makes of it is true of false. If he knows it to be false, that
is fraud of the most positive kind, but if he does not know it,
then it can only be from gross negligence, and in contemplation of
a court of equity, representations founded on mistake, resulting
from such negligence, is fraud. 6 Ves. 180, 189. Jeremy 385-386.
The purchaser confides in it upon the assumption that the owner
knows his own property and truly represents it, and, as was well
argued in the case in Cranch, it is immaterial to the purchaser
whether the misrepresentation proceeded from mistake or fraud. The
injury to him is same whatever may have been the motives of the
seller.
We will next inquire whether the misrepresentation in this case
comes up to the rule which has been laid down. In the first place,
it must be of matters of fact, and it has been argued by the
appellant's counsel that the letter of 21 January, 1833, did not
profess to state matters of fact, but to express opinions. It is
certainly
Page 38 U. S. 39
true that matters of opinion between parties dealing on equal
terms, although falsely stated, are not relieved against, because
they are not presumed to mislead or influence the other party when
each has equal means of information. But we consider the
representation in this case not the expression of opinion, but the
statement of facts. The appellant, in giving a description of a
mine in Virginia which he desired to be exhibited to the appellee
in New York, says that one hundred feet on the vein had been
developed which proved to be very rich, much richer than anything
yet discovered in the United States. That the surface was rich in
gold; that the formation was quite wide, and in one place twelve
feet; that the veins were disseminated throughout the whole
formation in threads of from two to six inches wide, and that there
was ore from the mine that would without doubt give several hundred
pennyweights of gold to the hundred pounds. Now as to one of these
statements, beyond all question it is a matter of fact -- we mean
the one which describes the width of the formation and veins.
Having made a personal examination, he declares the formation to
be wide, gives the actual width in one place, and then the width of
the veins, in terms not of conjecture but of the most positive
assertion. He gives their dimensions by feet and inches. This
statement, then, comes up to the standard of mathematical
certainty. And even in regard to the others, he does not profess to
speak of them from conjecture, but speaks of them as they are,
without qualification. Take, for example, this: "The surface is
rich in gold. Not that he thinks it will turn out to be rich, but
that it is rich." It was argued that there was no standard by which
to decide what quantity of gold would justify calling it "rich."
There is none by which it can be decided with mathematical
certainty, but the law does not require it. Suppose that a seller
was to describe to a distant purchaser a tract of land as being
rich, and it were proven to be poor or very poor. Can it be that a
court of equity would not give relief in such a case? The certainty
in the one case is as great as in the other, and the
misrepresentation as to richness must be proven in each case by the
evidence of those who understood the quality of the one or the
other.
In the next place, the misrepresentation must be of something
material, constituting an inducement or motive to the appellee to
purchase and by which he has been actually misled to his
injury.
Now in our opinion, that is emphatically the case in the suit
before us. The mine, we think, not only constituted a motive, but
the sole motive to the purchaser; he was induced to purchase all
interest at a high price in that which has turned out to be
worthless, and he has therefore been misled greatly to his
injury.
It must, in the next place, be in something in which the one
party places a known trust and confidence in the other.
Nothing could be stronger than the confidence here, because the
appellee had never seen the mine, and the appellant knew it; the
appellee had seen the letter of description and specimens, and
the
Page 38 U. S. 40
appellant knew that he had; the appellee confided in the truth
of the appellant's representation, and his skill in mines and in
mining operations, and the appellant knew that he did.
But it has been earnestly contended at the bar that whatever
might be the effect of misrepresentation in cases in which there
was nothing to countervail it, that in this case, at least, it
cannot avail the appellee on account of the particular character of
the contract.
The purchase of an interest in the gold mine was made through
the agency of Charles H. Richards, acting for himself and others,
and amongst them, for the appellee. Richards, by his letter of 18
June, 1833, to the appellant, amongst other things, said,
"But after all the above named gentlemen [amongst whom was the
appellee] had seen your letter, we concluded, at any rate, we would
look at the samples of ore, and have done so, and your letter
describing the premises to N. R. (Nathaniel Richards) he read to
us. The ore is rich beyond dispute, but how much there is of it
remains to be seen. In regard to the extent of the mine and its
richness, we must, of course, rely on your judgment."
The appellant, in his letter of 21 June, 1833, in reply to the
above letter of Charles H. Richards, speaking of the gold mine,
says, "I, however, sell it for what it is -- gold or snow balls --
and I leave it to you to decide whether you will take it at my
price or not." It is said that the contract having been concluded
upon the basis of this correspondence, the purchase was one, with
all faults -- that is, in effect, that the seller was absolved from
all liability by reason of any representation which he had made in
relation to the mine.
In support of this proposition, several cases have been cited at
the bar; let us examine them.
The case of
Baglehole v. Walters, 3 Camp. 154, was
this:
The defendant being about to sell a vessel, the subject of the
suit had printed particulars of sale, of which a copy was delivered
to the plaintiff in the following words:
"For sale, the good brig
Iris, burthen per register 208
tons; will carry 17 keels of coal and glass or 300 loads of timber;
has lately delivered a cargo of sugar from the West Indies in
excellent condition; is well found in all kind of stores, which are
in good condition. Hull, masts, yards, standing and running
rigging, with all faults as they now lie."
The plaintiff purchased two-thirds of the ship, which defendant
conveyed to him in the common form. The plaintiff undertook to
prove that at the time of the sale, the ship had several secret
defects in her, that these were known to the defendant, and that he
did not disclose them to the plaintiff. And he relied upon a
previous case of
Mellish v. Motteaux, Peake's Cases 215,
in which Lord Kenyon had held that the seller of a ship is bound to
disclose to the buyer all latent defects known to him, observing
that the terms to which the plaintiff acceded of taking the ship
with all faults and without warranty must be understood to relate
only to those faults which the plaintiff could have discovered or
which the defendants were unacquainted with. But Lord
Ellenborough,
Page 38 U. S. 41
disapproving of the doctrine of the case above cited, held that
where a ship is sold with all faults, the seller is not liable to
an action in respect of latent defects which he knew of without
disclosing at the time of the sale unless he used some artifice to
conceal them from the purchaser.
In the same volume of Campbell 505, a case is reported of
Schneider v. Heath, which was tried before Mansfield,
Chief Justice; the opinion expressed by the Chief Justice is
founded in so much good sense and justice that we should have felt
disposed, in a conflict of authorities, to have adopted it even if
it had not been, as in the sequel of this opinion we shall show it
was, subsequently recognized and acted upon by the court. The
opinion is in these words: "The words," that is, "with all faults
as they lie,"
"are very large to exclude the buyer from calling upon the
seller for any defect in the thing sold; but if the seller was
guilty of any positive fraud in the case, these words will not
protect him. There might be such fraud, either in a false
representation or in using means to conceal some defect. I think
the particular is evidence here, by way of representation, that
states the hull to be nearly as good as when launched, and that the
vessel required a most trifling outfit. Now is this true or false?
If false, it is a fraud which vitiates the contract. What was the
fact? The hull was worm-eaten, the keel was broken, and the ship
could not be rendered seaworthy without a most expensive outfit.
The agent tells us he framed this particular without knowing
anything of the matter. But it signifies nothing whether a man
represents a thing to be different from what he knows it to be or
whether he makes a representation which he does not know at the
time to be true or false, if in point of fact it turns out to be
false."
As it appeared in the case that means had been taken
fraudulently to conceal the defects in the ship's bottom, the case
may not be an authority in favor of the opinion above quoted; yet
it serves to show that the doctrine on this subject was not then
settled. About the time that this last case was decided, the case
of
Pickering v. Dowson, reported in 4 Taun. 779, was
decided in the Common Pleas. That also was the sale of a ship with
all faults. A copy of the particulars was delivered by the seller
to the buyer, which, amongst other things, represented the ship as
being copper-fastened and as having recently undergone a thorough
repair. It was proven that the ship was not copper-fastened and
that the defendant knew she was leaky. The court adhered to the
doctrine of Lord Ellenborough in
Baglehole v. Walters, and
held that the seller was not responsible. Now it will be observed
that all these cases were cases of ships, where the thing which was
the subject matter of the contract was in such situation that the
buyer had a full opportunity to inspect and examine the truth of
the representation, and this we take to be the ground of decision
in them. The meaning, says Heath, Justice, in
Pickering v.
Dowson, of selling with all faults is "that the purchaser
shall make use of his eyes and understanding
Page 38 U. S. 42
to discover what faults there are." This implies, in our
opinion, that the thing must be in such situation as to enable him
to make use of his eyes and understanding, and accordingly, in that
case, "the full opportunity of the purchaser to inspect and examine
the truth of the representation," is included in the marginal note
of the case as one of the terms of the proposition which exempts
the seller from liability.
Now we think that this case is strikingly contradistinguished
from that in the most important particular that in this, the
purchaser had not full opportunity to inspect and examine. It is
true that it would have been in the purchaser's power to have
traveled some hundreds of miles to Virginia to examine the mine; so
it was in the case which has been quoted from Johnson's Chancery
Reports; but the Chancellor does not even intimate an idea that it
was necessary for him to do so; so also in the case of
Sherwood
v. Salmon, 5 Day's Reports 439, the purchaser might by
extraordinary diligence have examined the land; but the court, in
reference to this very subject, said that where, from the remote
situation of the land or any other cause, a contract is made for
the sale of land without viewing it, there is the same reason that
the seller should be responsible for a false affirmation respecting
its quality as for any other fraud.
We think we may safely lay down this principle -- that wherever
a sale is made of property not present, but at a remote distance,
which the seller knows the purchaser has never seen, but which he
buys upon the representation of the seller, relying on its truth,
then the representation, in effect, amounts to a warranty; at least
that the seller is bound to make good the representation. No part
of the reasoning of the cases which we have been reviewing applies
to such a case; they proceed upon the idea that where the subject
of the sale is open to the inspection and examination of the buyer,
it is his own folly and negligence not to examine. Chancellor Kent,
in the second volume of his Commentaries 484-485, has justly said
that the law does not go to the romantic length of giving indemnity
against the consequences of indolence and folly or a careless
indifference to the ordinary and accessible means of information.
We think that this imputation cannot be made with any propriety
against the appellee. The subject of the purchase was several
hundred miles from him; he had never seen it; the seller knew that
he had never seen it; in this situation, he made a representation,
both by description in his letter and by the exhibition of
specimens; the appellee bought upon the faith of that
representation, the appellant knowing that the appellee had read
the letter and seen the samples; finally, the appellee had a double
confidence in the appellant -- first in his integrity, and secondly
in his skill in mining -- and the appellant admits his belief that
the appellee had this double confidence in him.
If, under these circumstances, the seller were not bound by his
representation, we know not in what cases we ought to apply the
Page 38 U. S. 43
well known and excellent maxim
"fides servanda est." We
have now compared the cases, and upon principle have shown that
they do not apply to this. But we will conclude our opinion by
referring to a case, later than all those which we have been
examining, the reasoning of which is conclusive, as we think, in
favor of the view which we have taken. It is the case of
Shepherd v. Kain, 5 Barn. & Al. 240. It was a case for
the breach of warranty, as to the character of a ship. The
advertisement for the sale of the ship described her as a
copper-fastened vessel, but there were subjoined these words: "The
vessel, with her stores as she now lies, to be taken with all
faults, without allowance for any defects whatever." It appeared at
the trial that the ship, when sold, was only partially
copper-fastened, and that she was not what was called in the trade
a copper-fastened vessel. It appeared also that the plaintiff,
before he bought her, had a full opportunity to examine her
situation.
The court said the meaning of the advertisement must be that the
seller will not be responsible for any faults which a
copper-fastened ship may have. Suppose a silver service sold with
all faults, and it turns out to be plated; can there be any doubt
that the vendor would be liable? "With all faults" must mean which
it may have consistently with its being the thing described. Here,
the ship was not a copper-fastened ship at all, and therefore the
verdict was right. This case decides that even where the plaintiff
had a full opportunity of examination, the term "all faults" did
not exempt the seller from liability for any defect but what was
consistent with its being the thing described, and, in effect, that
the description amounted to a warranty. In the case before us,
where the appellee had no opportunity for examination (and in that
respect the case is much stronger in his favor than the one just
cited), the terms of the sale, in our opinion, put upon the
appellee no hazard or risk, but those which were consistent with
the mine being such as it was described; that those terms in no
degree exempted him from liability for misrepresentation; but if
the mine had been such as described, then that they would have
exempted him from any liability for failure in its anticipated
produce.
It may be that the appellant made the representation under the
influence of delusion, but it is sufficient to decide this case for
us to know that the representation was untrue in material parts of
it.
The decree of the circuit court is
Affirmed with costs.
MR. JUSTICE STORY dissenting.
In this case I have the misfortune to differ from a majority of
my brethren. The bill seeks to set aside and rescind an executed
contract upon the ground of gross premeditated fraud, the contract
being confessedly one of great hazard and founded in speculation.
The answer fully and pointedly denies every allegation of fraud and
insists upon the most perfect good faith. The decree, by rescinding
the contract, affirms the material charges of fraud stated in
Page 38 U. S. 44
the bill. After a careful consideration of the evidence in the
record, my opinion is that there is no just foundation for or proof
these charges. I do not propose to review the evidence, though take
a very different view of it from what has been expressed in the
opinion delivered by my brother Barbour, and there are many facts
and circumstances which have struck my mind with great force which,
I regret to find, are not deemed of equal importance by my
brethren. I am not willing by my silence to sanction imputations
upon the appellant which cast so deep a shade upon his character,
which the record shows has hitherto been without stain or reproach.
In my opinion, the appellant stands acquitted of fraud, the victim,
if you please, of a heated and deluded imagination, indulging in
golden dreams, but in this respect he is in the same predicament
with the appellee, and none other.
MR. JUSTICE McLEAN dissented, stating that he agreed altogether
with MR. JUSTICE STORY.
MR. JUSTICE BALDWIN dissented both as to the facts and the law
as stated in the opinion of the Court delivered by MR. JUSTICE
BARBOUR.
On appeal from the circuit court of the United States for the
Southern District of New York. This cause came on to be heard on
the transcript of the record from the Circuit Court of the United
States for the Southern District of New York, and was argued by
counsel. On consideration whereof it is adjudged and decreed by
this Court that the decree of the said circuit court in this cause
be and the same is hereby affirmed with costs.
NOTE -- The counsel for the appellant afterwards presented a
petition, praying for a rehearing of this case, but the Court
unanimously overruled the application.