Torrey v. Buck , 2 N.J. Eq. 366 ( 1840 )

The Chancellor.

The object of this suit is to set aside «and declare null and void, a conveyance executed by the complainant to Samuel Hi Hamilton, one of the defendants, for ¡fraud and misrepresentation. It is a contract executed, and pre■sents, therefore, a very different question from that where a party calls upon the court to compel a specific performance. Those cases always rest in sound discretion, and the contract will be enforced or not, as shall appear most agreeable to justice and equity. This is a case which must abide the result, one way or the other, of the stern proof of fraud. This fraud may be made out either by a direct proof of certain facts, or may be inferred from the circumstances attending the whole case.

The complainant was the owner of a valuable house and lot of land in Newark, and in the fail of 1837, being desirous of disposing of it, negociated for that purpose in the first instance-with Lewis Loomis, and actually concluded a bargain to convey it to him for ten thousand dollars. After some chaffering and delay, Loomis declared his inability (o fulfil the contract himself, but said he could introduce the complainant to a gentleman who would buy' his place, and accordingly introduced him to the defendant, Buck. After taking time to examine the property, Buck finally agreed with the complainant to purchase it for nine thousand dollars, and to pay him five thousand dollars in the stock of a company in the city of New-York, of which he the said Buck was cashier, called the “United States foreign and domestic exchange company,” twelve hundred and fifty dollars in a-note of John Trafton of the state of Maine, and the residue in money. There was a mortgage on the place of seven hundred and fifty dollars, which was to make so much of the purchase money. The result was that, the complainant, in January, 1838, conveyed his property for the consideration of nine thousand dollars — seven hundred and fifty dollars of which was the amount of the mortgage or the place, five thousand one hundred dollars in tile stock of the aforesaid company', twelve hundred and fifty dollars in the Trafton note, and the balance, being nineteen-hundred dollars, was paid in cash or its equivalent. The fraud charged relates to the Trafton note and the stock, from which the complainant has never realized any thing, and which it is alleged are not now, and were not at the time of the transaction, of any value. As those constitute a great part of the consideration, it becomes very important to look into the charges of fraud, and see on what foundation they rest. The bill asks to-have the contract rescinded upon returning whatever has been received by the complainant; showing thereby a willingness on the part of the complainant, while he asks equity, to do equity.

The case has been embarrassed somewhat by the introduction of a third party, the defendant Samuel H. Hamilton, to whom the deed for the property, at the instance of Buck, was finally made by the complainant; and yet I do not see how it varies the case. The bargain was made between the complainant and Buck; this is admitted by the defendants’ answers; and the deed made on such bargain, by direction of Buck, (who had made a further contract with Hamilton,) directly-to him to avoid multiplicity of deeds. Hamilton cannot claim, in such case, to stand in any other or better situation than Buck would, had the deed been made to him. The conveyance is made on the contract entered into between the complainant and Buck, and the mere substitution of the name of another person, at the instance of Buck, cannot place that person in the situation of a bona fide purchaser without notice. The three defendants, Loomis, Buck and Hamilton, all lived in the city of New-York; Loomis and Buck appear to have been acquainted, so do Hamilton and Buck, but not Hamilton and Loomis. Hamilton had a patent right for sawing timber and felling trees, which he was selling out with the right for ceitain states. He had sold the right for the state of Maine to Trafton, for which he got the note heretofore referred to, and in which purchase, it would seem, Buck was interested ; and the arrangement made between Buck and Hamilton was, that he should take the deed from the complainant for his property, pay him the money, give him the Trafton note and the stock, and for the stock give to him, Buck, the right for the aforesaid patent for the states of Vermont and Massachusetts. The result of all this was, that Buck got the right for said patent in the states of Vermont and Massachusetts for his stock ; and Hamilton, for such patent right, for the Trafton note, and about nineteen hundred dollars in money, got a deed for the complainant’s property worth nine thousand dollars, subject to a mortgage of seven hundred and fifty dollars. The complainant has realized as yet only the nineteen hundred dollars paid in money, with, as I presume from the evidence, little or no prospect of ever receiving one cent more.

Was the transaction fraudulent, or not; and if so, can this court afford the relief asked? There is no more common head of equity jurisdiction than to relieve against frauds, and whenever they are made to appear in any of the transactions between man and man, this court is bound to relieve against them. I shall consider this case as if the deed had been made direct to Buck; that will disentangle it, and, as J have already stated, the fact that the deed was filled up with the name of Hamilton, instead of that of Buck, cannot, in my judgment, in any way affect the case. There is no pretence that the complainant had any thing to do with the contract between Buck and Hamilton, nor, indeed, does it appear that he was even informed what that contract was. He dealt only with Buck.

As to the fraud charged in the Trafton note, I am of opinion there is no proof that will justify any such conclusion. The mere fact that the note was not paid at maturity, furnishes no such proof. As the note was not due at the time the complainant received it, it came to him as a negociable instrument, and many of the legal objections to it were thereby removed, if any existed. But I do not perceive that any effort has been made by the complainant to recover the money since the note became due. I can see no ground for saying, from the evidence in this cause, either that the note was not valid and binding on the maker, or that he was unable at the time it was made, or has become so since, to discharge it. We know there have been great vicissitudes in the condition of very many men within the last few years, and a large amount of the obligations made in good faith and with an honest intention, remain undischarged. If (he complainant intended to rest his case at all on this point, he was bound to show what was the consideration of the note, and what the condition of the maker. For aught that I can discover, the note may have been given for value, and the maker able to pay. I think, therefore, the charge of fraud, so far as this note is concerned, unsupported by the evidence.

The remaining ground for sustaining the charge of fraud, is of a very different character, and from the first Breaking of the case before me, has made a deep impression on my mind. • What was this stock, of which Buck prevailed on the complainant to take five thousand one hundred dollars on a purchase of nine thousand dollars? I cannot learn that the company was ever incorporated under the laws of the state of New-York, though located in the city of New-York. I cannot learn that it ever had any standing either there or elsewhere, or indeed that any of its stock was ever sold or transferred except to the complainant The defendants, in their first answer, do not say any thing on this subject, although the charge is distinctly made in the bill that the stock was of little or no value; and when, upon exception taken to the answer for this cause, and sustained, a further answer is put in, what says the defendant Buck to this part of the case? He answers literally, that he did not know at the time of the negociation, or at any other time, that said stock was- “ of little or no valuethat he had understood from the president that the company had mortgages to secure stock subscribed' to an amount between two and four hundred thousand dollars, some of which he had seen ; and that from such information he believed said stock, to be “ of valuebut of the precise or more certain amount of the value of said stock or of said mortgages, he professes to have had no other knowledge or information. That he never knew or heard of the price of any of the stock except that sold to the complainant, nor does he know any thing further of the value of the stock. What kind of answer is that to this important inquiry ? The defendant, by the very mode of answering, must satisfy every mind that the charge against this stock was true — that it was a mere bubble. But the evidence has placed this subject beyond all doubt. Harvey A. Hatch testifies, that he knew this institution, and that the stock was of no value. He had five thousand dollars of the stock, and he does not think that any person who knew tiie institution would have given him one dollar a share for it. That he had fifty dollars in the bills of the company, twelve dollars of which he gave away, and thiity-eight dollars of it he gave to his landlord to snake him such allowance on his board as he could get for them. This was more than a year before, and his landlord had informed him that he could uot get one cent for them. He further says, that he has heard the institution called a swindling institution by various persons, and from those who had been connected with it. Daniel Mallory says he knows this institution ; it was got up by Albert C. Bcmcritt, who has a bad character. The stock never had any value. The institution was got up as a fraud, and was so considered by all. To this evidence there is no witness called to make any contradiction. There is no doubt that the stock is utterly worthless. The whole affair was a bubble, and if mortgages were taken for stock, there is little •doubt it was upon very insufficient and uncertain properly.

The defence, however, was not rested so much upon the stock being of any value, as upon the fact that the complainant had a full •and fair opportunity to inquire into the character of the institution for himself, and particularly that the defendant over and over again declined to express any opinion himself as to its value. This last matter is evidently, from the answers and the evidence, considered by the defendants a strong point in their cause — that Buck would not give the complainant the slightest opinion as to the value of the stock, or the character of the institution, but referred him to others, and particularly to the president of the •company.

There is a feature in this case which has a material bearing' with me. The defendant, Buck, at the time of the negociation, was the cashier of this company, and as such had, or should have had, freo access to all the papers, and full knowledge of its condition; and if any thing was concealed from him, that fact was certain evidence that all was not right. The fact that Buck, cashier as he was, declined to give the complainant any information respecting the company or its stock, and now predicating -his defence mainly on that, furnishes, in my view1, strong evidence against him. A cashier of a company, and know nothing of its affairs! — and that, too, when other people knew it to be worthless. I cannot suppose such a state of things, and if it was so, it was notice to him that the institution, in the language of one of the witnesses, “had no bottom.” It is this very hold-ing back of information which in this case created all the difficulty. A suppressio veri is as good a reason for setting aside a conveyance as a suggestio falsi: Broderick v. Broderick, 1 Peere Williams, 239 ; Pearson v. Morgan, 2 Brown's Chan. Cases, 389. Suppose Buck had come out with the naked truth, and said, I am the cashier of this company, but whether it is worth any thing or not is matter of doubt; I cannot say to you from my knowledge that the stock is worth one cent; — w’ould the complainant have taken the stock? No. It would have ended all the difficulty. But he declined expressing any opinion, and referred him to others, and particularly to the president of the company. The complainant did inquire, and said some persons told him it was good, and some that it was good for nothing ; that he knew it was a speculation, and he meant to run the risk. If a case could be made excusing the fraud, founded on the folly and indiscretion of the complainant, this is certainly that. case. The man seems to have been infatuated ; but the folly of the complainant can never justify the defendant in taking away his property without compensation. This is not the case of stock which has varied in the market with the times, but of stock w’hich never had any value.

I cannot tolerate the idea for one moment, that, relying on the weakness and credulity of the complainant, a man, himself the cashier, shall pass off the stock of a company without any value, to the amount of five thousand one hundred dollars on the purchase of nine thousand dollars, and then defend himself upon the ground that he did not profess to give him any information respecting it.

Fair dealing, and the preservation of the rights of men, call loudly, I think, on this court, to set aside this whole contract.

There has been much evidence as to the value of the property, i think that of no sort of consequence. The parties fixed upon their own price, and from the evidence, at the time, it would seem to me the price fixed was not much out of the way. Since then property has farther depreciated, and a restoration to the ■ same state of things as existed before the execution of the deed will be less to be regretted by the defendants.

It is my opinion, after carefully examining this case, that the deed from the complainant to Samuel H. Hamilton should be set aside, upon his being repaid, with interest, the money advanced by him, and having returned to him the Trafton note and the certificates of stock; and that the injunction be made perpetual. As between the defendants, Buck must restore to Hamilton what he received for his stock, and take back his stock. The costs of the complainant to be paid by the defendant, Robert Buck. The bill, as to Loomis, must be dismissed.

The following decree was thereupon made: — “ It is ordered, adjudged and decreed, that it be referred to William M. Scudder, esquire, one of the masters of this court, to take an account of all sums of money paid by the said defendant, Samuel H. Hamilton, either in part payment of the price of the lot of land and premises described and conveyed in and by the deed from the said complainant, Asa Torrey, and Mary his wife, to the said Samuel H. Hamilton, dated the thirteenth day of January, in the year of our Lord eighteen hundred and thirty-eight, and in the bill of complaint particularly set forth, or towards satisfaction of the amount of principal or interest due on any mortgage or other lien and incumbrance on the said land and premises at the date of the said deed, or otherwise, for the advantage and improvement of the said land and premises, or any houses or other buildings thereon ; and also of the dates of all such payments, respectively. And it is further ordered, that upon the .complainant’s paying or tendering to the said defendant, Samuel H. Hamilton, or to his solicitor in this cause, within forty days after the said master shall have made his report, at such time and place as the said master shall appoint, the full amount of such payments, as the same shall be ascertained and reported by said master, together with lawful interest thereon from the time of such payments, respectively, and upon the complainant’s delivering to the said defendant, Samuel H. Hamilton, or to his solicitor in this cause, a certain promissory note mentioned in the complainant’s bill of complaint, dated the second day of January, in the year of our Lord one thousand eight hundred and thirty-eight, made and signed by one John Trafton, for the payment of twelve hundred and fifty dollars in six months from the date thereof, to the said Robert Buck or order, and by him endorsed; and also upon the complainant’s assigning and transferring to the said Samuel H. Hamilton, all the shares and interest of and in the United Stales foreign and domestic exchange company, mentioned in the pleadings and proofs in this cause, which were received by the said complainant in part payment of the price of the said land and premises above mentioned, the said deed of conveyance from the said Asa Torrey. and Mary his wife, to the said Samuel H. Hamilton, shall be vacated and rendered null and void, and the said Samuel H. Hamilton shall and do r'econvey the said land and premises in the said deed described, to the said Asa Torrey, or to such person as he shall appoint, free and clear of and from all incumbrance done or made by the said Samuel H. Hamilton, nr by any claiming by, from •or under him ; and also, that the injunction heretofore issued in this cause be made perpetual. And in case the said complainant shall not, within the time aforesaid, pay or tender to the said Samuel H. Hamilton, or to his solicitor in, this cause, the full amount which shall be ascertained and reported by the master as aforesaid, together with the interest thereon as aforesaid, and also deliver to the said Samuel H. Hamilton, or his solicitor, the said promissory note of John Trafton, and also assign and transfer to the said Samuel H. Hamilton the said shares and interest in the said the United States foreign and domestic exchange company, it is further ordered, adjudged and decreed, that in that ■case the said complainant’s bill do stand dismissed out of this court, so far as relates to or concerns the said Samuel H. Hamilton, with costs to be taxed. And it is further ordered, adjudged and decreed, that the said defendant, Robert Buck, do reconvey to the said Samuel H. Hamilton, or to such person as he shall appoint, the patent right for felling forest trees and sawing timber in the states of Massachusetts and Vermont, mentioned in the pleadings and proofs" in this cause, upon the said Samuel H. Hamilton assigning and transferring to the said Robert Buck, or to such person as he shall appoint, the shares and interest of and in the said the,United States foreign and domestic exchange company, above directed to be assigned and transferred by the said Asa Torrey to the said Samuel H. Hamilton ; and that the complainant’s bill of complaint be dismissed as against the said Lewis Loomis; and that the said Robert Buck do pay to the complainant his costs in this suit, to be taxed. And for the better taking of the account above directed, the parties are to produce before the said master, as they shall be required, all deeds, books, papers and writings in their custody or power, relating to the matters above referred to the sáid master, and are to be examined upon interrogatories touching the same, as the said master shall direct; and that the testimony and exhibits heretofore taken or made in the cause, may be used before the said master, and the parties shall also be at liberty to take further evidence in relation to the matters hereby referred ; and the said master is to make his report with all convenient speed, and any of the parties are to be at liberty to apply to the court as occasion shall require.”