Ladd v. Chaires

delivered the Opinion of the Court.

The contest in this case arises from an alleged misrepresentation in the sale of a tract of land. Complainants, Tompkins and Chaires, assert that they made application to Ladd for the purchase of a tract of land containing 240 acres, which he expressed a willingness to sell, but insisted upon their taking with it a tract of eighty acres adjoining, which ^e said he owned. This they objected to, alleging that it i^not suited to the objects they had in view —the erection of a mill and factory. Ladd insisted on the sale of the entire tract, and refused to sell unless the whole was taken; that they purchased, under these circumstances, and afterwards finding that he was not the owner, as he had repi’esented, of this 80 acre tract, they applied for an abatement of the price on the last note remaining unpaid, and he refusing, their application is now to a Court of Equity, for relief. The Court below sustained the bill, and decreed in their favor, from which Ladd has appealed to this Court.

It is distinctly admitted that Ladd represented himself authorized to sell the contested eighth, being described by a map in his possession, prepared by a former proprietor, whose accuracy he had reason to confide in, and that it did not belong to him. After discovering this fact, he bought the land, and insists on their taking it agreeably to the bargain. He resists their claim for release on the ground of their having sustained no damage or injury, and that the subject in contest was 3iot material or essential to the agreement. We do not think the latter objection comes with propriety from a party who made the sale of this tract the turning point of the bargain, in express terms — complainants being told he wouldjiot sell any unless the entire tract *400was sold. It was to buy this with the other, or buy none. If not material, why insist upon this condition to the sale ? The only motive we can conceive, was to prevent the loss of the 80 acre tract, which might be the case if the other part was sold without it. "We can regard the sale of this tract as immaterial and indifferent only on the supposition that defendant could have got as much without its sale as with it, which is not very likely, considering that the whole tract was sold at five dollars per acre. The price of the 240 acre tract, upon that supposition, would have been $6.66 per acre, and the price of the former proprietor, who held it at $10 per acre, would have been $13.33 per acre for the 240 acres, which we must presume he would have asked, if not the owner of the 80 acre tract. So that we think the addition of this tract must have been regarded as essential and material by the parties in framing their contract. A mistake, then, having been made, of a material character, in the formation of the contract, the question arises as to its effect in point of-law.

“ Where there is an error in the thing for which an individual bargains, by the general rules of contracting the contract is null, as in such cases the parties are not to be supposed to have given their assent.” 1 Fonb. Eq., 114; Allen vs. Hammond, 11 Peters, 72.

“ Contracts made in mutual error, under circumstances-material to their character and consequences, seem, on general principles, -invalid.” 1 Story Eq., 154.

The 'same principle will apply to all other cases where the parties mutually bargain for and upon the supposition of an existing right. Ibid., 164, § 143; Hitchcock vs. Giddings, 4 Price, 135.

The case in 11 Peter’s Supreme Court reports illustrates the rule. There the parties bargained for the collection of k claim vs.- the Portuguese government, and under the ex*401pectation that very great expense, trouble and delay would attend the business, a very extraordinary compensation was agreed upon. It turned out that the claim was allowed eight days before the agreement, though unknown to the parties. The Court say : “The contract was entered into through the mistake of both parties ; it imposes great hardship and injustice on the appellee, and is without consideration.” Nevertheless they allowed him compensation for services rendered. Mr. Webster, one of the counsel, puts the doctrine, with great force, in this language: “ Where a fact of leading importance to parties entering into a contract was supposed to exist, and did not exist, the contract formed in the belief that it was in existence, should be set aside.” P. 68.

The rule applies to cases of purchases where the parties have been innocently misled under a mutual mistake as to the extent of the thing sold. 1 Story, 166, § 144.

In the present case, Ladd no doubt was under the honest and sincere conviction that he was the owner of the eighty acres, and acting on that belief, it was not improper for him to treat it as his, by making it the subject of sale. With a knowledge of the fact that he was not owner, it would have been improper for him to represent himself as such, and a contract so made would be regarded as fraudulent. Having induced complainants to bargain with him, under an impression discovered afterwards to be false, can he hope to hold ’them to the agreement? We think not. If no agreement as to this tract was originally made, as we have seen by the authorities was clearly the case, it was not for Ladd, by a change of his position, to give validity to it. This would be to make a new bargain ; to allow him to contract for them. But this cannot be. The error was his, and his must be the loss, according to-every principle of right and propriety. We have alluded to oa* *402ses in which the contract was rescinded on account of the mistake. This is not asked by complainants. Indeed, it is questionable'whether they would be entitled to it, as they got what was the main object of their contract — the site on the river, and the land they bargained for and desired to buy.

The party may be relieved on the principles of compensation, which is thus explained : “ Where there are no indicia of fraud, and the misdescription goes only to part of the estate, and is of such a nature as not to prejudice the full enjoyment of the residue, or the objects the purchaser, had especially in view in making the purchase, then the Court will .enforce the contract, with compensation.” Atkinson on Titles, 100.

In our view the agreement must be regarded as if the eighty acre tract had not formed part of the sale, and the 240 acres had been sold without it. This would have been the case if there had been no mistake as to the ownership.

An abatement of the price should then be made to the extent this tract entered into the consideration agreed to be paid. This is the damage complainants would sustain if compelled to pay for the whole tract. Although the rate was five dollars per acre, we by no means conceive that this should be the rate of deduction. The tract containing the site was the one of value, and the eighty acre tract comparatively of much less value. So far as its addition extended the price that would have been given for the other tract, if it can be ascertained, the complainants are entitled to have a credit for on their note. We do not perceive in the record the materials for ascertaining it. Possibly it may be done through means of a Master, to whom the matter may be referred by the Court below, with-power to call for the estimate's and papers, and examine the parties and witnesses.

*403The Court below, concurring in disaffirming the sale of the contested eighth, allowed the difference between $1.25, the price paid for it per acre, and $5, with directions that title should be made to them for the entire tract. We are of opinion that complainants are under no obligation to take it, and should not be compelled to do so by decree of the Court.

Complainants insisted that the contract as to this eighth was illegal and invalid, on account of champerty. We think they are not entitled to raise this question ; for giving judgment at law by consent, they reserved their equitable rights. If this defence be available, it is legal, and not equitable.

The decree of the Court below will be affirmed so far as it declares the contract invalid as to the eighty acres, but will be reversed and set aside so far as it directs title to be made thereto, and fixed the damage at the sum of $300.

And the said Court willproceed to appoint a Master, whose duty it shall be to proceed, in conformity with this opinion, to ascertain, as near as maybe, the sum or amount for which a deduction should be made from the contract price of the land sold in consequence of the addition of the 80 acres, with power to call for estimates and papers, and examine the parties and witnesses, and for such other proceedings as may not be inconsistent with this opinion, and the rules and principles of equity and justice.

delivered the following dissenting opinion:

I concur with a majority of the Court in overruling the decision in this cause pronounced by the Chancellor in the Court below, but dissent from so much of the order as directs the case to be sent back for further proceedings.

It is admitted by the defendant below that he did make a misrepresentation in regard to his ownership of the land *404in controversy, at the time of and during the treaty for the sale to the complainants ; but he expressly states in his answer that this misrepresentation was the result of an innocent mistake, and there is no charge or pretench in the bill that he meditated any fraud in the transaction. “ Mistake” is one of the well defined and admitted grounds of Equity jurisdiction, but it is not every mistake of fact that will induce the equitable interference of the Court. The doctrine upon this subject is so lucidly stated by Story, in his admirable Treatise on Equity Jurisprudence, that it seems impossible to mistake it. He says : “ The rule as to ignorance or mistake of facts entitling the party to relief, has this important qualification, that the fact must he material to the act or contract; that is, that it must be essential to its character, and an efficient cause of its concoction. Eor though there may be an accidental ignorance or mistake of a fact, yet if the act or contract is not materially affected by it, the party claiming relief will be denied it.” Story Eq. Ju., §141, 5.

Applying the rule to the facts in this case, the question arises, what was the fact in reference to which the mistake occurred ? The allegation and admission is that Ladd represented himself to be the owner of the eighth of land in controversy, when in fact and in truth the title was in the government. Was the mere fact as to who held the title at the time of the treaty, a matter “ material” to or the “efficient cause” of the contract? It would seem not, for the purchasers took good care to provide against a failure of title, by taking the covenant of the vendor to perfect the same, and he is now able and ready to comply with that covenant. Wherein, then, consists the “ materiality” of the mistake ? I am at a loss to perceive. It certainly did not affect the value of the purchase, for it is strongly intimated in the bill, if not expressed in so ma*405ny words, that the particular eighth of land in controversy was wholly valueless. Now, upon the subject of “ materiality,” I take the rule of equity to be this : that no misrepresentation or mistake of fact will be deemed “ mateai” which does not affect the value of the -thing contracted ,-for. The representation that he had the title to this particular eighth, was doubtless a potent argument in the mouth of Ladd why he would not consent to separate it from the other three; but as a matter of argument merely, I do not think it comes up to the rule. At most, it can only be received as “ damnum absque injuria” and equity never interposes except to remedy or prevent injury. Story Eq. Jur., §151; 2 Bibb, 474, Crittenden vs. Craig.

But the rule of equity proceeds further, and sometimes refuses its interference even where the mistake is of a material fact. This occurs when there has been a strict observance of perfect good faith between the parties, and the mistake complained of is the mistake of all. Story Eq. Ju., § 147; Fonb. Eq., Chap. 2, §7, (note v.)

' “ Where the mistake is not the occasion of the promise, the act is valid, there being nothing wanting of the true assent on all sides.” 2 Pow. on Con., 263.

I can discover nothing in the facts of this case which calls for the interference of a Court of Equity. A vendor, supposing himself to be the owner of a tract of land, contracts to sell the same, and executes a covenant to perfect the title. He afterwards discovers that he was mistaken as to his ownership, and that the title is in fact in another. He forthwith purchases the title, and thus puts himself in a position to comply with his covenant, and it is now claimed that instead of thus acting, he ought to have communicated the fact to the vendees, and left it to their option to have rescinded the contract. I do not think he was bound by any principle of equity or good morals voluntarily to *406place himself within the power and consequently at the mercy of the vendees, who held his covenant for title, and might, upon a demand or refusal, have proceeded against him for damages, in a Court of Law, or for a specific performance in a Court of Equity. In cases where there appears no meditated fraud, equity is as observant of the mutuality of rights in the enforcement of contracts, as it is of the mutuality of assent in their concoction, and a very simple test of the principle involved in this controversy is this : Might the vendor have been compelled to respond in damages for a non-compliance with his covenant for title ? Evidently he might. If, then, he might have been thus compelled, I am at a loss to discover the principle upon which it can be ruled to be iniquitous in him to place himself in a position to make good his legal obligation. The vendees are now tendered all they contracted for — the title — and with that I think they ought to be satisfied. .

I am the more decided in my dissent in this cause because of the apprehension that by making the Courts of Equity Jurisdiction too easily accessible, parties maybe induced to abate that vigilance and caution in the concoction of their contracts, which affords the'surest guarantee against litigation. Whilst Courts of equity should be ever open to re\>dk& fraud in all its aspects, they should nevertheless be careful not to encourage negligence by a too ready interference in the business transactions of individuals. Pothier has expounded this subject with his usual force and sterling sense, and given to. us a well defined line of demarkation. “ As a matter of conscience,” says he, “ any deviation from the most exact and scrupulous sincerity, is repugnant to the good faith that ought to prevail in contracts. But in civil tribunals, a person cannot be allowed to complain of trifling deviations from good faith in the party with *407whom he has contracted. Nothing but what is plainly injurious to good faith ought to be there considered as a fraud sufficient to impeach a contract.” With how much greater force is this doctrine applicable to a mere mistake of fact, unaccompanied by any pretence of fraud. I am of opinion that the facts of this case do not afford sufficient ground for the interference of equity, and therefore think that the bill ought to have been dismissed.