Smith v. Babcock
Opinion of the Court
The lapse of time since the proceedings in this case commenced has been such, that the members of the court are neither of them the same. Most of the counsel are also new, and the condition of all the respondents, with a single exception, has changed, it is said; and several, from what was supposed to be splendid affluence to bankruptcy, and one of them passed “that bourne whence no traveller returns.” Where the fault has been for such unusual delay, or whether there has been none but mere casualties and postponements, growing out of the great number of parties and counsel, and the complexity as well as magnitude of the case, I shall not attempt to settle. But my best efforts have been made to prevent any further postponement, not indispensable to a due hearing and examination of the cause; and I shall now proceed to deliver a final opinion on the questions necessary to be decided, with a desire to put both sides in possession of the reasons on which it is founded, rather than with the vain expectation of rendering it satisfactory to both. •
Various questions have been raised as to the competency of some portions of the testimony and the sufficiency of other parts, which may be first disposed of by a single general remark. Without giving in detail my decision in each case, it may be taken for granted, where I rely on a piece of evidence, and refer to it in support of a conclusion of fact, it is deemed competent; and where a fact has been denied by the answers in particulars responsive to the bill, it is not considered as sustained by sufficient proof, unless it be by more than the testimony of one witness. It may be added further in the outset, that I discover no delay in the institution of the proceedings by the complainant, which should be regarded as a bar to his recovery on the merits, if merits exist; and which can, therefore, be interposed to excuse this court from the labor and responsibility of examining the rights of the different parties on those merits. Warner v. Daniels [Case No. 17,181]; Mason v. Crosby [Id. 9,234]. The proceedings were begun in less than two years after the purchase of the land by the plaintiff, and in little more than one year after the deficiency in the timber was ascertained to be great, and after the conduct of the respondents was believed to have been unfair and Illegal. Nor is there understood to have been any alteration in the property or title since the sale, which is sufficient to disable the plaintiff from making a valid re-conveyance of his share, if it should otherwise appear just to rescind the sale; though it is stated in evidence that some auctions of the land for taxes have since taken place. But redemptions are understood to have been made before the title was foreclosed; and though some timber was got off by the plaintiff and others the first winter, it is supposed to be not so much as sensibly to change the value and 'condition of the premises.
Proceeding then to the great points in controversy, as the interests and liabilities of the respondents are in some respects different, I shall first consider those of Cross, the most active and conspicuous participator in the transaction; next, those of the rest of the First Boston Company; and, lastly, those of Noble.
It is clear, that the respondent, Cross, was the sole owner of the wliolé township in dispute, about the 1st of June, 1S35. It is equally clear, that in all the subsequent transfers of it, as well as in all thé contracts and arrangements for sales, whether defeated or perfected,
The first specific examination concerning Cross’s course, in respect to these sales, may as well be in relation to the representations about the quantity of pine timber on the township. What kind of statements on that subject did he actually make to the plaintiff and others, about the same period, and connected with the sale of this land, so as to render them competent evidence? See cases in Warner v. Daniels [supra], showing when they are competent. Next, were they relied on by the plaintiff? and were they false? The case is full of proof, that he made statements as to the quantity of good pine being one hundred and thirty millions feet per acre, not only at Boston and Hopkinton, in writing and orally, by guarantee separately and in bonds, but at Long Island and to this plaintiff, with the other purchasers. That they were relied on, also, is proved by the fact, that the land was purchased with the view of paying the interest and part of the principal speedily, by sales of the timber; that Cross gave a guarantee of twenty-five per cent, profits from it by such sales; that even before leaving New York he was constituted their agent, to go at once on the land and begin the removal of the timber, to realize these great profits from it; that he gave written guarantees of the quantity, and computations showing how some $43,200 per share could be made by the purchasers of this timber.
It is an objection not well sustained, which his counsel have urged against setting up such representations as fraudulent, that another remedy existed on those guarantees. It is a novel' doctrine, that a written warranty is a bar to a suit or defense founded on fraud in the same transaction; and the cases are not . only numerous, that fraud vitiates all contracts tainted by it, but that it may be set up in contests as to the consideration of the sales, whether a warranty existed or not. Semble Schwartz v. United States Ins. Co. [Case No. 12,505]; 1 Day, 156-158; 4 Mass. 491, 492; 4 Dum. & E. [4 Term R.] 67, 337; 6 Johns. 110, 181; 1 Johns. 414, 503; 2 Wooddeson, 416; 7 Mass. 68. If such an objection was urged in another view, as furnishing an ample remedy at law (and hence that none in equity exists here, under the judiciary act of 1789), the conclusive answer to it is this: The other remedy is only against one of the respondents instead of all, and that one entirely insolvent
All that remains on this point is, to decide whether these representations were in reality true or. false. Perhaps there is no better general test of this, than the failure of Cross to fulfil his various guarantees concerning them, during the four or five years after, when the plaintiff and others contended that they had turned out to be false, and while Cross was not only under guarantees to make them good, but swears that he had ample moans for any such purposes; though since become insolvent. If they ■ were true, it would have been no loss, but a gain for him to take back the land; or if doubtful, it was honest and honorable to exhibit new evidence of their truth, or, with his professed ample means, to make good the indemnity he had given. On the contrary, if they were neither true nor colorably so, but undeniably groundless, and made, not in ignorance, but with intent to mislead, the course of conduct was likely to have been pursued which has been charged in the bill as exhibited on the present occasion. Firstly, buying Reed’s bond, who estimated the good pine at only twenty-five millions, then getting a set of certificates which were made in March for seventy or eighty millions, and then in three months, when new sales at a higher price were contemplated, obtaining a new set of certificates for one hundred and thirty millions, increasing like the rolling snow ball; and whether obtained in some degree by presents or “gratification money,” or by inexperience and looseness of morals in certifying, it is not necessary to settle on the evidence as to those points: but only that they were obtained and used, and were in truth great exaggerations. Again, when the correctness of the statements as to this large
Lastly, when those who had been thus misled complained in 1836, it is in perfect keeping with the same hypothesis, that the certificates were false, if not so known to be, that lie should not attempt to fulfil his guarantee, though professing in his answer to have been amply able, but recommended “Christian resignation,” and proceeded at once to foreclose his mortgages. If satisfied that a great error had occurred inadvertently, why did he not procure and return the notes, and honorably rescind the sale, when his ability at that time, though pledging the notes to Noble for certain specified liabilities, is sworn by both him and Noble to have been great, and to have rested on much other property not pledged, as well as that pledged. But the closing survey of the timber, made under an arrangement between the purchasers, and some of the holders, to give up their notes to the amount or extent the quantity of pine timber should prove to be less than eighty millions of feet, shows beyond question how the actual truth was in respect to the representations of there being one hundred and thirty millions. The whole quantity was in fact found not to have exceeded eight millions, not one sixteenth of the quantity represented and guaranteed; and two of the very certifiers in March, 1835, Russell and Paine, when under oath, testify to this reduced quantity of eight or ten millions as the truth in March, 1835, instead of the eighty millions, to which they then certified, and instead of the one hundred and thirty millions which Russell was the pilot to point out to the certifiers in June, 1835. How fully does this indicate what was to be inferred from Reed’s own knowledge and belief, for some time an owner and explorer of this township, that the quantity of good pine timber was then known not to exceed twenty-five millions? And how fully could any one possessed of that knowledge, like Cross in all probability, have been satisfied that certificates swelling the quantity several hundred fold most be deceptive, and founded in ignorance or fraud? and that the land, if possessing such an increased quantity, would never have been sold to him by Reed at a dollar per acre, or even two dollars, and that he himself, or the Boston Company, with such an increased quantity really on it, ought not to sell it at even six dollars per acre?
Whether the exaggeration and falsity of these representations and certificates were known at the time or not by Cross, is not material in a civil suit, however otherwise it may be in a criminal one. See Doggett v. Emerson [Case No. 3,962]. But, to show the probability of his knowledge, connected with his representations, and the fact of their falsity, it is apparent. that still more evidence could have been furnished if deemed necee-, sary. The bond of Reed distinctly appears to have been in the market for this land before January, 1835, and in the hands of some person in Bangor. It would have had a very material and additional influence on this point, if this township, as seems probable, had in fact been fully explored before he bought it, and the quantity of timber ascertained to be less, or at all events no larger than Reed had supposed. As the proof is, it certainly was surveyed from Bangor before January, 1835; and the result as to the timber seems to have been such as to defeat any permanent purchase of the township there. And this was probably done by Haynes, judging from Cross’s own answer to Tuthill’s bill. That Cross knew this result before his purchase is not improbable, though the evidence of it is inferential. Certainly he knew it through- Cordis in September, who had obtained it at Bangor from Moulton, and made it the ground with Cross against completing a purchase of a share in the town from him, and was thus fully in possession of the facts when he made the exaggerated statements to the plaintiff in October and November after. Before that, also, from Reed’s evidence as to Cross’s frequent inquiries of him about the quantity of timber on the land, Cross probably must have known that Reed did not, though once the owner, compute the quantity higher than twenty-five millions. Probably, then, through the whole sales Cross knew that the survey by Morse and Stone was not only a great exaggeration of the true quantity of pine timber on the land, when calling it seventy or eighty millions feet per acre, but the survey in June, calling it one hundred and thirty millions, was a still greater departure from the facts. He had assuredly enjoyed ample means to know the incorrectness of both of them. But if this survey under Morse and Stone, was believed by Cross to be only as high as the truth, and nothing then existing is known which should suggest any motive for its being too low; but, on the contrary, Moulton’s communications, founded probably on some other prior examination, or facts connected with this, in
The next important representation, connected with the sale, and especially with the confidence placed in the statements and guarantees of Cross, as to the quantity of pine timber, related to his wealth. As that was asserted and believed by others to be great, or otherwise, his guarantee as to the quantity of timber, and also as to the profits to be made from it, would be more or less confided in, and more or less induce a stranger to buy. Had .Cross represented himself to be poor, who believes that his guarantee would have had the influence on the purchase by the plaintiff which it probably had, when coming from a man stated to be so very wealthy? So the prior purchase of the land back by Cross from the first company, at an enhanced price over whai they gave for it, if made by a man of property, able and likely to pay, and not by a needy speculator, careless whether he ever paid or not, if he could only obtain the title to sell to others, was an important element to influence the plaintiff and other buyers. What others, possessing fortune and responsibility, had done at five dollars per acre, there could be less risk in doing at six dollars, than if it had been done by those who were irresponsible and never likely to pay,, unless able to sell again at as high a price. The importance and influence of his wealth on purchasers in trusting to his guarantees, and to the risk he had run in buying at such high prices as a man of fortune, are thus very manifest. That he made representations of his great wealth to the plaintiff and others, and in almost all forms, is not only proved again and again, but attempted to be shown by himself and some witnesses to have been well founded. Without going into all the details of evidence, as to the truth or falsehood of his assertions to the plaintiff and others, concerning his great wealth at that time, it is certain that he has since taken the benefit of the bankrupt law, and disclosed, in his petition and schedule, rather a meagre account of property compared with the debts he owed. It is equally certain that no particular losses are shown to have been sustained by him since-1833, unless it be by the Long Island notes; and most of that must, as yet, have fallen on others. Much less are many specific losses shown, since 1837 and 1839, when his last answers were filed, and when he still seemed unwilling to be regarded as insolvent. It is evident, too, that the depreciation in his property since 1838 and 1839 is not likely to be much, though it may have been more since 1835, But, even* in 1833, the idea of his great wealth seems to have rested much more on a mere reputation to that effect, than on any substantial and particular data, sworn to by witnesses. If his own testimony, however, were competent, the case, on its face, in its general aspect, might appear to be one, showing his fortune then to exceed 8290,000. Indeed, even after his conveyances to Noble, he represents himself as retaining “much property,” being, as estimated by him in another place, over 8130,000; and that he has since paid “many thousand dollars.”
But the proof as to this, when coming to particulars, is very meagre, except his own testimony. That he had, even in October, 1835, much estate of solid and real value;, except what was then conveyed to Noble, and especially much after paying his debts, is very questionable from various circumstances, some of which it may be here proper to advert to. They are, that the conveyance then was made on the eve of a threatened suit by the First Boston Company; that it contained a long list of both real and personal estate; that it extended down to his carriage and horses, if not to every thing which was exposed to attachment; that it seemed on its face, so far as any writing is put in the case, to contain another proof of its being a general conveyance by an insolvent, as it extended so as to cover subsequent liabilities for four years; that one of his creditors soon after sued him, and recovered a judgment which he was unable to satisfy; that others had contests concerning the title of a part of the property he conveyed to Noble; that the only notes he is shown to have procured since the conveyance, have been likewise transferred to Noble under like pledges; and that from his own answer, and more especially his deposition, giving an estimate of the value of his property and the amount of his debts, so as to render him then worth a balance of nearly $150,000 by one, and $290,241 by the other, it is quite evident that the property, not assigned to Noble, was chiefly of a “fancy character." It consisted, among other things, of shares in the Maine “Mining Company,” “United States’ Quarrying Association,” and “Hollis Granite Company;” beside, some lands in various places, and among the rest in “Shel-burne, N. H.,” “inclusive of minerals,” and for which little probably was given, or could soon, if ever, be expected. These are valued
Again, taking the property which is in his ■conveyance to Noble, and putting the value on it which Noble would seem to, and making the deductions made by him for incumbran-ces, and then making a like pro rata reduction on Cross’s estimates of other property, where he is as likely to run into excesses as in that with Noble; and it is manifest, even •on his deposition if admitted, that he was a bankrupt in 1835, not having means enough, if thus estimated, to pay all he concedes that he then owed. He seems to forget that the debts he owed were sure to be exacted without reduction, while the claims due to himself were subject to great losses and risks, and the property he owned was of such a character, that no reliance could be placed on any thing beyond its cost, and not always that, until it was actually sold, and the consideration realized in money. Thus, as one illustration. Of the lands assigned to Noble, the latter seems to value one portion of them at .about $24,000, after deducting the mortgages •on them; while Cross, after a like deduction, values them at $150,000. This is an overestimate by Cross in these lands alone of •$120.000. Supposing a like over-estimate in nil his property, and the *true value of the whole was but $56,000, while his admitted -debts were $100,000. Again, Cross computes nil he assigned to Noble, both real estate and notes, at about $203,000; but all which Noble has realized from it, is stated to be only $13,500, or not one sixteenth. His whole property, on that scale of depreciation, would be worth only $22,000, or not enough to discharge his debts into $78,000. Again, Noble swears that all the signers of the notes assigned to him in the first instance, except fwo firms, have failed; that set-offs existed ¡against many of them; that none were secured by mortgages; and that half of the debt of these two firms was doubtful. From this it can readily be computed how little his notes, as well as other property, was likely to accomplish in paying $100,000 of debts, most of which in the end, as was to be expected, seem to have been spunged out by the bankrupt law.
Another striking evidence of Cross’s own opinion, being entirely unsettled as to the value of his property to the extent of over $100,000, is, that in his deposition he computes his wealth to be from $100,000 to $150,-000 (varying as doubtful quite $50,000), while in his bill of particulars annexed he computes himself worth $290,241, after paying all debts, or nearly $200,000 more than the first sum of $100,000. There is another similar illustration of his habit in over-estimating his property, tested by himself, and near the time of this transaction, before any depreciation could have occurred. Thus he computes the Dorchester property at $7,000, when he sold it to Noble for only $1,200, a depreciation of near five sixths. Such a fortune, like the Indian philosophy of the earth resting on an elephant, and the elephant on a tortoise, but nothing, for the tortoise to stand on, falls with the first adverse gale. So it happened, and was verified by Cross himself, in relation to the sales and the net profits anticipated, of more than $100,000 from this very tract of land now in controversy. Instead of realizing that princely fortune, the very first purchase-money to Eeed of the small sum of $30,000, according to the proof, has never yet been paid, except a few thousand dollars otherwise raised. The paying of that, depended mainly on the paying by the First Boston Company to Cross; and their paying, depended on Cross’s purchase back and paying them; and his paying them, depended on the paying of the First Boston Company or somebody else .to them; and the paying by the Second Boston Company or others, depended on the sale and paying to them by purchasers in Long Island or elsewhere; and theirs, on the paying to them by the purchasers of “the good pumpkin white pine timber” at one hundred and thirty millions feet, yielding over a million dollars in profit, when in fact only seven or eight millions grew on the whole township, and with a bad stream to get it to market. This foundation of the whole failing, the entire cob-house tumbled down, with fragments rolling and scattered in all directions, but not a single payment perfected from first to last.
I refrain from spending time on the evidence as to Cross’s efforts to create, through the newspapers and otherwise, in advance of the attempts in August to make these sales, exaggerated notions as to his great wealth and philanthropy. It is certain, that when in that month he gave his bond to the first company, though it was intended as he says for a purchase, they were not willing to trust him as a man of property, nor did they even confide in his notes secured by a mortgage. So, again, whether he was intending to dupe others, or really duped himself on this topic, till the 22d of October, 1S35, it is impossible,
The next misrepresentation, set up as made by Cross in August, October, and before the sale in November is, that he owned the whole township A No. 2, having repurchased it of the First Boston Company at an advanced price, and from a conviction of its superior qualities. Clearly from the evidence, such a statement seems to have been made in August, during the negotiations as well as at the time of the negotiation in October, and the sale in November. Indeed, it is quasi admitted, being justified as. true on the ground, that having obtained a bond for a deed in August, and given a bond to take and pay for one on 'the 19th of October, he was virtually the owner till that date; and that though he then failed to obtain a deed from his inability to make the promised payments, yet he obtained a parol extension of the time for having the deed and for making payment, thirty days longer. However such a contract for a purchase may in law or equity confer certain rights to the land, which may be sustained on making, subsequently, the payments stipulated (1 Sugd. Vend. 171; 1 Atk. 572; 7 Ves. Jr. 265, 274), yet it is difficult to see how they amount to an actual sale till the condition precedent is fulfilled; and which usually is the payment or tender of the consideration.
As between the parties where there is a contract to sell and buy, chancery, by considering that done, which ought to be done, may regard the buyer as owner, and if he is to mortgage back, as mortgagor; Longworth v. Taylor [Case No. 8,490]. This must be, however, only between them and not third persons, and even a court of equity could not consider a deed as executed, unless the consideration was paid or secured. So what is to be conveyed is regarded as personalty, if the vendor die before conveying. 7 Ves. Jr. 436; McKay v. Carrington [Case No. 8,841], Here, too, not a dollar of the money was tendered or paid at the time agreed, nor till after Cross had himself conveyed to the plaintiff and others, and obtained notes and money to pay over to Montague, who then, and not till then, delivered to Cross the several conveyances of one tenth each, which had been signed by the trustees, and which conveyances they did not mean should have any effect till payment and delivery. This was as fully known to Cross as to themselves. It is equally difficult to see, how such an inchoate and imperfect claim to have the land in a certain event, which had not then happened, and did not happen at the time agreed, nor till after he had made the very sale, now in controversy, could, in common parlance, be regarded as making him the owner or purchaser till that event. Much less can it be regarded so in the sense, and for the purpose and effect manifestly intended in making those representations here, and as. they were probably understood by others, who re
But if the naked truth had been developed at the sale, that the money had not been paid to.Cross by the First Boston Company, for the enhanced price then given by them, if it has been to this day, except in part; that Cross himself was one of the purchasers in interest from himself at that enhanced price, to the extent of one tenth of the township; that the next purchase back by him at a still further enhanced price had never been completed, nor a dollar of money paid for it, nor any likely to be, until he could accomplish another sale of the land, and thus raise the means; that this had been attempted with a second Boston company, a part of whom were also members of the first one, buying from themselves at an advance, but never paying any thing, from a conviction among some at least, that the pine timber on the land had been greatly overrated; looking at all this, can any person suppose that the purchase back, represented by Cross to have taken place to himself, accorded, as understood by the grantees in Long Island, or was meant to accord with the whole truth? or that it was supposed by him to be understood by the plaintiff, and other grantees, in conformity with what he knew to be the truth in relation to what had happened as to that repurchase? And can any one for a moment believe, that the real facts as to it, if all disclosed, would have made the same impression on them, or held out the same inducements to buy as the representations did, which Cross then actually made? I think not. But when you add to this the further representation by Cross, that he had purchased this land back from a conviction of its superior qualities, there can be little doubt of the influence he meant to produce by the whole statement, and that it was at variance with the real gist of the whole transaction.
There was still another matter, connected with the land and the sale, which appears to have been stated by Cross in a manner not according with the facts as proved by various witnesses. The value of all the timber on the land depended much on the facilities, and speed, and certainty of getting it to a market. Cross represented that it could be sent to market, yearly, by a stream running through a portion of the township, while in truth it cannot be so sent, usually, short of two or more years; and he thus impressed on the plaintiff and others a belief of a fact, which would naturally lead to a great overestimate of the value of what timber did exist on the land, independent of the other impression he attempted to make, of a quantity of pine timber being there so greatly beyond the truth as since developed, and as before referred to. But, besides these departures from what was open, upright and truthful in the transaction, certain other measures were resorted to with a view to produce the sale, which were reprehensible, and tended to suppress the real character of the transaction. In such cases there is little if any difference between suppressio veri and sugges-tio falsi.
Thus the whole matter as to the Second Boston Company, whose agent it is now said by some of the defendants he was, and whose bond of August, 1S35, he carried to New Fork in his pocket, and who in that bond state they had purchased this township of him, when they had not, but whose failure to purchase and pay took place in October, and were well known to him in November, as well as the cause of it, in the deficiency of timber on the land, which had been assigned to him by some of them, — I say, the whole of this seems from the evidence to have.been carefully concealed or suppressed, and did not become known to some of the grantees, if to any of them, before the ensuing spring. Had it all been made known before the sale, it cannot be doubted that its influence would have been decisive to prevent the sale, and could hardly have been overcome except through another concealment which existed in the case, and which is among the most censurable of the whole, and was at the start resorted to by Cross, and must throughout the whole of it have naturally exercised a controlling influence over the minds of the plaintiff and others. This was the employment of Chalmers, residing in New York, and a former partner of Cross, and an acquaintance of the grantees, as a secret agent of Cross, to promote the sale, on high commissions for the service, while Chal-mers was to hold himself out to the grantees as a friend of theirs in the trade, a counsel-lor, and a purchaser of several shares in common with them.
The proof of all this, though denied by Cross in part, is satisfactorily made out by Chalmers’ own testimony and various corroborating facts. If Chalmers, thus conducting, stood alone to disprove the answer of Cross, thus conducting, the infles of evidence might require us to hesitate as to the proof of this charge being sufficient, unless believing Cross to be otherwise much more discredited by the contradictions to many of the allegations in his answer than Chalmers is. But, beside such a consideration, Cross admits some circumstances which go to support Chalmers. Cross admits he had been his former partner, and Cross was thus likely to use his services, and was not so likely to mislead him, as a stranger, in making a sale
' The notes given to Cross were, as Chalmers states, but a cover to blind the eyes of all concerned, in Boston and New York, with counter notes given by Cross to him, to be subsequently exchanged or arranged so as to exonerate Chalmers from any other payment than his commissions as agent. Had the grantees known Chalmers’ position, it cannot be supposed, for a moment, that the trade would probably have been consummated. Connected with this, and the diminished confidence to me placed in Cross’s statements when to the contrary, and connected with his general behavior as to fairness throughout the whole business, is the change in his answer’s and oaths respecting the form of the written contract with Noble. The lame account also given of his exaggerations concerning the amount of his property; his apparent tampering with some of the certifiers and persons living near the land; his coneeal-ments as to the Second Boston Company, and of the disclosure's made to him by Cordis; his antedating all the writings in November; his antedating the paper signed by Gregg-; his having certificates addressed double, as if made either at his request or Babcock’s; his failure to produce the Keed bond; his claim at one time to have Noble retain property to pay it, and then avoiding it when sued; his pretensions to be immensely rich in 1S35, aud yet, in that very year, allowing himself to be prosecuted, defaulted, and no payment made, and assigning most of his estate to other creditors; his assumed ability to ful-fil all his extravagant guarantees, and yet going into hopeless bankruptcy; his avowed loss of the written contract made with Noble, but preserving one not made; the looseness evinced in his deposition respecting his various debts, and the securities for them, lodged with Noble, and not accounted for in his bankrupt schedule; and, finally, his eagerness to sell what he stipulates and guarantees shall yield a profit of $1,296,000, thus throwing away at once that immense profit! —from all these, and from the considerations before explained, I regret that it is impossible to divest my mind of the conviction, that the conduct of Cross, in this transaction, has been such as to render his answer entitled to diminished confidence, and the sale to the plaintiff void on account of material misrepresentations, which could not but have influenced the plaintiff to make the trade, and which have turned out to be unsupported by facts. Nor do I entertain much doubt, that the bill, in this case, alleges enough to justify setting aside the sale on account of a gross and great mistake in the quantity of pine timber on the land; there being clear evidence not only of that mistake, but that the quantity of such timber formed a principal inducement to the purchase by the plaintiff and others.
But there is no substantive, distinct claim in this bill to set the sale aside for a mistake alone; and though all the averments necessary to recover for a mistake may be included in the higher charges of fraud, and there are some analogies to justify the waiver of what is surplusage in cases at common law, such as finding a prisoner guilty of manslaughter under an indictment for murder, and of larceny under one for burglary; yet it is not certain that the respondents, under this bill, would come fully prepared to make such answers and proof as they would make, in case of a bill asking specifically to have the sale set aside for a mistake. The case of Daniel v. Mitchell [Case No. 3,562] seems to sustain such a course; but the printed report of it does not set out the bill so fully as to enable one to judge, with certainty, whether it is a precedent in point or not on this question. The manuscript bill, however, on being examined by me, is found to declare the representations there made not to be true. It uses the words “ ‘knowingly’ and ‘wilfully’ misled
I have therefore turned my attention to the matter of falsehood and fraud, as perhaps necessary, and have inquired what misrepresentations were made, which were material in the trade, rather than looking to mere mistakes; and am convinced that falsehood and fraud were practised in all the means used by Tuthill, so far as those means &re proved to have come to the knowledge •of Smith, the plaintiff; and in that mode, as well as directly, they extended to other essential elements in the trade, so as entirely to destroy its validity in respect to the respondent, Cress. More especially is this the case as to many details, where the purchaser, confiding in the representations and guarantees of Cross, who' claimed to be a man of great wealth, would be less particular, ••and surely would be far less so as to matters laying more within Cross's private knowledge. Mason v. Crosby [Case No. 9,234], As to these, still trusting to him, they would look only to general appearances and general considerations. There is, to be sure, much in extenuation as to Cross, that shows "him to have been, in such- an insane era as 1S35, in many respects duped as well as duping; and after conforming heedlessly to •a false standard of the times, acting, without doubt, from recklessness and want of •sober reflection, in respect to his statements, more than with a view wilfully to misrepresent and defraud. One striking illustration •of this existed in his presumption to guarantee that the land, even at the high price it was sold for, should yield over a million •of dollars in profits. Nor is there any solution of this, independent of extreme credulity and inconsiderate folly, except what is worse, a conviction that he was worth nothing. and hence was risking nothing, though professing to be so wealthy. His temperament seems to have been sanguine, and his operations hasty; and hence he perhaps often believed what others, even in that credulous epoch, distrusted. But it is to be remembered, that in all these cases, the court is bound to look only to civil obligations and duties. It is not necessary, except in criminal prosecutions, to find that the mind was evilly disposed, or knowingly deceiving under an entire loss of its moral tone. But it is enough if statements were made, whether with or without knowledge, which were material to the trade and were relied on, and which turn out to have been clearly unfounded. He, who hazards such statements, should be made to suffer from them civiliter, rather than those whom he misleads by them; the author of them should suffer rather than their victims. According, then, to this respondent, all which charity and the facts may justify, he must still be answerable to the plaintiff for all the money and notes he obtained from him. What aid he ought to receive from the other parties to the bill in meeting this liability, and on what terms or conveyances back by the plaintiff, will be seen after examining the rest of the case
The next inquiry is, how does the case stand in respect to the other defendants, who were members of the Hirst Boston Company? They were owners, as cestui que trusts of certain shares in common and undivided with- Cress. . Besides this, they had recently bought the land of him, and united with" him in making a new survey of the timber on» it; and some of them had visited the premises in company with him. He held a large amount still due front them in notes; and in a few weeks, if not days, after taking them, during the very next month, entered into a negotiation with Babcock and Glover, the trustees authorized to sell and manage the land, to repurchase it from them at the advanced price of five dollars per acre, when they had given only $3.50. This was done, either because he believed, after so short a time, that he had parted with it much below its real value, though at nearly treble the price he had agreed to pay Reed for it, which belief would be not a little extraordinary; or from a conviction, which he had impressed on the minds of the trustees of the company, that although not able to pay them so large a sum as the advanced price would amount to, even after deducting their own notes to him, he could in a short time accomplish it, if they would give him a bond for a deed by the 19th of October ensuing; and. in the mean time, would co-operate with him in effecting a sale to a second company in Boston ata still further advance, and then enable him to make still another sale at a still further advance for the second company in New York or elsewhere. The whole seems to have been parts of one plan; that plan or arrangement was to effect a sale by and payment to the own
It is a very decisive fact, to show it was not meant as a sale to Cross, that they did not execute to him a deed at once, and after taking up their own notes, receive for the balance a mortgage from him on the whole premises, in order to secure it, and which they could not doubt, after just giving three dollars and a Iialf per acre for the land, would make'them entirely safe. Nor could Cross object to this, if the sale was bona fide, though at a price so much beyond what*he had just sold it for; because in this way he would secure the first notes that run to himself, and all the consideration for his original sale to them, and only be liable to pay, beside, what he had become convinced was the increased value of the township. Nor would its being incumbered by a mortgage be any bar to his subsequent sale on his own account at an expected price still higher, as the mortgagees would discharge it on receiving a due portion of the consideration, and a good title could then be made by him, and the balance would be his own regular gains. But not doing this, and resorting to the form of a bond on the 15th of August, to convey to him on his making payment by the 19th of October, and receiving back a bond from him to make the payment, is much more reconcilable with the idea, that the sale was either conditional and to depend on his success in other sales by their aid; or was rather, and as is most likely in the usages of that day, regarded merely as one mode of enabling Cross, as their agent or attorney, to get more confidence as an apparent buyer. He might thus be able to make an absolute sale, if he could, for them, before the 19th of October, and then, on letting them have the money and securities to the amount of five dollars per acre, convey a title, and retain the residue of the consideration for his services and gains. In the usages as to land sales in Maine, in 1835 and 1836, the agent was frequently clothed with papers as an actual or expected purchaser, though in truth a mere agent. Because his statements as one, who had himself ventured to buy, and was more responsible as an owner, would be more confided in than those of only an agent. Doggett v. Emerson [Case No. 3,960], At first the “bonds,” so called, were not sealed, but were mere written slips, agreeing to give a refusal a certain length of time at a certain price. But others were soon drawn by lawyers in common form. They appeared in that form more like real sales, and hence misled more in getting credit as owners, and at last that form was generally adopted. Cross also would be perfectly willing to enter into such an arrangement, if confident he could sell the land with the company’s cooperation at a higher price, as he would thus obtain not only the excess, but the payment of his notes held against the company for his sale to them, and great profits on his one tenth still owned in the township. This direct interest of his seems, before the proceedings were closed in November, to have increased to two tenths, if not more, thus making him a larger owner in the first company, and hence more likely to be employed as its agent: and though an agent, this large private interest accounts also for the circumstance of his being willing to indorse the notes he procured to the company, having It also in his own power to take only good ones, and to secure them, as he did in this instance, by mortgages, which he seems aft-erwards to have proceeded to foreclose with dexterous speed. What appears to have next been done, in order to render this arrangement successful? The first company engaged to -unite with other signers, to form a second Boston company to purchase the township of Cross forthwith, at even a dollar in advance on an acre, or over $28,000 advance in the aggregate on the price they had just agreed to sell it for to Cross. It is proved that they agreed, as a company, to take something like one third of the new shares, divided into thirty instead of ten, as in the first company, and three of the old members actually headed a subscription for seven shares in the new company. How can this be accounted for, if the sale to Cross had been absolute or bona fide, and not a mere mode of enabling the first company to effect in that way to others, if possible, an absolute sale, in order that they might realize five dollars an acre from Cross, for what they had just before engaged to pay to him only three and a half?
If they really wished to remain interested in the land, why sell to Cross any but the portions which they did not wish to retain? And why, if so wishing, agree to pay a dollar per acre more than they were getting from him for the very same premises? If the old company did not still remain owners,
It is difficult, then, to resist the conclusion, that, however, in form they may have given Cross a bond, to convey to him on condition, and however they did in form convey to him in the end, after he had made the bargain with and given a deed to the plaintiff; the whole was but a mode of making a sale by them,' through him, as a part owner and agent. He was to fix the terms within certain limits, negotiate the times of payment and amounts, and they then, and not till then, were to receive the consideration and deliver a deed, to and through him, for the purchasers. That this was the real nature of the transaction, several circumstances, be
The measure of the liability of each of the respondents in this class will be the amount each was entitled to receive, and did receive from Cross and the trustees, which was paid by the plaintiff, and any notes of the plaintiff either may have received from Cross towards his share. When a master has reported on this, the final decree can be made up to correspond with the report of the master. If any of the respondents be dead since the pleadings closed, a scire facias can issue against his executor, to show cause why judgment should not be entered, to that extent, against his goods and effects. To this extent they will come, in aid of Cross's general liability.
The last inquiry is in respect to the liability of Noble. He is the holder of some of the notes, taken for this sale to Smith, and if he took them before due and in the usual course of business, as an absolute purchase of them for a present or past consideration, and without notice of any fraud by Cross in the procurement of them, or any want of an adequate consideration to the makers, he is a bona fide purchaser, and cannot be required to surrender them till paid. But, on the contrary, if it is satisfactorily shown, that he knew what was the consideration for them, and that it was either fraudulent or of little value, or if he took them without such knowledge and notice, yet not as a purchase in the usual course of business, whether for a new or past consideration, but rather as a pledge to secure existing liabilities; and, much more, if he took them to secure future liabilities, the notes are open to any defence they would be if still continuing in Cross’s hands. Among those defences is fraud, or want of adequate consideration, or a set-off against the prom-isee. Without regard to notice of fraud, or of enough to cast a shade on their consideration, the first and best test on this subject strikes me as being, whether there was an absolute sale of the notes? Was there any residuary interest left In the vendor, the in-dorser? Any equity of redemption? Any right to have a return of them on the payment of money or performance of some act? If so, it was not within the principle of protection to negotiable paper in the market, as that principle is to protect a purchaser, and not a mortgagee, who takes, the notes as security only for other matters, instead of buying them in market overt as negotiable paper. He thus holds them merely as he would un-negotiable paper, or personal property pledged for a like purpose; as some personal property and even land were pledged in this case to Noble. In such an event, he does not hold them for an agreed price paid outright for the notes, or credited for them on a former debt at the time of receiving them instead of when collected; nor as other property bought and not lodged merely as security. The destruction or loss, or failure in any way of this last property would fall on the assignor, while of the former it would fall on the assignee or buyer.
These seem the natural and truest tests of such transactions, rather than the fact of the consideration being new or pre-existing. 10 N. H. 266; Williams v. Little, 11 N. H. 66; 20 Johns. 637; 6 Hill, 93; [Swift v. Tyson] 16 Pet. [41 U. S.] 1; [Coolidge v. Payson] 2 Wheat. [15 U. S.] 66; [Townsley v. Sumrall] 2 Pet. [27 U. S.] 170; 4 Hill, 93; McNiel v. Holbrook, 12 Pet. [37 U. S.] 84. A pre-existing debt is a good consideration for the sale of a note when it is sold actually, or taken in actual payment. But, whether the consideration be one or the other of these, new or pre-existing, seems of little consequence, except as one species of evidence in relation to the fact of
Now there can be no doubt, that Noble took the notes and other property of Cross in October, 1835, as collateral- security for certain debts belonging to him and his partner, Wyer, and liabilities for which Cross was responsible,' and that he was to apply their proceeds in discharge of those debts and liabilities, and return any balance to Cross. A similar account is given of the transaction by Noble, in his answer in Tut-liill’s Case, even after the alleged discovery of the mistake in the authenticity of document C, as to his agreement with Cross. But whether the property so assigned, was to be held as security for any new and future liabilities by them, on account of Cross, during the ensuing four years, is a matter about which there is much controversy, and is in the former view, as to the character of the transfer, not very material. So it is equally certain, that when the present notes were handed to Noble by Cross, in November following, it was done under a like arrangement as to their being security for the former debts and liabilities, and any balance was to be accounted for as with the others. But the same doubt exists, whether they were intended to cover any future liabilities or debts between the parties, and an additional doubt, whether any new responsibilities, before not included and not assumed, were to be covered by the pledge of these last notes. It is also quite clear, that some of the former notes, to the amount of about $4,800, were given up, when these last, amounting to about $29,000, were lodged with Noble in November. I speak of what is clear, as contradistinguished from what is controverted, because the writing itself, given by Noble to Cross, October 22, 1835, whether in the form as now contended by them, or as they originally, in the pleadings in this case, set it up to be in respect to future debts and liabilities, is conceded on all hands to have been an obligation to account for the proceeds with Cross, and pay over to him any balance.
Such is its language, as to this, under either view; such the averments in the answers, as well as the bill; and such the nature of the transaction. Neither the real, nor personal estate, nor notes were appraised at certain sums, and sold, or pretended to be sold, and Cross discharged or released from debts to that amount. The same remarks are applicable to the pledge of the last notes, except that some of the former ones were given up then; and there is some contest, whether some new de,bts or liabilities were not also to be covered by these. Giving those up is likewise another evidence that they had not been purchased outright.. It will be seen, that, under these circumstances and views, it becomes unnecessary to settle the much controverted question, whether the writing given back by Noble to Cross covered any liabilities not existing at the time; and whether its operation would then be different in respect to this case, however it might be as to subsequent attaching creditors of the property. For, fn either event, it is in other respects on its face, and as proved by the nature of the whole transaction, and as admitted in Noble’s and Cross’s answer, ’ decisive that the notes ■ were not sold absolutely, but only lodged as collateral security; the proceeds to be accounted for afterwards, and any balance to be paid over to Cross, and no past nor present consideration having been discharged or released at the time between the parties, and no fixed sum having been agreed on, for which the notes were sold or bought. Indeed, Noble admits, that no specific value, was fixed or computed by him as to the property or notes originally assigned, so little did he think of making a purchase of them.
Again, it is unnecessary to settle another moot point, whether when the new notes, including that in this case, were pledged,. Noble assumed any new liabilities or not. For if he did, they were only for the amount of a part of the notes; and of those formerly pledged, a part were given up, and the whole left were held as the others had been, only for security for what was due at the time they were pledged, whether consisting of old or new matter. It was no more an absolute sale for one set than the other; and they both were understood to be held in pledge the same way and to the like extent, and on like terms, though they might be in.
There is so much in this long and complicated case, which it is necessary to decide, in order to dispose of it properly among so many parties, and such conflicting interests, that I am inclined not to agitate and decide either facts or points of law which arise, unless their decision seems to be, in some degree, either necessary or expedient to a correct judgment of all the merits. But ■when it so seems, it is the duty of the court,, however unpleasant to itself or the parties, to probe the truth to the bottom, and announce it fearlessly without regard to consequences. I am more inclined, also, to forbearance, whenever justifiable, if the questions involve imputations on character and moral turpitude, such as fraud and palpable misrepresentations, made with a view to deceive. For these reasons, I have offered an opinion on the character of Cross’s conduct in this case, because obliged to do it in order to dispose of the merits justly; but I have not expressed any opinion on the evidence, implicating several of the First Boston Company in respect to representations, covering the quantity of timber on the township in dispute, and concerning Cross’s title, and which have not been shown to be true. It is not necessary to a just disposal of the case, to pass on the character of their own acts, or those of some of them, whether fraudulent in design or not. Because, without that, I hold the members of that company, in law, responsible for the statements and conduct of Cross, as their agent, and a part-owner in selling the land. The sale was for their benefit, and the proceeds of it were received by them to the extent of their claim on Cross, and for whose statements and conduct, while so acting, they must, in a civil point of view, be liable, if they choose to take the benefit or fruits of his doings, whether intending themselves to have defrauded the purchasers or not.
In like manner, and for like reasons, I do’ not intend to express any opinion on the conduct of Noble, in respect to his books, some of it very remarkable, or on his various answers as to the paper C, containing what purports to be the contract between him and Cross, neither of them professing to preserve the true contract, but both preserving what was wrong, and losing what was right: or, on the looseness and imperfections of his exhibits and accounts, connected with this large transaction; or the variances of dates, sums, and positions, taken at different times; or on his knowledge of any thing false or fraudulent in the proceedings of Cross in selling this land to the plaintiff and Others, so as to obtain the notes now in dispute for his own security; or on his collusion in any way or to any extent with Cross, either to defraud his creditors by the conveyances to Noble; or to defraud the plaintiff and others by having their notes forthwith negotiated to himself, so as to prevent defences to them, or the satisfaction of any judgments which might aft-erwards be recovered against Cross on guarantees, or warranties, or bonds. But in respect to the fact of notice to Noble, or knowledge by him, that these notes were part of a large consideration paid by the plaintiff and others, for township A., No. 2; and that the land was of little value in comparison with the price obtained, if it were necessary to decide, no great doubt can exist, looking to all the circumstances and proofs. It probably is not necessary to show, that Noble had such knowledge, if he held the notes merely as collateral security. 10 N. H. 226; 11 N. H. 66. But if this knowledge was necessary, it is well made out, and the facts involved were enough not only to excite inquiry, but to “cast a shade” over the notes themselves, and bring them so as to be open to this de-fence on other well settled principles. Chit Bills, 281; Story, Bills & Prom. Notes, §§ 194, 197. The fact of his knowledge does not, as is argued, depend merely on the testimony of George Miller. If it did, the position of Miller, as one of the associate purchasers, and the attorney and adviser of the rest, would require a close scrutiny; and after all, it would be but the evidence of one person to overcome the denial of Noble in his answer. But it besides rests on the evidence
Now, after all those intimacies and confidences, and connections, that he should become the assignee of Cross to the large amount of $80,000 or $100,000 worth of property, and then take in addition to it near $30,-000 more in notes, and not ask Cross the consideration of them; and that Cross, when so asked by such a friend and creditor and trustee, should have concealed from him that the notes were given for this land, and the price per acre; and that Noble did not know the purchasers must have given such a price, under the supposition that the quantity of timber was much larger than Noble knew to be probable; it is exceedingly difficult to believe. This conclusion is strengthened, moreover, by the testimony of Gregg, that Noble told him that Cross had frequently said to-him he was agent of .the Boston Company; showing that they were in the habit of conversing about the land and its sale. For reasons like these, and those first detailed, without going into the specific question of any fraud being known or intended by Noble, it seems to me equitable as well as legal, that he should be considered as holding the notes subject to any equities or defences, existing against Cross at the time of their indorsement by him. In holding this, if a loss must happen somewhere, it is more proper m justice, as well as law, that it fall on Cross, and those representing him, and holding the notes for him, and for his benefit as well as their own, rather than on those whom Cross had deceived and misled in order to obtain them. But, at the same time, though in this view it seems right to require the notes of the plaintiff held by Noble to be surrendered, and it must be done, yet it is proper that Noble should have the same lien on what is to be re-conveyed to Cross or the First Boston Company, and what constituted the consideration for the notes, as on the notes themselves. Hence Cross’s two or three tenths, as owned at the time he got these notes, should go in pledge to Noble till his claims are satisfied, rather than go to the general assets of Cross as a bankrupt, for the benefit of all his creditors, pro rata. The re-conveyance by the plaintiff might be made so as to do justice in two or three ways. But the most natural one is for it to run to Cross, on the plaintiff’s receiving his money and notes, in trust for Noble to the extent of the shares owned by Cross at the time of the sale, and to be conveyed by Cross to Noble as collateral security after the notes of Smith are surrendered to him, and the residue held in trust for each of the First Boston Company, and to be conveyed to each, according to his shares in the land, after his making the payments of money directed by the decree in this case.
Let a master be appointed to ascertain and fix the sums of money to be paid by Cross, and refunded to, or in aid of, him, by each • owner, and also to prepare the form of the conveyance to be executed by the plaintiff, and by Cross to the other parties; interest to be computed on all that has been paid by the plaintiff, from the times it was paid, and the usual deductions made for timber cut, or rents received by him.-
During the argument of this case, and after the pleading and evidence were closed and printed without any reference to the bankruptcy of Cross, or any other of the respondents, it was moved that he might have leave-to file and avail himself of a certificate of discharge as a bankrupt, which he had obtained since this bill was instituted. The motion ■was made in May, 1840. Afterwards it was found, that such a plea had been made by him and others, after the case was printed, but had been lost; a duplicate wais allowed to be filed. Since that motion was made, this court, in the Maine district of this circuit, overruled a like motion, both for being made too late, and for being, as to a claim, not provable before a commission in bankruptcy. The grounds of this decision were fully explained in the opinion in that case, and may be seen in the concluding part of it. Doggett v. Emerson [Case No. 3,962]. Where others, or Cross himself, pleaded a discharge in bankruptcy at the next term after obtained, the objection as to improper delay might not apply, but the other objection as to the nature of the demand, being one merely in equity, and tainted by fraud, applies in full force to the whole of them. These pleas are, therefore, overruled.
It is stated, also, since the case has been
Case-law data current through December 31, 2025. Source: CourtListener bulk data.