Fay v. Hill

249 F. 415 | 8th Cir. | 1918

TRIEBER, District Judge

(after stating the facts as above). [1, 2] It is insisted on behalf of appellant that the court, as a court of equity, was without jurisdiction, as there was a complete and adequate remedy at law, and therefore his plea to the jurisdiction should have been sustained. As the action was commenced after February. 1, 1913, when the new equity rules were in force, the fact that the plaintiff had a complete and adequate remedy at law is no longer ground for demurrer or motion to dismiss. The proper procedure is to move to transfer it to the law side. Equity Rule 22 (198 Fed. xxiv, 115 C. C. A. xxiv). Failing to make such a motion, and proceeding to a hearing, was a waiver.

[3-5] But, aside from this, if there had been a transfer to the law side of the court, and the bill treated as an answer to the action at law, if it stated an equitable defense, it would have had to be disposed of by the court', sitting as a chancellor, before the trial of the action at law to a jury; and if upon such a hearing the equitable defense had been sustained there would be nothing left to try to a jury. This was decided by this court in Union Pacific R. R. v. Syas, 246 Fed. 561, -C. C. A.-. The facts alleged in the complaint make it clearly a case for equitable relief, as it seeks to cancel contracts alleged to have been obtained by fraud and deception, and that the minds of the parties had never met. Sharon v. Hill (C. C.) 20 Fed. 1; Sharon v. Hill (C. C.) 22 Fed. 28. The cancellation of the contracts would prevent their use in any other action instituted by appellant on these contracts.

[6] Was the decree right upon the fácts? The findings of the trial judge, especially as most of the testimony was taken in open court, are entitled to high consideration, and unless clearly against the weight of evidence, or induced by a mistaken view of the law, such findings will not be disturbed by the appellate court.

[7, 8] A careful reading of the testimony leads to the conclusion that the representations by appellant that it was a corporation, and by implication at least, with a capital and commercial rating, was such a concealment of facts as amounts to a fraud. In Smith v. Richards, 13 Pet. 26, 36, 10 L. Ed. 42, the rule laid down in Story’s Equity Jurisprudence was followed:

“ ‘Where the party, intentionally, or by design, misrepresents a material iact, or produces a false impression, in order to mislead another, or to entrap or cheat him, or to obtain an undue advantage of him, in every such case, there is a positive fraud, in the truest sense of tho terms; there is an evil act, with an evil intent; dolum malum, ad eireumveniendum. And the misrepresentation may bo as well by deeds or acts, as by words; by artifices to mislead, as by positive assertions.’ ”

The court then proceeded:

"And even if tho party innocently misrepresents a fact, by mistake, it is equally conclusive; for it operates as a surprise and imposition on tile other party. Or, as Lord Thurlow expresses it, in JSevill v. Wilkinson, ‘It misleads the parties contracting, on the subject of the contract.’ ”

Even if there was no fraudulent intent on the part of the appellant, there can be no doubt that the minds of the parties never met, as, when the appellees made the contract, they were under the impression that appellant was a corporation engaged in the manufacture of linoleum, with a capital and commercial rating. While it is the general rule that a contract may be made by correspondence or by telegraph and when the offer is made by the seller and accepted by vendee it is a valid contract, there are exceptions to this rule. When a party inquires for prices and misrepresents his financial' standing, either expressly or by suppressing a material fact which, if known to the vendor, he would not have entered into the contract, in such a case a concealment of the true facts is a fraud on the vendor which entitles him to a rescission, provided he acts promptly. The evidence iti this case sustains beyond question the finding of the trial judge that there was a material .misrepresentation or concealment of the truth on the part of the appellant when he represented himself as the Western Linoleum Manufacturing Company. Nor can there be the least doubt that the appellees acted under this misapprehension and exercised extraordinary diligence for the purpose of ascertaining the commercial standing of the so-called Western Linoleum Manufacturing Company, and upon discovery of the true facts promptly rescinded the contract.

It must not be overlooked that these contracts of sale were not for immediate delivery, but for deliveries to be made at future times. The contracts were made in November and December, and the deliveries were to be made between April and August, in equal monthly installments. It was therefore of the utmost importance to the appellees that the vendee should be a responsible party, and financially able to accept and pay for the oil when delivered, although tlie price might have declined considerably in the meantime. As stated in Arkansas Smelting Co. v. Belden Co., 127 U. S. 379, 388, 8 Sup. Ct. 1308, 1310 (32 L. Ed. 246), where there was a contract for future deliveries :

“During the time that must elapse between the delivery of the ore, and the ascertainment and payment of the price, the defendant had no security for its payment, except in the character and solvency of Billing and Eilers.”

Had appellant made the inquiry for the price of oil in his own name, instead of in the name of a supposed corporation, which had no existence, there can be no doubt that appellees would never have entered into these contracts in the absence of references as to his financial standing. Therefore the minds of the parties,have never met. A case directly in point is Fifer v. Clearfield & Cambria Coal & Coke Co., 103 Md. 1, 62 Atl. 1122. Other authorities in point are Cundy & Bevington v. Lindsay, 3 Appeal Cases, 459, 47 L. J. Q. B. 481, 38 L. T. 573, 6 Eng. Rul. Cases, 211, decided by the House of Lords; Boston Ice Co. v. Potter, 123 Mass. 283, 25 Am. Rep. 9; Rodliff v. Dallinger, 141 Mass. 1, 4 N. E. 805, 55 Am. Rep. 439.

[9] Another ground upon which relief is frequently granted by courts of equity is when a hardship amounting to an injustice would be inflicted on a party by holding him to his apparent bargain and it is unreasonable to hold him to it. Paget v. Marshall, 28 Ch. D. 255, 54 L. J. Ch. 575, 51 L. T. 351. The evidence satisfies beyond question that appellant was insolvent, having no means to respond to losses which appellees may sustain if, by reason of a fall in the price of oil, he refused to accept the oil when tendered, and that he entered into these contracts solely for speculative purposes, with neither intention nor ability to carry them out, if the price of oil should decline, when deliveries were to be made, but to take the profits arising from the transaction, if the price of oil appreciated.

[10, 11] Another ground upon which the decree must be sustained is the finding by the trial judge, warranted by the proof, that the price of oil had declined at the time of the cancellation of the contracts, and appellant could sustain no damage by the repudiation pi the contract by appellees. It is true this would be a complete defense at law, but, a court of equity having obtained jurisdiction by reason of the equitable allegations, it retains it for all purposes.

The decree of the court below is right, and is affirmed.

SANBORN, Circuit Judge, dissents.