Allen v. Hammond/Opinion of the Court

This suit in chancery is brought before this court, by an appeal from the decree of the circuit court for the district of Rhode Island. The bill was filed in the circuit court, by the appellee, to compel the appellant to deliver up to be cancelled a certain contract, on the ground of its having been given through mistake.

In the year 1830, the appellee being the sole owner and master of the brig Ann, of Boston, while on a voyage from New Orleans to Madeira, and thence to the coast of Africa, was illegally captured, off the Western Islands, by a part of a Portuguese squadron. Notice of the capture was given to the American government, but the vessel and cargo were condemned. Such remonstrances were made by the American government, that on the 19th day of January 1832, the claim of the appellee was admitted, to the amount of $33,700, by the Portuguese government. On the return of the appellee to the United States, he executed a power of attorney to the appellant, which is stated to be irrevocable; authorizing him to prosecute his claim against the government of Portugal. And on the 27th of January 1832, the parties entered into a contract, under seal, in which Hammond agreed to pay Allen ten per centum on all sums which he should recover, up to $8000, and thirty-three per cent. on any sum above that amount, as commissions. And Allen agreed to use his utmost efforts to recover the claim.

Prior to this period, and before the power of attorney was given, Allen, who was a commission-merchant at Providence, Rhode Island, had acted as the agent of Hammond in procuring insurances on his vessel and cargo, at various times, and also in the transaction of other business. Commissions were charged by Allen as in ordinary cases; and it appears, that Hammond was indebted to him for these services, at the date of the above agreement, the sum of $268. Allen had effected an insurance on the brig for the voyage in which it was captured, and as soon as he heard of the capture, he made representations of the fact to the secretary of state, at Washington. This was not only sanctioned by Hammond, but from his correspondence with Allen, he seems to have placed great confidence in his disposition and ability to serve him. There are a great number of facts which are proved in the case, and contained in the record; but it is unnecessary to state them, as they can have no direct bearing on the principal, and indeed, the only, question in the cause.

It appears, that eight days before the agreement was entered into by the parties, the Portuguese government admitted the claim of Hammond, one-fourth of which was shortly afterwards paid. And the question arises, whether an agreement, entered into under such circumstances, ought to be delivered up and cancelled. No one can read the contract, without being struck with the large sum that Hammond is willing to pay on the contingency of recovering his claim. Allen was to receive as a compensation for his services, a sum little below the one-third of the amount recovered. This shows, in the strongest point of view, that Hammond could have entertained but a remote prospect of realizing his claim; and indeed, it would seem, when the circumstances of the case are considered, that he could have had little or no ground to hope for success. His vessel and cargo had been condemned; the Portuguese government was in an unsettled state, and its finances in the greatest confusion and embarrassment. In his vessel and cargo, Hammond appears to have lost his entire property; and this very naturally threw him into despondency, and induced him to agree to pay nearly one-third of his demand, to an agent, who might, by possibility, recover it. He, no doubt, supposed, that by interesting his agent so deeply in the claim, he would secure his sympathies, and his utmost exertions. And the prospect was, if the claim, or any part of it, should be obtained, it would be the work of time, and of great effort.

Allen is not chargeable with fraud in entering into the contract, nor in using the most persevering efforts to get possession of the instalment paid. That the contract was entered into by both parties, under a mistake, is unquestionable. Neither of them knew that the Portuguese government had allowed the claim. Can a court of equity enforce such a contract? Can it refuse to cancel it? That the agreement was without consideration, is clear. Services long and arduous were contemplated as probable, by both parties, at the time the contract was executed. But the object of pursuant was already attained. No services were required under the contract, and for those which Allen had rendered to Hammond prior to it, regular charges seem to have been made.

It is true, the amount of services required by the agent was uncertain. He took upon himself this contingency; and had not the claim been allowed by the Portuguese government, until after the contract, he would have been entitled to his commissions, however small his agency might have been in producing the result. This, it may be supposed, was a contingency within the contemplation of the parties, at the time of the contract; so that, unconnected with other circumstances, the smallness of the service rendered could have constituted no ground on which to set aside the contract. But no one can for a moment believe, that Hammond intended to give to his agent nearly $10,000, on the contingency of his claim having been allowed at the time of the contract. And it is equally clear, that his agent, under such a circumstance, had no expectation of receiving that, or any other amount of compensation. The contract does not provide for such a case; and it could not have been within the contemplation of either party. Services were made the basis of the compensation agreed to be paid; but the allowance of the claim superseded all services in the case.

The equity of the complainant is so obvious, that it is difficult to make it more clear by illustration. No case, perhaps, that it is difficult to make supposed, where the principle on which courts of equity give relief, is more strongly presented than in this case. The contract was entered into through the mistake of both parties; it imposes great hardship and injustice on the appellee, and it is without consideration. These grounds, either of which, in ordinary cases, is held sufficient for relief in equity, unite in favor of the appellee. Suppose, a life-estate in land be sold, and at the time of the sale, the estate has terminated by the death of the person in whom the right vested; would not a court of equity relieve the purchaser? If the vendor knew of the death, relief would be given on the ground of fraud; if he did not know it, on the ground of mistake. In either case, would it not be gross injustice, to enforce the payment of the consideration? If a horse be sold, which is dead, though believed to be living by both parties, can the purchaser be compelled to pay the consideration? These are cases in which the parties enter into the contract, under a material mistake as to the subject-matter of it. In the first case, the vendor intended to sell, and the vendee to purchase, a subsisting title, but which in fact, did not exist; and in the second, a horse was believed to be living, but which was in fact dead. If, in either of these cases, the payment of the purchase-money should be required, it would be a payment without the shadow of consideration; and no court of equity is believed ever to have sanctioned such a principle. And so, in the case under consideration, if Hammond should be held liable to pay the demand of the appellant, it would be without consideration.

There may be some cases of wager, respecting certain events, where one of the contingencies had happened at the time of the wager, which was unknown to both parties, and which was held not to invalidate the contract; of this character, is the case of the Earl of March v. Pigot, 5 Burr. 2802. But the question in that case, arose upon the verdict of a jury, on a rule to show cause, &c.; and Lord MANSFIELD says, 'the nature of the contract, and the manifest intention of the parties, support the verdict of the jury (to whom it was left without objection), that he who succeeded to his estate first, by the death of his father, should pay to the other, without any distinction, whether the event had, or not, at that time, actually happened.'

In 1 Fonbl. Eq. 114, it is laid down, that 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 a case, the parties are supposed not to give their assent. And the same doctrine is laid down in Puffendorff's Law of Nature and Nations, b. 1, c. 3, § 12. The law on this subject is clearly stated, in the case of Hitchcock v. Giddings, Daniel's Exch. 1 (s. c. 4 Price 135); where it is said, that a vendor is bound to know that he actually has that which he professes to sell. And even though the subject-matter of the contract be known to both parties to be liable to a contingency, which may destroy it immediately; yet if the contingency has already happened, the contract will be void.

By the decree of the circuit court, on the payment of the amount including interest, which is due from the appellee to the appellant, he is required to deliver up to be cancelled the agreement entered into on the 27th of January 1832, which leaves the parties as they were before the contract; and as we consider the decree just, and sustained by principle, it is affirmed.

THIS cause came on to be heard, on the transcript of the record from the circuit court of the United States for the district of Rhode Island, and was argued by counsel: On consideration whereof, it is now here ordered, adjudged and decreed by this court, that the decree of the said circuit court in this cause be and the same is hereby affirmed, with costs.