Hume v. United States/Opinion of the Court

In his celebrated judgment in Earl of Chesterfield v. Janssen, 2 Ves. Sr. 125, 155, Lord HARDWICKE arranged all the forms of fraud, recognized by equity, in four classes, the first two of which he gives in these words: '(1) Then fraud, which is dolus malus, may be actual, arising from facts and circumstances of imposition, which is the plainest case. (2) It may be apparent from the intrinsic nature and subject of the bargain itself; such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other; which are unequitable and unconscientious bargains; and of such even the common law has taken notice; for which, if it would not look a little ludicrous, might be cited James v. Morgan, 1 Lev. 111.' The case referred to by the Lord Chancellor was ruled by Sir Robert HYDE, then at the head of the king's bench, and is reported in Lev. 111, in these words: 'Assumpsit to pay for a horse a barley-corn a nail, doubling it every nail; and avers that there were thirty-two nails in the shoes of the horse, which, being doubled every nail, came to five hundred quarters of barley. And on non assumpsit pleaded, the cause being tried before HYDE at Hereford, he directed the jury to give the value of the horse in damages, being 8, and so they did. And it was afterwards moved in arrest of judgment for a small fault in the declaration, which was overruled, and judgment given for the plaintiff.' James v. Morgan is cited by Lord Chief Justice HALE (Anon. 1 Vent. 267, note) to the point that 'upon certain contracts the jury may give less damages than the debt amounts to;' and also in Bacon's Abridgment, ('Damages,' D. 1,) together with Thornborough v. Whitacre, 6 Mod. 305, 2 Ld. Raym. 1164, to the same point, stated thus: 'Though in contracts the very sum specified and agreed on is usually given, yet if there are any circumstances of hardship, fraud, or deceit, though not sufficient to invalidate the contract, the jury may consider of them, and proportion and mitigate the damages accordingly.' In Thornborough v. Whitacre the plaintiff declared that the defendant, in consideration of 2s. 6d. paid down, and 417s. 6d. to be paid on the performance of the agreement, promised to give the plaintiff two grains of rye corn on a certain Monday, and to double it successively on every Monday for a year, and the defendant demurred to the declaration. Upon calculation, it was found that, supposing the contract to have been performed, the whole quantity of rye to be delivered would be 524,288,000 quarters. The court recognized the case of James v. Morgan as good law, and said that, though the contract was a foolish one, the defendant ought to pay something for his folly. 'The counsel for the defendant, perceiving the opinion of the court to be against his client, offered the plaintiff his half crown and his cost, which was accepted of, and so no judgment was given in the case.' In Leland v. Stone, 10 Mass. 459, James v. Morgan and Thornborough v. Whitacre are referred to with approbation, and the principle of mitigating the damages applied, as also in Cutler v. How, 8 Mass. 257; Cutler v. Johnson, Id. 266; and Baxter v. Wales, 12 Mass. 365. And see Greer v. Tweed, 13 Abb. Pr. (N. S.) 427, and Russell v. Roberts, 3 E. D. Smith, 318. Mr. Justice SWAYNE remarks in Scott v. U.S., 12 Wall. 443-445: 'Where parties intend to contract by parol, and there is a misunderstanding as to the terms, neither is bound, because their minds have not met. Where there is a written contract, and a like misunderstanding is developed, a court of equity will refuse to execute it. If a contract be unreasonable and unconscionable, but not void for fraud, a court of law will give to the party who sues for its breach damages, not according to its letter, but only such as he is equitably entitled to. James v. Morgan, 1 Lev. 111; Thornborow v. Whitacre, 2 Ld. Raym. 1164; Baxter v. Wales, 12 Mass. 365.' But James v. Morgan and Thornborough v. Whitacre were plainly cases in which one party took advantage of the other's ignorance of arithmetic to impose upon him, and the fraud was apparent upon the face of the contracts. In the latter case the defendant, by demurring, admitted that there was no fraud, and consequently the only question was on the validity of the contract in the absence of fraud, and it was sustained, but the plaintiff was allowed to take nominal damages only. And as to many of the cases it may be objected that they are at variance with the rule that a party must recover according to his contract if he sue upon it, o not at all, although, if the express contract were void, the defendant might nevertheless be held in general assumpsit, upon the implied contract to pay for property received from the plaintiff and retained.

The true principle deducible from the authorities, and most consistent with the reason of the thing, seems to be this: In the instance of a special contract which has been wholly executed, and the time of payment passed, if the plaintiff proceeds in general assumpsit the express contract is only evidence of the value of the consideration, which is open to attack by the defendant in reduction of damages. But, where the action is in special assumpsit, the express promise of the defendant fixes the measure of damages to which the plaintiff is entitled. And while the general rule is that the performance of every contract may be resisted on the ground of fraud, at law as well as in equity, yet upon a contract of sale the defendant, having accepted performance, cannot interpose this defense to defeat the contract, unless he returns the article, or proves it to have been entirely worthless, though he may ordinarily recoup the damages which he can show he has sustained through the fraud. And there may be contracts so extortionate and unconscionable on their fact as to raise the presumption of fraud in their inception, or at least to require but slight additional evidence to justify such presumption. In such cases the natural and irresistible inference of fraud is as efficacious to maintain the defense at law as to sustain an application for affirmative relief in equity. When this is so, if performance has been accepted in ignorance and under circumstances excusing the nonreturn of articles furnished, and these have some value, the amount sued for may be reduced to that value. In the case at bar the shucks had been appropriated by the government before the discovery of the error in the schedule, and the position of the claimant in regard to it, and, if the defendant successfully impeached the contract on the ground of fraud, the judgment for the actual market value of the shucks was correct, and sustainable under the pleadings. In order to guard the public against losses and injuries arising from the fraud or mistake or rashness or indiscretion of their agents, the rule requires of all persons dealing with public officers the duty of inquiry as to their power and authority to bind the government; and persons so dealing must necessarily be held to a recognition of the fact that government agents are bound to fairness and good faith as between themselves and their principal. Whiteside v. U.S., 93 U.S., 247, 257; U.S. v. Barlow, 132 U.S. --, ante, 77. If the claimant intended to induce the agents of the government to contract to pay for these shucks 35 times their highest market value, and the agents of the government knowingly entered into such a contract, it will not be denied that such conduct would be fraudulent, and the agreement vitiated accordingly. If the claimant knew that a clerical error had been committed, of which the agents of the government were ignorant, and deliberately intended to take advantage of the error to obtain the execution of a contract for the payment of so grossly unconscionable a price, or if the facts were such that he must be held to have known that their action, if understandingly taken, would be in palpable dereliction of their duty to their principal, and, notwithstanding, sought to profit by it, the character of the fraud, so far as the claimant is concerned, is not changed by the fact that such action was the result of the negligence or mistake of the government's agents, untainted by moral turpitude on their part. The claimant by his replication insists that the price of 60 cents per pound for shucks 'was the price at which he intended to bid, and that there was no mistake on his part in making out the bid.' This is an admission, when taken with the findings of fact, that he designed to commit the agents of the government to a contract 'such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other,' and is fatal to his recovery, according to the letter of the contract. Nor is its effect in that regard weakened in any degree by the suggestion that, under bids on each item separately, the claimant made but little profit, or none at all on some of the articles. The court of claims did not err in the admission of the evidence upon which the fifth finding of fact is based, nor in its refusal to permit the claimant to recover more than the market value of the shucks, its allowance of which we will not disturb. The judgment is affirmed.