Smith v. Richards

ON appeal from the Circuit Court of the United States for the southern district of New York.

The case is fully stated in the opinion of the Court. It was argued by Mr. Patton and Mr. Webster, with whom was Mr. Botts, and Mr. Ogden, for the appellant; and by Mr. Berry and Mr. Crittenden for the appellee.

In the Circuit Court for the southern district of New York, a bill was filed by Guy Richards, for the purpose of rescinding a contract made by the appellee with William R. Smith, for the purchase of a part of the Goochland gold mine in the state of Virginia, the contract being alleged to be fraudulent. It was agreed by the counsel for the parties, that a decree should be entered in the Circuit Court, pro forma, against the complainant; and accordingly, on the 22d of April, 1837, a decree was entered, rescinding and annulling the contract in relation to the purchase of the Goochland mine, ordering that it be given up to said Guy Richards; that the appellant Smith repay all moneys advanced by said Guy Richards upon said contract, and upon the promissory notes made by complainant and delivered to the defendant, so far as said notes had been paid by complainant, &c. From this decree an appeal has been prayed and allowed to this Court.

The counsel for the appellant insisted that the decree was erroneous and ought to be reversed, and the bill dismissed.

'1. Because the said complainant has wholly failed to prove that the representations and description of the Goochland mine alleged in the bill to be unfair and untrue, are other than fair, accurate, and just descriptions and representations; and that on the contrary thereof, the proofs in the cause show that the representations, declarations, and descriptions made and given of said mine, so far as the same are complained of in said bill, were and are true, just, and faithful.

2. Because the opinions and estimates made by the appellant of the value of said mine and of its richness and great worth, and which are alleged in the bill to have been false, exaggerated, and deceptive, and made for the purpose of defrauding and deceiving the complainant; were not only his real, honest, and bona fide opinions, but were such as he was well warranted in entertaining and expressing.

3. Because, even if the Court should be of opinion that the estimates of the value and richness of the mine and vein, expressed by the appellant, were exaggerated and extravagant; he is in no manner at law or in equity responsible for such exaggerated and unfounded statements as to the value and richness of said mine, and its veins or deposites of gold.

4. Because, even if all the descriptions of said mine, and all the declarations made in regard to it by said complaint, as set forth in said bill as untrue, inaccurate and erroneous, were so in fact; it would not be competent, either at law or in equity, to rescind the contract which had been executed for the purchase and sale of the property, unless it had been proved that the appellant knew that such descriptions and declarations were inaccurate, erroneous, and false.

5. Because, so far from the plaintiff having succeeded in showing any such knowledge, the testimony clearly proves, that the appellant did believe, and had just reason to believe that his descriptions of said mine, and representations of its value, were strictly and literally true, just, and accurate.

6. Because, it is distinctly and expressly admitted by the complainant, and proved by the testimony, that certain specimens or washings of gold ore, forwarded by the appellant Smith to Nathaniel Richards, and alleged to have been taken from said Goochland mine, and exhibited to him as fair samples of said mine, were exceedingly rich in particles of gold, and gave every indication that the mine from which they were taken, if the said specimens were proper and fair samples of such mine, must be very abundant in gold, and of great intrinsic value. And it is clearly and conclusively shown that the said specimens were really and fairly taken from said mine, in a way and manner to ensure their being fair and proper samples of the mine; and that many other specimens had been taken from it by others before Smith was interested in or knew any thing of said mine, of equal richness with the specimens forwarded to Nathaniel Richards by him.

7. Because, even if the proof should be considered as having established that the cuts, searches, examinations, and explorations made since the purchase by the complainants and others from the appellant, have demonstrated that the mine is not as valuable as the indications warranted Smith to believe, or even that the property is wholly worthless as a mine, (and it is by no means admitted, that such examinations have been sufficiently extensive or well conducted to justify such conclusions,) yet that the appellant is not responsible for such failure of the mine to realize the expectations justly founded upon the indications of value and richness which existed at the time of, and before the sale; whether the disappointment has resulted from the veins giving out, being intercepted by rock, or whatever cause of the like kind. Such contingencies and disappointments are always to be hazarded in every kind of speculative adventure; and adventures in gold mining have never been, in any country, remarkable for exemption from them. And the appellant in this case did not undertake to insure against them by any act or expression. On the contrary, it is proved, that the complainant and those who united with him in the purchase, were fully alive to the risks and hazards attendant upon all gold mining adventures and speculations; and were emphatically admonished of these hazards, when the appellant exonerated himself from responsibility for their occurrence, by the explicit declaration, made at the time of the contract, that he sold the mine 'for what it is, gold or snowballs.'

8. Because, the property being expressly sold with all faults ('for what it is, gold or snowballs,') accordingly to the settled rules of law applicable to such a contract, the vendor cannot be made responsible for any defect in the quality of the thing sold, or for any misdescription, known or unknown to the said vendor; unless it also appear that he committed positive fraud, by resorting to some means of concealing the defects and misdescription, and by artifice and contrivance prevented the purchasers from discovering them.'

The counsel for the appellant, in support of the third point, 'that even if the Court should be of opinion, that the estimates of the value and richness of the mine and vein, expressed by the appellant, were exaggerated and extravagant, he is in no manner at law or in equity responsible for such exaggerated and unfounded statements as to the value and richness of said mine, and its veins or deposites of gold.' The following authorities were cited. Sugden, Law of Vend. 2. Chandler vs. Lopus, C. Jac. 4. 1 Rollis, Abr. 801, (pl.) 16. Harvey vs. Young, Yelverton, 21, (b.), and notes to the American edition. Fenton vs. Browne, 10 Ves. 144. 1 Salk. 211. Risney vs. Selby, S.C.. 2 Lord Raymond, 1118. Sugden, Law of Vend. 4, in note Amer. edit. of 1828. Kinnard vs. Lord Dean, 1 Coll. Dec. 332. Roswell vs. Vaughan, Cro. Jac. 126. Sherwood vs. Salmon, 2 Day's Reports. Davis vs. King, 1 Starkie, Rep. 61. Whitefield vs. M'Leod, 2 Bay. 380-384. 1 Levinz. 102. Pollard vs. Lyman, 1 Day, 156.

In support of the fourth proposition, that 'even if all the descriptions of said mine, and all the declarations made in regard to it by said complainant, set forth in the said bill as untrue, inaccurate, and erroneous, were so in fact, it would not be competent either at law or in equity to rescind the contract which had been executed for the purchase and sale of the property, unless it had been proved that the appellant knew that such descriptions and declarations were inaccurate, erroneous, and false.'

The counsel for the appellant cited, first; cases showing the distinction between the degree of unfairness and proof of fraud, required to authorize a Court of equity to refuse specific performance, and that necessary to justify a rescission of a contract. Ellard vs. Lord Landaff, 1 Ball and Beatty. Cathcart vs. Robinson, 5 Peters' Rep. 276. 10 Ves. 292.

2. Cases showing that the rule, caveat emptor, prevails in England, New York, and Virginia, both as to real and personal property; and that to rescind a contract there must be actual fraud and intentional misrepresentation.

3. That in sales of real estate the rule applies even as to title, viz. Roswell vs. Vaughan, Cro. Jac. 196. Pollard vs. Layman, 1 Day, 156. Hithcock vs. Giddings, 4 Price, 135. Yelverton, 21. (b.) Notes, American Ed. Commonwealth vs. M'Clenahan, 4 Rand. 482. Chesterman vs. Gardiner, 5 John. Ch. R. 29. Abbott vs. Allen, ib. 523.

As to defects of quality or misdescription, there can be no rescission or responsibility upon the vendor, unless there be a warranty-fraud, or intentional misrepresentation. Parkinson vs. Lee, 2 East, 314. Sands vs. Taylor, 5 John. R. 395. Duke of Norfolk vs. Wortly, 1 Camp. 337. Seixas vs. Wood, 2 Caines' Rep. 48. Oldfield vs. Round, 5 Ves. 508. Dyer vs. Lewis, 7 Mass. 284. Legge vs. Croker, 1 Ball and Beatty, 506.

As to the eighth point, 'that the property being expressly sold with all faults, (for what it is, gold or snowballs,) according to the settled rules of law applicable to such a contract, the vendor cannot be made responsible for any defect in the quality of the thing sold, or for any misdescription, known or unknown to the said vendor; unless it also appears that he committed positive fraud, by resorting to some means of concealing the defects and misdescription, and by artifice and contrivance prevented the purchasers from discovering them.'

The counsel for the appellant cited Oldfield vs. Round, 5 Ves. 508. Baglehole vs. Waltens, 3 Camp. 154. Schneider vs. Heath, 3 Camp. 506. Pickering vs. Dowson, 4 Taunt. 779. Sherwood vs. Salmon, 2 Day. Tucker vs. Cocke, 2 Rand. 57, Green's opinion, 65. Vernon vs. Keegs, 12 East, 632. S.C.. 4 Taunt. 488.

Mr. Berry and Mr. Crittenden, for the appellee, insisted that the description of the property sold was materially false in the particulars set forth in the brief of the appellee; that the false description was given by the appellant, with the design to deceive, and that he adopted measures to conceal the matters of false description; and contended that even if the contract of the parties could be construed a sale with all faults, that the case came within the principles decided in the case of Schneider vs. Heath, 3 Camp. 506.

But they contended that the contract was not to be construed a sale with all faults; and referred to Pickering vs. Dowson, 4 Taunt. 779.

If so, they contended that the sale was fraudulent and ought to be set aside, on the authority of adjudged cases; and cited Boyce's executors vs. Grundy, 3 Peters, 210. 1 Merev. 26. Donalson vs. Weakley et al. 3 Yerger's Rep. 178. Sherwood vs. Salmon, 5 Day's Rep. 439.

They further contended that if the false representations should be considered as made by mistake, that being so in matters which formed the inducement to the contract on the part of the appellee, a Court of equity ought to relieve by rescinding the contract: and cited 1 Story's Eq. 202. 204. McFerran vs. Taylor, 3 Cranch, 270. Glassell vs. Thomas, 3 Leigh, 113. Chamberlane vs. Marsh, 6 Mun. 283. Pearson vs. Morgan, 2 Bro. Chan. 389. Allen vs. Hammond, 11 Peters, 63. Calvery vs. Williams, 1 Ves. Jr. Hitchcock vs. Geddings, 4 Price, 133. Lowndes vs. Law, 2 Coxe's Cases, 363.

Mr. Justice BARBOUR delivered the opinion of the Court.