Withers v. Greene

THIS cause was brought up, by writ of error, from the Circuit Court of the United States for the Southern District of Alabama.

It was an action of debt brought in the District Court of the United States for the Middle District of Alabama, by May, assignee, on a single bill, under seal, for the payment of three thousand dollars, executed by R. W. Withers to A. B. Newsom, a citizen of Tennessee, and by him assigned to the plaintiff. Pending the suit May died, and Greene qualified and revived in him name as administrator.

After some pleas which were withdrawn, the defendant filed the following:--

'And for a further plea in this behalf, said defendant, by leave, &c., says, onerari non, because he says that heretofore, to wit, on the ___ day of _____, in the year 1839, said defendant, at the instance and request of one A. B. Newsom, the payee of the sealed note or writing obligatory in the plaintiff's declaration mentioned, purchased of the said Newsom two certain fillies, that is to say, one dark brown filly, said to have been foaled in the spring of the year 1835, and one sorrel filly, said to have been foaled the 22d day of June, in the year 1837, at and for a large sum of money, to wit, the sum of four thousand dollars, to be paid by the said defendant to the said Newsom; for the payment of which said sum, in part, defendant gave to the said Newsom the said sealed note or writing obligatory, in the said plaintiff'§ declaration described, and said defendant avers that said sealed note was given for and upon no other consideration whatsoever. And said defendant further avers, that the said Newsom falsely and fraudulently represented to said defendant, that the said fillies were raised by himself, and that the said fillies were sound, and that the said fillies had certain pedigrees, that is to say,-(the pedigrees are set forth in the plea, but they are here omitted,)-all which said representations as to the soundness of the said fillies, as to the fact that they were raised by the said Newsom, and as to their pedigrees, were false and untrue, and known to be false and untrue by the said Newsom, and were so made, as aforesaid, by the said Newsom to deceive and defraud the said defendant.

'And said defendant further says, that he, relying upon the said false and fraudulent representations of the said Newsom, and believing the same to be true, made the said purchase of the said fillies. And said defendant further says, that said fillies were purchased by him as aforesaid for their blood, and for the turf, and that otherwise they were wholly worthless to the said defendant. And said defendant further says, that the said Newsom was before, and at, and hath been ever since, and still is, a citizen of the State of Tennessee, residing three hundred miles or more from the residence of said defendant, who then resided, and still resides, in the County of Greene, in this State; and that said Newsom brought the said fillies from Tennessee to the residence of said defendant, in Greene County, and then sold them to said defendant as aforesaid.

'And said defendant further saith, that he did not discover the extent of the unsoundness of the said fillies until a long time after said purchase, to wit, the fall after the said purchase, when they were being trained for the turf, and that he did not learn that the pedigrees were false until a long time after said purchase, to wit, some time in the fall of 1839, or winter of the year 1839-40.

'And said defendant further saith, from the time he discovered the permanent unsoundness of the said fillies as aforesaid, and the falsity of the said pedigrees as aforesaid, he was ready, willing, and desirous to, and would have returned and delivered the said fillies to the said Newsom, if he had had an opportunity so to do, which he did not; and that from the discovery of the fraud of the said Newsom as aforesaid, up to the death of the said fillies, which happened during the winter and spring of the year 1840, he was willing and ready to deliver and return the said fillies to the said Newsom, as aforesaid.

'And said defendant further saith, that said fillies died, as aforesaid, without the fault or neglect of the said defendant or his servants; all which several matters said defendant is ready to verify. And said defendant saith, that the said sealed note or writing obligatory was obtained from him by the said Newsom by the false and fraudulent representations as aforesaid, and is therefore, fraudulent and void in law; wherefore said defendant prays judgment, whether he ought to be charged with the said debt,' &c.

To this plea the plaintiff demurred, and, in May, 1843, the court sustained the demurrer, and gave judgment for the plaintiff in the sum of three thousand dollars debt, and eight hundred and eighteen dollars damages, together with costs.

The defendant sued out a writ of error, and brought the case up to this court.

It was argued by Mr. John Y. Mason, for the plaintiff in error, and Mr. Bayly, for the defendant in error.

Mr. Mason, for the plaintiff in error.

The facts being well pleaded, and admitted to be true, it will be insisted for the plaintiff in error, that the demurrer should not have been sustained.

The facts constituting the gist of the defence may be thus stated:--

1. The consideration of the contract on the part of Withers was four thousand dollars, of which one thousand was paid, and the single bill was given for three thousand dollars.

2. That the payee procured the contract by representations false and fraudulent, with a knowledge that they were false, and with the purpose to defraud.

3. That, the facts being falsely stated, the fillies were wholly worthless to the defendant.

4. That the fraud was not discovered until long after the sale, and no opportunity offered to return them until they were dead; and that the fillies died without fault or neglect on the part of the defendant; and on these facts the question is, Can the plaintiff enforce the contract, as to that part of the purchase money which is unpaid?

The contract was made in Alabama, and the lex loci governs.

The plea proceeds on the ground, that, as to the defendant, there was a total failure of consideration, but that, if the contract were not to be regarded as nudum pactum, there was a failure of consideration to the full amount sued for and unpaid.

The statute, to avoid circuity of action, and to promote justice, authorized a defence at law, which without it could have only been made in equity.

1. The conduct of the vendor amounted to dolum mulum ad circumveniendum, which, being proved or admitted, vitiates all contracts, both at law and in equity. Story on Contracts, § 165; Ferguson v. Carrington, 9 Barn. & Cres. 59; Fermor's case, 3 Coke's R. 77.

To deprive the defendant of the benefit of this defence, it must clearly appear that the vendee acquiesced in the contract after he discovered the fraud. The fact of such acquiescence must be determined on the circumstances of each case.

The offer to return the article purchased would show that there is no acquiescence; but the party must have reasonable time to do this act of repudiation, thereby rescinding the contract in whole. In this case it will be insisted that the fillies could not be returned or tendered after they died, and that the excuse is sufficient for not doing so before that event, and after the fraud was detected.

2. It is stated by Kent, that, 'in cases where the consideration has totally failed, the English courts have admitted that fact to constitute a good defence between the original parties to a bill of exchange, though a partial failure is no defence.' 2 Kent's Com. 473; Morgan v. Richardson, 1 Camp. N. P. 40, note; Mann v. Lent, 10 Barn. & Cress. 877. 'But with us a partial as well as total failure of consideration may be given in evidence by the maker of a note to defeat or mitigate a recovery, as the case may be.' 2 Kent's Com. 473; Hills v. Bannister, 8 Cowen, 31; Sill v. Rood, 15 Johns. 230; 13 Wendell, 605; Cook v. Mix, 11 Conn. 432.

With regard to the quality of goods sold, the seller is bound to answer where he has made fraudulent representations concerning them, which amounts to a warranty in law. Seixas v. Wood, 2 Caines's R. 48. In the English cases, where the right to defend or to recover back money paid under contracts has been denied, it is conceded that the vendee may sue on the warranty or for the deceit. The leading case of Hunt v. Silk, 5 East, 449.

In Alabama the rule has been established, under their statute, that, where 'fraud enters into the transaction, it is competent for the defendant, on proof of it, to show a defect in the consideration in diminution of damages.' And that, 'wherever a defendant can maintain a cross action for damages, on account of a defect in personal property purchased by him, or for a non-compliance by the plaintiff with his part of the contract, the former may, in defence to an action upon his note, made in consequence of such purchase or contract, claim a deduction corresponding with the injury sustained.' Peden v. Moore, 1 Stewart & Porter, 71; 3 Stewart, 98.

In the case of Peden v. Moore, the court below refused to instruct the jury, that, if they believed that the consideration of the note had failed to the full amount, except what had been paid, they should give a verdict for the defendant; and ruled that, unless a total failure of consideration was proved, they should find for the plaintiff. The decision was reversed, and the rule established, that a partial failure of consideration was admissible in defence. See, also, Barrett v. Stanton and Pollard, 2 Alabama, 181. The case of Peden and Moore, it is submitted, must rule this.

The defendant Withers, in an action against Newsom, on proof of the facts stated, would be entitled to recover damages for the fraud practised. Such a suit may be maintained without any offer to return the goods sold. Fielder v. Starkin, 1 H. Bl. 17; Patteshall v. Tranter, 3 Adolph. & Ellis, 106; Caswell v. Coare, 1 Taunt. 566; 2 Kent's Com. 480, note.

In an action by payee against the maker of a note, it is competent for the maker, in reduction of damages, to prove that the sale was effected by means of false representations on the part of the payee, although the chattel has not been returned or tendered to him. Harrington v. Stratton, 22 Pick. 510; Parish v. Stone, 14 Pick. 198; McAllister v. Reab, 4 Wendell, 483; Spalding v. Vandercock, 2 Wendell, 431; Burton v. Stewart, 3 Wendell, 236; Miller v. Smith, 1 Mason, 437.

It is stated by Chief Justice Mansfield, in 1 Taunton, that the rule which allows fraud or breach of warranty to be given in evidence in mitigation of damages, arises from the desire to avoid circuity of action. Under the statute of Alabama, and the rule established in Peden v. Moore, the defence in this case is admissible a fortiori. In Mississippi, where there is a similar statute, the same rule prevails. Harman v. Sanderson, 6 Smedes & Marsh. 41, 42.

The modern English cases have greatly relaxed the ancient rule on the subject of rescission of contracts for sales of personal property. Poulton v. Lattimore, 9 Barn. & Cress. 269; Steward v. Coesvelt, 1 Carr. & Payne, 23; Percival v. Blake, 2 Carr. & Payne, 514; Chitty on Contracts, 463, 743, ed. 1848.

In the case of Parish v. Stone, 14 Pick. 198, and Harrington v. Stratton, 22 Pick. 516, and in Peden v. Moore, the English cases are reviewed, and I submit that it is clearly shown that the technical reasons on which the decisions were founded cannot be justified, and do not apply, where the authority to make the defence is given, as here, by the statute. If it shall be held that the worthlessness of the fillies sold to the defendant does not constitute a total failure of consideration, because they were, or might have been, of value, for the plough or otherwise, to the vendor, and it shall also be held that the excuse offered by the vendee for his failure to return is insufficient, he is still entitled to an abatement. Beecker and Beecker v. Vrooman, 13 Johns. 302, 303, and cases cited; Lewis v. Cosgrave, 2 Taunt. 2, 3. In this case the court held, that, 'as it was clearly a fraud, and a man cannot recover the price of goods sold under a fraud, a new trial should be granted.' Any defence which in England may be made in assumpsit for the price of the goods sold may be made in Alabama, under her statute, in a suit on a sealed bill, for the purchase-money.

The utmost effect, therefore, which can be given to the failure to offer to return is, that the defendant cannot rescind the contract in toto, avoid the payment of the note in suit, and recover back the money paid, if the property be of any value. But he is entitled to such abatement in mitigation of damages, if sued in assumpsit, or by virtue of his special plea, if sued in debt, as the price exceeded the fair value of the goods sold.

And this conclusion entirely conforms to the principle on which the duty to return is founded, to put the parties, as near as may be, in statu quo. It avoids circuity of action, and gives to the plaintiff a fair value for his property, fraudulently sold at a price extravagantly beyond it. The sum already paid would, without doubt, have been decided by the jury, if submitted to them, to be rather more than a fair price for the property sold, on the facts admitted in this case.

Mr. Bayly, for the defendant in error, contended that the defendant ought to have returned or offered to return the property, and that this should have been done immediately upon the discovery of the fraud. 12 Wheaton, 183; 2 Kent's Com. 480; 1 Campbell, 190; 4 Mass. 402; 15 ib. 319. He who would rescind a contract must put the other party in as good a situation as he was before; otherwise he cannot do it. Chitty on Contr. 276; Hunt v. Silk, 5 East, 449; Conner v. Henderson, 15 Mass. 314.

Many other authorities might be added to the same effect, but, on a subject on which the cases are so numerous and so entirely uniform, it will be sufficient to give a reference to a few of them, without citing them at large. See Pulsifer v. Hotchkiss, 12 Conn. 234; Masson v. Bovet, 1 Denio, 69; Coolidge v. Brigham, 1 Metcalf, 547; People v. Niagara C. P., 12 Wendell, 246; Barnett v. Stanton, 2 Alabama, 181, 195; Minor v. Kelly, 5 Monroe, 272.

Moreover, this ought not to have been a plea in bar of the whole action. The question what the fillies were worth was one for the jury to decide. In the cases cited by the opposite counsel, the plea went merely to the diminution of damages, instead of being in bar of the whole claim.

Mr. Justice DANIEL delivered the opinion of the court.