Case Name: Administrators of Benjamin Hough v. John W. Hunt
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1826-12
Citations: 2 Ohio 495
Docket Number: 
Parties: Administrators of Benjamin Hough v. John W. Hunt.
Judges: 
Reporter: Cases decided in the supreme court of ohio : upon the circuit at the special sessions in Columbus
Volume: 2
Pages: 459–466

Head Matter:
Administrators of Benjamin Hough v. John W. Hunt.
"Where a person deeply in debt, to obtain a loan of money, agrees to purchase a tract of land, at more than double its value, in connection with-the loan, and gives a mortgage upon other property to secure the loan and part of the purchase money, the vendor being apprised of the purchaser’s necessities, equity will rescind the cqntract.
This case was reserved for decision here, by the Supreme Court of Eoss county. It was a bill in chancery, asking relief against a • contract for the purchase of a tract of land, by Hough from Hunt, upon the ground pf advantage being taken of the necessities of the complainants’ intestate, and unfair practices in respect to the contract. The facts of the case were as follows:
In September, 1818, Hough, the intestate, being pressed for •money to pay a debt due from him to the Branch Bank of the United States at Lexington, applied to the defendant for a loan of money to make that payment, about two thousand six hundred dollars. Hunt made an agreement with *Hough, to make 'him a loan of ten thousand dollars, upon condition that Hough would buy of him five hundred and ninety-three acres of land, near Chillicothe, where Hough resided, at twenty dollars per acre. ■Hough assented to these terms, and received, by way of loan, two thousand six hundred dollars.
The price of the land, and the money advanced, amounted to ■fourteen thousand four hundred and seventj'-five dollars. Hough gave his three separate notes to Hunt, dated_ September 15, 1818, for four thousand eight hundred and twenty-five dollars each ; one payable September 15, 1819; one December 15, 1819; one March 15; 1820. In November, 1818, Hunt gave the intestate a bond to convey the five hundred and ninety-three acres of land, upon the payment of the two last notes. At the time of taking the notes, he took from Hough a mortgage on a separate valuable tract of 'land to secure the payment of the first note, due September, 1819, which was given in part for the money borrowed, and in part for the pui’chase money of the land. The balance of the loan of ten. thousand dollars, beyond the two thousand six hundred, was never advanced, Hough not being able to give such security as was required by Hunt. Hough died on September 4, 1819. Judgments were obtained on all the notes against Hough’s administrators, and also upon the mortgage. Hunt knew of Hough’s embarrass•ments at the time of the contract, and the land( purchased at twenty dollars per acre was proved by several witnesses to have not been worth half that sum. The bill prayed that the contract of purchase might be canceled, and the mortgage discharged by the payment- of the two thousand six hundred dollars loaned, with interest.
Grxmke, for complainants:
"Whatever may once have been the fluctuation and contradiction-in the opinions delivered by the English chancellors, the law of that court appears to be now settled that gross inadequacy of price may be a sufficient ground for rescinding a contract; and it is not true that the only use to be made of it is as a shield of defense. It is true, in the case of Day v. Newman, cited by Sir Samuel Romily, 10 *Ves. 300, the cross bills of both vendor and purchaser were dismissed; but the inadequacy does not seem to have been such (one-half the value) as is intrinsically indicative of fraud. In Knott v. Hill, 2 Vern. 26, it was ruled that the purchase-of an estate in remainder, from an heir, was void, in consequence of the inadequacy, though the purchaser knew the risk of getting■ nothing, if the heir died first.
In Wiseman v. Beatle, 2 Vern. 121, the same principle was declared ; although the purchaser run the same hazard of getting-nothing. if the vendor should die before his uncle.
In Ivisleton v. Griffith, 1 P. Wms., an unconscionable bargain was-rescinded, although there, also, the purchaser labored under the=disadvantage of getting nothing on a certain contingency.
In Bough v. Price, 3 Wilson, 320, the .court afforded relief, although the deeds were actually executed, and the contract no longer-remained in fieri.
In Gwynne v. Heaton, 1 Br. Ch. Cas. 1, although the sale was by' a young man, of a reversionary interest after the death of his-father, the court declared that they rescinded not in consequence-of this circumstance, but on the ground of inadequacy.
In Gartside v. Itherwood, 1 Br. Ch. Cas. 558, the same relief was. afforded. There was no distress on the side of the seller, and yet-. the inadequacy of price, as affording in itself intrinsic evidence of' fraud, was deemed sufficient to overthrow the agreement, and the-bargain was accordingly canceled.
In Underhill v. Horwood, 10 Ves. 211, Lord Eldon says that- “ if the terms are so extremely inadequate, as to satisfy the conscience of the court, that there must have been that pressure upon-the distress of the purchaser, which, in the view of this court,amounts to oppression, it would relieve.”
In Morse v. Royal, 12 Ves. 355, Lord Eldon found great, difficulty in sustaining the sale, although the vendor was not in-embarrassed circumstances, and had confirmed the contract.
In Richett v. Loggove, 14 Ves. 214, the chancellor afforded relief, although eonveyances had been actually executed, *on the ground of inadequacy. And, in the case of Purcell v. McNamara, 14 Ves. 91, he went equally far.
There is, says Mr. Powell, Contract, part 2, 158, a great opinion, Lord Thurlow’s, that inadequacy of price, per se, shall be sufficient to rescind, as affording self-evident demonstration of unfair advantage and fraud. Only see the lengths to which the courts have gone, in setting aside even contracts executed, and regarding inadequacy to be as much an ingredient of fraud, where the sale is by auction, as where it is by private agreement. Sugden, 170.
The true rule is laid down in 2 Johns. Ch. Cas. 1, by Kent, who ■says that inadequacy alone will not be sufficient to rescind, unless it amounts to gross inadequacy; and in that case, the conveyance had been actually executed. And as there must be some definite rule, by which to determine when the consideration is grossly inadequate, the English court of chancery have lately determined that one-half the value, where the bill is filed by the vendor, does not constitute that gross inadequacy. Masheen v. Cote, cited by Mr. Maddock, 1 vol. 214.
In 2 Atkyns, 134, Lord Hardwieke relieved, although neither of the parties were apprised of the value.
It may be asserted that inadequacy affords grounds for relief only because it is proof of fraud; and if fraud is positively disproved, if the mere presumption which arises from the inadequacy ■of the consideration, is contradicted by direct and positive proof, that then the whole ground of relief fails. But it would seem from the case cited by Mr. Powell, page 158, that it is the inadequacy itself, and not the inadequacy as mere evidence of fraud, which has been made the ground of relief.
2. The purchaser was in distressed circumstances; and here the principle to be extracted from the cases does not appear to be that this distress of the one party affords proof of imposition by the other, but rather that the distress has rendered the first incompetent to •act freely, and that therefore there need be no fraud on the other side.
In Berney v. Pitt, 2 Vern. 14, the plaintiff averred imposition, but none was proved; yet he succeeded, because distress was proved.
*In the case of Astley v. Reynolds, cited 2 Br. Ch. Cas. 156, the party being in distress, was considered unable to act, “so that the judgment of the court (says Mr. Justice Burnet) is, that necessity alone could induce him to make the contract.”
In Heathcote v. Paignon, 2 Br. Ch. Cas. 156, there was no proof of any advantage taken of the distress of the complainant.
In Chesterfield v. Jansen, 1 Atk. 252, Lord Hardiwicke says that .chancery “will relieve against presumptive fraud,, so that equity goes farther than the rule of law, for there fraud must be proved and not presumed.” But he can not mean that a court of law will not relieve against fraud, proved by presumptive evidence, for such is not the fact. The distinction intended to be established is not between the evidence which will prove fraud in the two courts, but between actual fraud' and cases which, though they do not amount to fraud, are cases of great and intolerable hardship. That must be the-meaning of this great judge.
3. Third persons, and particularly the representative of the general creditors of the intestate, have a much stronger interest and right to impeach the transaction than the intestate himself. This is the rule with regard to lunatics, who can not stultify themselves after their reason is restored, but their heirs may; although in Webster V. Woodford, 3 Day, 90, the Supreme Court of Connecticut have held that the lunatic himself may file a bill to rescind.
In 8 Cranch, 37, it was held that the trustee of an insolvent debtor might take advantage of a defect in a moi’tgage which the insolvent himself could not, because he represented (as in this case the administrator does) the general creditors.
Brush and Fitzgerald, for respondent:
We concur in opinion with the learned counsel for complainants that the true rule is laid down upon this subject, how far and when a chancellor ought to relieve by rescinding contracts on the ground of inadequacy by Chancellor Kent, in the case of Osgood v. Franklin, 2 Johns. Ch. 23.
*The impression which fastened itself upon our minds, when we saw that case referred to in his argument, was that he did so lest it should be supposed he was afraid of the effect it might have upon the case of his clients. But by appearing to rely on it, as an authority in their favor, it would be supposed he deemed it not unfavorable, much less decisive against them. The chancellor asserts, page 23: “ There is no case where mere inadequacy of price, independent of other circumstances, has been held sufficient to set aside a sale made between parties, standing on equal ground and dealing with each other, without imposition or oppression.” If unqualifiedly he means this (and he does, or he has not spoken with his usual circumspection), the only inquiry to be made in this case is, if there exists, in fact, any of those “other circumstances,” amounting to “imposition or oppression ” which will warrant a court of equity “in setting aside the sale” made in this case. Such circumstances are charged in the bill as that decedent was in embarrassed circumstances, and that this was known to the defendant, who took advantage of the situation of decedent, to impose on him a hard contract. We venture to hope that what, is charged against defendant and not proved, will be disregarded. If so, this case will be considered clear of any imputation or fraud,, imposition or oppression, or any other circumstance to discolor it injuriously to the defendant, or inconsistent with the most perfect fairness on his part. Then admitting the disproportion between price and value, as stated by plaintiff’s counsel, one-half, this court will be bound upon authority to dismiss the bill. Two cases cited by the chancellor in the above case of Osgood v. Franklin, 2 Johns. Ch. 23, 24; Martlock v. Butler, and Day v. Newman, 10 Ves. 292, 300, are decisive, as exactly analogous in principle and fact. It seems in those case the court would not entertain a bill to give relief on either side, either to rescind or enforce the contract. The-disproportion was at least one-half, but there was no fraud. Chancellor Kent cites these two cases with approbation; he can not,, therefore, be supposed to mean that where the inequality is no greater, that its grossness may, nevertheless, amount to fraud, without any other circumstances ^affecting the conscience-of the party charged with fraud. When he adds, after the quotation above made, “ and the inequality amounting to fraud must, be so strong and manifest as to shake the conscience and confound the judgment of any man of common sense,” we understand him to mean that the inequality must be so great that no sensible man can resist the conclusion, “ ex evidentia rerum,” that advantage was taken of weakness or distress, knowing that this weakness or distress existed.

Opinion:
By the Court :
From the evidence in this case, it is manifest that at the timo of the contract for the sale of the land in question, the vendor knew that the purchaser was in some degree embarrassed. It is also fully proved that the land was not worth half the price that Hough agreed to pay for it. The circumstances of the case are altogether extraordinary. Hough is hard pressed for the sum of two thousand five hundred dollars. He applies to Hunt for a loan of that sum. He obtains it, and an engagement that the lender will loan him seven thousand five hundred dollars more upon good security. But at the same time the twenty-five hundred is borrowed, and a contract made for a further loan, a contract of sale is made for a tract of land at eleven thousand nine hundred and seventy-five dollars, being more than double its real value. Two thousand three hundred and twenty-five dollars of which, with the money actually loaned, is secured upon other property than that sold.
The mind revolts at the idea that a man so embarrassed would, to obtain the "loan of two thousand six hundred dollars, voluntarily embarrass himself further, by creating a new debt of eleven thousand nine hundred and seventy-five dollars for property not worth half that sum. It is impossible that the vendor, who also made the loan, was not sensible that he was 'taking advantage of the purchaser's necessity. The imprudence .of the proceeding, on the part of Hough, was so gross that it could justly be attributed to no other cause.
It is not in proof that Hunt knew the extent of Hough's embarrassments. But he knew that he was in necessity to *some extent; of that necessity he must have been sensible he took advantage, in exacting the contract for the sale of land. The wish to obtain further loans and the agreement to make them, with the subsequent escape from performing that agreement, are strong circumstances in confirmance of the fact that Hunt knew Hough's situation and acted upon it.
One peculiar hardship of the case is that, upon account of this unconscionable contract, Hunt has fastened a part of the purchase money upon Hough's other lands, sweeping from previous creditors that which their means had supplied, and retaining to himself the whole consideration which his contract was supposed to advance.
The rule in chancery is well established. When a person is incumbered with debts, and that fact is known to a person with whom he contracts, who avails himself of it to exact an unconscionable bargain, equity will relieve upon account of the advantage and hardship. Where the inadequacy of price is so great that the mind revolts at it, the court will lay hold on the slightest circumstances of oppression or advantage to rescind the contract. So, when a person borrowing money to relieve his necessities is induced to purchase property at an exorbitant price, and to an amount greatly beyond the loan obtained, and secure the payment by mortgage on his other lands, the necessity of the purchaser, connected with the exorbitancy of price, are sufficient evidence of unfair advantages to justify the interference of the court. We consider this a case of great exorbitancy of price, where the purchaser was deeply embarrassed, and where the' vendor availed himself of that embarrassment to exact the bargain. We are, therefore, of opinion that the contract of purchase be rescinded, and that the mortgage remain a lien only for the money loaned .and interest.