Court Opinion

ID: 3484474
Source: CourtListenerOpinion
Date Created: 2016-07-05 21:09:37.231779+00
Date Added: 2024-06-11T13:35:47.026346
License: Public Domain

It is with diffidence and reluctance that I venture to dissent from any opinion of the Court, believing as I do, that in most cases of difference of opinion, I am treading the path of safety in following the united judgment of my associates, *Page 164 
but the decision of the main question involved in this case is one of much importance as a judicial precedent, and as I have not been able, after careful consideration, to adopt the view of the Court upon that question, I think it proper to state why I cannot do so.
The history of the transaction which led to this suit, as I understand the facts of the record, may be thus condensed: On December 2d 1897, Dunan contracted in writing to purchase of the Chicora Company one thousand tons of fertilizer to be delivered before May 1st, 1898, for which payment was to be made as follows: $5,089.98 to be paid cash May 1st, 1898; $3,029.23 by note due September 1st, 1898, and $3,059.39 by note due November 1st, 1898. By the terms of the contract the vendor reserved the right of cancellation in case of any occurrence it might regard as unfavorable to the purchaser's credit. In March, 1898, a portion of the fertilizer having been shipped to Dunan, further shipments were suspended in consequence of information communicated by Clarence C. Whiting, the broker through whom the sale was made, that Dunan was defaulting on notes to other persons for fertilizers purchased, and on March 7th, 1898, Dunan made a statement to Whiting of his financial condition, showing net assets of $63,000 over all liabilities, whereupon shipments were resumed, and the goods were all delivered prior to May 1st, 1898. Dunan did not pay any part of the cash due May 1st, 1898, nor did he deliver the two notes maturing September 1st and November 1st, 1898, and on June 4th admitted his inability to make any cash payment whatever. In consequence of this inability, a sealed agreement was made June 22d 1898, by which payment of the $5,089.98 due May 1st, 1898, was extended to December 1st, 1898, and the payment of the $6,088.62, for which notes should have been given as before stated, was extended so as to cover five instalments, due, respectively, January 1st, February 1st, March 1st, April 1st and May 1st, 1899. As security for the $5,089.98, Dunan assigned certain bills receivable to *Page 165 
amount of $4,872.32, and as security for the $6,088.62, he assigned 221 shares of the stock of the Rasin Fertilizer Co. owned by him, but which were hypothecated with certain banks for loans aggregating $5,800. The Chicora Co. agreed to pay off these loans, and hold the stock till May 1st, 1899, as security for the $6,088.62, and upon payment in full to assign the stock to Dunan. As further security for the $6,088.62 Dunan assigned a claim of $3,333.33 against the Chesapeake Guano Co., then in the hands of receivers, which claim has been ascertained to be entirely worthless. The Chicora Co. paid off the amount of hypothecation, $5,800, and held the stock as agreed on, the evidence showing that the market value of the stock in June, 1898, and up to the sale, hereafter to be mentioned, was about $30 per share, or $6,630 for the 221 shares, being only $830 above the hypothecation.
About November 15th, 1898, Dunan was employed by the Rasin Fertilizer Co. as agent to effect a sale of its plant to the Virginia and Carolina Chemical Co., which sale was consummated December 15th, 1898, upon terms which raised the value of the stock of the Rasin Fertilizer Co., on liquidation, to about $62 per share, or more than double the amount for which it was pledged to the Chicora Co. and for which sale Dunan received a commission of about $6,000. This sale was proposed to the stockholders by a resolution of the directors passed December 2d 1898, and was approved by the stockholders at a meetingheld December 12th, 1898, Dunan being present at that meeting, and Mr. Lanahan being present both at that meeting and at the directors' meeting December 2d 1898.
On December 3rd, 1898, Dunan having gone to New York, wrote Wagener, the treasurer of the Chicora Co., through whom the agreement of June 22nd had been made, and who was then in New York, requesting an interview, which was held that afternoon. Dunan testifies that he then told Wagener he had a friend who would lend him $9,000 with which to settle the claim of $11,888.62 and that this was the best *Page 166 settlement he could make, but that he did not state who his friend was, nor did he allude to the action of the directors of the Rasin Fertilizer Co. on the previous day, nor to the fact that negotiations were pending for the sale of its plant, which if consummated would appreciate the value of the stock largely and give him in addition a commission of $6,000; that Wagener declined to make the abatement asked, but finally consented to abate $2,000, and agreed at his request to hold this offer until December 5th, to enable him to submit it to his friend. Wagener testifies that at that interview Dunan told him, with tears in his eyes, that he had been very unfortunate, and had nothing,
and that he consented to abate $2,000 from the claim because he sympathised with Dunan and wished to help him, and also wanted to wind up the matter; that at that time, neither he nor any of the officers of the Chicora Co. had any knowledge of the action of the directors of the Rasin Fertilizer Co. on the previous day, or of the pendency of the negotiations for the sale of its plant, but that Dunan said his friend would carry the stock for him, if he would settle the claim. Whiting testifies that he heard on the street in Baltimore, December 5th, that the Rasin Fertilizer Co. had been purchased by the Virginia and Carolina Chemical Co. and that he at once called on Dunan and asked him if it were true, and Dunan replied, there was no truth in it; that negotiationshad been pending with a Northern syndicate, which, if carried out, would give the Rasin Co.'s stockholders very little fortheir stock, but added that he had arranged with Wagener to give him his money. Whiting says he learned later in the day, definitely, that the sale had been made, and so wrote the Chicora Co. Wagener says the Chicora Co. advised him of their information from Whiting, and that he was very angry that Dunan should have gotten him in that way to make a reduction on a just claim, and that he went to Baltimore, December 9th, to see Dunan, but Whiting advised him not to do so, as he was provoked and angry, and that he acted on this advice, and *Page 167 
wrote Dunan that he would refuse to be bound by the agreement thus procured. The bill was filed April 27th, 1899, alleging that under the agreement set up by Dunan, Wagener was bound upon payment of the claim, less $2,000, to assign to Mr. Lanahan the 221 shares of Rasin Fertilizer Co. stock which he held, and for this reason Mr. Lanahan was made party plaintiff, and Wagener a party defendant. I concur in the conclusion reached by the Court that the agreement was supported by a sufficient consideration, and cannot be regarded as nudum pactum, but I cannot concur in the conclusion that it is such an agreement as should be enforced by a Court of Equity, when the means by which it was procured are known and considered.
It has long been settled law that the interposition of a Court of Equity in granting relief by the enforcement of any contract is not a matter of right in the litigant, but is one of sound judicial discretion, controlled by established principles of equity, and in dealing with these questions, so frequently arising upon every variety of facts and circumstances, the Courts have stated the law with a corresponding variety of language and wealth of illustration. Thus in Gurley v. Hiteshue, 5 Gill, 217, JUDGE CHAMBERS said: "A Court of Equity, professing as it does to lend its aid exclusively to cases in which a claim can beconscientiously enforced, will never coerce the specific performance of a contract for a party who has not acted fairly, openly, and without suppression of an important fact. Whether with a fraudulent design or innocently, yet if a falseimpression has been conveyed, and made the basis of thecontract, this extraordinary jurisdiction of the Court will not be exercised by coercing a specific performance."
In O'Brien v. Pentz, 48 Md. 577, JUDGE STEWART said: "To warrant the interference of a Court of Equity, the contract must be mutual and equal in all its parts, and have no circumstances of suspicion as to its bona fides, and it must be made under circumstances commending it to the favorable apprehension of theCourt." *Page 168 
In Ellard v. Llandaff, 1 Ball  Beatty, 240-1, specific performance of an agreement for a lease, in consideration of the surrender of an old lease, was refused, the tenant having failed to disclose the fact that the life on which the old lease depended was, when the agreement was signed, in extremis; LORD CHANCELLOR MANNERS saying, "All the material facts must be known to the parties, and is it not against all principles of equity that one party, knowing a material ingredient in an agreement, shall be permitted to suppress it and still call for a specific performance?" These illustrations will suffice to show that the power to coerce specific performance ought not to be exerted, whatever be the form of the contract, or its technical legal validity to sustain an action for its breach, when, upon all the facts and circumstances, it does not commend itself to the Court as secured by fair and open dealing, and as establishing a precedent promotive of the principles of justice.
The learned Judge of the Circuit Court stated in his opinion that he regarded the evidence as showing that Wagener considered the stock he held as collateral abundant to secure the indebtedness, and as establishing the fact that his motive in making the abatement was, first to close up promptly a business transaction, and secondly, to help an impecunious debtor, and that it could not therefore have been material to either consideration that the stock would probably advance as a result of the sale to the Virginia and Carolina Chemical Company; and in consequence of this view, the Court held that the mere silence of Dunan as to the pending negotiations for sale, and its probable results, did not amount to fraudulent concealment, and did not operate to vitiate his contract or prevent its enforcement in a Court of Equity, But an examination of the testimony has led me to a different conclusion.
It will be borne in mind that this stock, on June 22d 1898, was pledged for loans of $5,800, and that in order to get possession of it the appellant was obliged to pay off these loans, thereby increasing Dunan's indebtedness to *Page 169 
him by that amount. Looking first to the face of the agreement of June 22nd, it would not appear that the stock was regarded by the appellant as ample security, since Dunan was required to assign a claim of over $3,000 against the Chesapeake Guano Co. as further security, though this has since proved to be of no value. Wagener, who managed the transaction, testifies that he thought in taking up this stock he was taking a speculative risk almost; that he did not know its value, but had heard some had been sold at about $30, and that Mr. Lanahan told him "he thought it might become valuable." Whiting, who acted in conjunction with Wagener, testifies that he made some investigation about it, and learned from Mr. Homer, of the Second Nat. Bank, that the stock had been offered sometime back at $40, and that a large block had been offered in Richmond at $30, but that Wagener's idea was to get any security that was possible, and he decided to lift the load of $26 per share, and carry it for Mr. Dunan as collateral; that his recollection was Wagener put it at $40, as a basis of calculation, and that on that basis there was still a considerable amount uncovered, and that the claim against the Chesapeake Guano Co. was assigned to fill out that deficit. Mr. Lanahan testified that Wagener asked him what he knew about this stock; that Dunan proposed to assign it to them as collateral security for their debt, and that he told him he was a considerable holder of this stock, and that he thinks he told him he considered it perfectly good. It does not follow, because Mr. Lanahan thought the stock perfectly good, that the appellant regarded that assigned to it as ample security for its debt. There is nothing to show that Mr. Lanahan knew the amount of the debt, the number of shares assigned, or the fact that the appellant was required to advance $26 per share to get possession of it. The testimony of Wagener and Whiting is clear and uncontradicted, that it was not regarded as sufficient security, and that for this reason further security was required for the deficit of $3,040 shown to exist upon the basis of $40, at which the *Page 170 
stock was estimated by Wagener in the transaction. The language of Mr. Lanahan, as stated by Wagener, "that he thought the stockmight become valuable," is suggestive rather of futureanticipated protection, than of present actual protection, and made it only more incumbent upon Dunan in his negotiation for an abatement to withhold nothing bearing upon the appreciation of the stock since its assignment. I cannot therefore agree with the Circuit Court that Wagener believed the collateral was ample security, and that any rise in value was immaterial to his motives in making the abatement, on the suggestion that it would enure only to the benefit of the debtor. I think the fair inference to be drawn from all the evidence is that Wagener regarded this stock as of uncertain and fluctuating value, and thought it better, in view of Dunan's failure to comply with any part of his original contract, and of his representation of his utter inability to comply with any condition of the extension of June 22nd, to secure the settlement offered in December, 1898, rather than to await the realization of the opinion of Mr. Lanahan that the stock might become more valuable, of the prospect of which he had neither knowledge nor means of knowledge. I cannot doubt that if Dunan had disclosed to him the fact that a sale of this stock, which would raise its value to $62, and give Dunan a commission of $6,000 had been approved by the directors, and only awaited the ratification of the stockholders, the agreement never would have been procured.
Nor can I regard this as a case of mere silence on the part of Dunan, not vitiating his contract, nor preventing its enforcement in equity. For this position, reliance was had upon Laidlaw v.Organ, 2 Wheaton, 195, and Turner v. Green, [1895], 2 Ch. 205. I have already referred to Ellard v. Llandaff, 2 Ball 
Beatty, 250, as laying down the rule by which I think this case should be governed, upon the principle so well stated by SIR EDWARD FRY, that "silence which would not constitute fraud, may yet constitute such unfairness in a contract as to stay the hand of the Court;" *Page 171 
and which is quoted in Turner v. Green, where Ellard v.Llandaff was mentioned, with a possible suggestion of disapproval, though admitting that its authority had not been questioned by any reported case.
In Laidlaw v. Organ, supra, the question was whether the intelligence of the signing of the treaty of Ghent, which materially affected the price of goods bargained for, and which was exclusively within the knowledge of the vendee, ought to have been communicated by him to the vendor. The United States District Court directed a verdict for the plaintiff. On error to the Supreme Court, the judgment was reversed, JUDGE MARSHALL saying, it is true, "The Court is of opinion he was not bound to communicate it," but adding immediately thereafter, "It would be difficult to circumscribe the contrary doctrine within proper limits where the means of intelligence are equally accessible to both parties. But, at the same time, each party must take care not to say or do anything tending to impose upon the other. The Court thinks the absolute instruction of the Judge was erroneous, and that the question whether any imposition was practiced bythe vendee upon the vendor ought to have been submitted to thejury." We think it is obvious therefore, that if that had been an application for specific performance, it would have been refused, and the vendee would have been left to his action for damages.
The case of Turner v. Green, 2 Ch. Div. 205, decided in 1895, presents the appellee's case probably as strongly as any which can be adduced, but I cannot think it should be adopted to control this case. The application there was for the specific enforcement of an agreement to compromise a pending action, which the defendant claimed ought not to be enforced, because the plaintiff, being aware that the clerk, before whom some preliminary proceeding was pending, had expressed an opinion (not amounting to a decision) favorable to defendant, did not disclose this fact to the defendant when the compromise agreement was made, and it was held that plaintiff's silence, under the circumstances *Page 172 
of that case, was not sufficient ground for refusing specific performance, JUSTICE CHITTY adopting as a correct exposition of the law the text of SIR EDWARD FRY, "that mere silence as regards a material fact, which the one party is not under obligation to disclose to the other, cannot be a ground for rescission or a defense to specific performance." Conceding this to be a correct proposition of law, it leaves for determination in each case what facts are not required to be disclosed. In that case it was held that plaintiff was under no obligation to disclose the clerk's expression of opinion, presumably because the defendant had the same means of knowledge as the plaintiff, and JUSTICE CHITTY proceeded to say that if there had been any overreaching by plaintiff, or any misleading conversation with reference to theproceeding before the clerk, a different case might have been presented, in which an obligation might have arisen binding plaintiff to disclose all he knew. He also adopted as a correct statement of the law, LORD CAMPBELL'S language in Walters v.Morgan, 3 D.F.  J. 718, that, "simple reticence does not amount to legal fraud, however viewed by moralists; but a singleword, or a smile, from one party intended to induce the other party to believe the existence of a non-existing fact, which might influence the making or declining of the contract, would be a sufficient ground to refuse a decree for specific performance." This statement he says is correct, and "is of general application, except perhaps in the case of contracts requiringuberrima fides, which involve a duty to make full disclosure, and that wherever there is an obligation to disclose, the non-disclosure is a defense to a specific performance action." It might be argued with great force, within the lines of Turner v.Green, that this is a contract requiring uberrima fides and carrying with it the obligation of full and frank disclosure, since the parties were not dealing at arm's length. Dunan had not invited the appellant to a trial of skill and shrewdness in bargaining, but had appealed to its generosity for a release from a concluded contract, and for the abatement *Page 173 
of a large part of the debt incurred thereunder. But I shall not discuss this question, because I think the testimony shows that the appellant was misled by the conduct and statements of Dunan, and that the agreement was procured by those means, and therefore, upon all the authorities, ought not to be enforced.
Wagener testified that when Dunan saw him in New York, December 3rd, and asked for an abatement of $3,000, he told him "he hadnothing." Now while this may have been true at that moment, it was also true that the moment the sale, which had been approved by the directors, was ratified by the stockholders, he would have his commissions of $6,000, and the difference between the stock at $62 per share ($13,702) and the debt for which it was pledged to the appellant $6,088, amounting to $7,614, and making with his commission a total of $13,614, as he knew at that time. In the opinion of the Court, the fact that Dunan received a commission of $6,000 for effecting the sale of the Rasin Company's property is treated as immaterial, because that whole amount was applied by him to the payment of a debt owed by him to another person, but he had the same right and power to apply that $6,000 to the Chicora Company's debt as to that of the person who received it. It was available for the payment of his debts to whomsoeverdue, and he could not truly say, as he did say, that he hadnothing and could not make any better settlement than that offered, when the sale thus consummated put him in the possession and control of $6,000 as commissions and $7,614 for appreciation of his 221 shares of the Rasin Company's stock, which were then pledged to the Chicora Company. Dunan himself, testifying in chief, stated that he told Wagener at that time that $9,000 "was the best settlement he could make for some time," when he knew at that time that if the sale was consummated on the 12th of December the pledged stock would thereby become worth more than double the debt due the appellant, and a speedy settlement would follow at 100 cents on the dollar. *Page 174 
On the afternoon of December 5th, at or about 5.20 o'clock, Dunan, being in Baltimore, telegraphed Wagener in New York, that his party accepted the abatement of $2,000, and would make payment December 14th. Whiting testified that on that day, December 5th (at what hour is not stated), he went to Dunan's office and asked him if it were true that the Rasin Fertilizer Company had been bought by the Virginia Carolina Company, and that Dunan said there was not any truth in it; that negotiations had been pending with a Northern syndicate, which if carried out would give the Rasin stockholders very little for their stock, but that on the same day he, Whiting, ascertained that the transaction was a fact and so wrote the appellant. It was true that no completed sale had then been made, but the testimony shows that Dunan knew Whiting's connection with the appellant from the inception of the transaction down to that time, and I cannot regard Dunan's conduct throughout, and his statements both to Wagener and Whiting in any other light than as an effort to suppress all knowledge of the pending sale, and to prevent its disclosure until he could close the negotiations for abatement by his telegraphic acceptance, which followed hard upon the heel of his interview with Whiting.
The nature of the agreement, and the circumstances under which it was made, being those which I have stated, I think a Court of Equity should abstain from its enforcement, and that the appellee should be left to his action at law.
(Filed April 27th, 1900.) *Page 175