Court Opinion

ID: 6638067
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:42:56.700309+00
Date Added: 2024-06-11T15:59:07.931433
License: Public Domain

Harwood, J.
This case stands for review, upon appeal from the judgment and an order overruling appellant’s motion for a new trial. The object of the action was to obtain a decree of cancellation of a deed of conveyance of an undivided one-fourth interest in a certain quartz lode mining claim, situate in Jefferson County, known as the “ Ida Mine,” for alleged gross inadequacy of consideration paid for said property, and acts of fraud and deceit in the procurement thereof. It appears that the deed of conveyance in question was made and delivered March 22, 1890, in consideration of one thousand and twenty dollars paid to the grantor, and on the twenty-fifth day of that month he commenced this action for cancellation of said deed. In the complaint an offer is made to restore to defendant the sum of money paid plaintiff as such consideration, with interest thereon, or to pay the same into court for the use of defendant, or to make such disposition thereof as the court may direct; but it is not shown by the complaint that plaintiff had, prior to the commencement of the action, tendered or offered to return to defendant said sum of money. Defendant’s counsel moved the court for judgment on the pleading, on the ground that an action for cancellation of a contract cannot be lawfully commenced and maintained unless it is shown by plaintiff that he has first tendered back to defendant that which was received as consideration for the execution of the contract, and that the same does not appear in this case. The motion was overruled, and the action of the court in that respect is the first alleged error assigned by appellant.
We do not perceive why, in reason, the doctrine contended for should apply in cases of this nature. The very object and *145purpose of the action is to compel an undoing of what has been done ; to compel a mutual restoration of each party to the position he occupied before the fraudulent transaction was consummated. Neither the relief nor the right to relief is predicated upon the tender back of what was paid in procuring the contract. In this case the relief, if granted, proceeds upon the ground that some circumstances or conditions exist in relation to the parties which in law amounts to constructive fraud, or that actual fraud has been practiced in procuring the execution of the conveyance or contract. (Willard’s Equity Jurisprudence, 302; 1 Story’s Equity Jurisprudence, § 694, et seq.; 2 Pomeroy’s Equity Jurisprudence, §§ 922-928.) As a matter of course, in granting such relief the court requires equity at the hands of the complaining party, as well as from the party guilty of fraud; that is, the restoration of everything of value received in the transaction. The precise point has been under consideration in numerous well-considered cases of this nature, and it has been held that a court of equity will proceed with the action for cancellation without requiring, as a condition precedent to commencing the action, that the complaining party shall have tendered back what he had received; that an offer in his complaint to restore the same is sufficient; and,.if a case is made out which moves the court to grant relief, it carries into effect the maxim that he who seeks equity shall do equity. (1 Story’s Equity Jurisprudence, § 693; Gould v. Cayuga Co. Nat. Bank, 86 N. Y. 75; 99 N. Y. 337; Allerton v. Allerton, 50 N. Y. 670; Vail v. Reynolds, 118 N. Y. 302; Shuee v. Shuee, 100 Ind. 477; Hopkins v. Snedaker, 71 Ill. 449; Whelan v. Reilly, 61 Mo. 565; Thomas v. Beals, 154 Mass. 51.)
We think the rule is sustained by the greater weight of authority as applicable in cases like the one at bar. If such were not the rule, fraud might, in its manifold resources, frequently contrive to so shape the conditions and circumstances that the defrauded party could not make an offer to restore, prior to invoking the power of the court for relief; and relief would then be denied by reason of the rule. However, the rule seems not to be applied to all cases where rescission is sought, as will be seen by consulting the cases cited supra. Where a party defrauded is so situated in respect to the subject-matter that he *146can return to the guilty party that which the lattdr parted with in the transaction, and nothing more is necessary to effect a rescission, in such ease the rule seems to be, that the complaining party must first restore, or offer to restore, what he received, & before he can maintain his suit or defense; as, where a party has been induced through fraudulent representations to buy chattels, he may rescind the contract by a return or a tender back of such chattels, and resist payment therefor on the ground of fraud in the inducement to purchase, or recover back money or other valuable things given in payment; but it must appear that within a reasonable time after discovery of the fraud restoration or offer thereof was made. The ease of Gifford v. Carvill, 29 Cal. 589, and the cases therein cited, are illustrations of that class of cases. It will be observed, however, in the illustrations brought to view, that the action or defense through which relief is sought is an action at law, or a defense to such an action. In the one case the action is to recover back money paid out in the transaction induced by fraud, or, on the other hand, a defense against an action brought to enforce the contract, which was procured through fraudulent representations. Occasionally a case will be found where the true distinction seems to have been lost sight of, and the rule requiring a return or offer to return, as a condition precedent to maintaining the action, is applied to an action in equity for cancellation, rescission, or annulment. This seems to have been done in the case of Herman v. Haffenegger, 54 Cal. 161, cited by appellant. That was an equity case for the rescission of a contract on the ground of fraud in procuring it, and for recovery of property claimed to,have been parted with by the complaining party through fraudulent representations. The court denied relief on the ground that it did not appear that the plaintiff had, prior to commencing his action, returned or offered to return what he had received in the transaction. The only authority cited was Gifford v. Carvill, supra, which was not an equity action for rescission or cancellation, but was an action at law in all its attributes. The latter case was brought to enforce payment of certain promissory notes, and the defense set up was fraudulent representations made and relied upon in the sale of mining stock, for which the notes were given. *147Fraud, as a defense in such a case, does not belong exclusively to equity jurisdiction. We find no error in the action of the court in overruling defendant’s motion for judgment on the pleadings.
This cause was tried by the court, sitting with a jury impaneled to aid in finding the facts. All other specifications of error urged by counsel for appellant relate to the admission of evidence and finding of facts. It was alleged in the complaint that one George La Point, by prearrangement, conspired with defendant to aid him in procuring a conveyance of said property from plaintiff for a grossly inadequate consideration; and that in furtherance of such design said La Point did a series of wrongful acts, and made certain false representations, specifically set out and alleged, calculated to aid, and which did aid defendant in procuring a conveyance of said property. During the trial the court permitted plaintiff to introduce testimony tending to prove that, two days prior to making the conveyance to defendant, said La Point sought out and introduced himself to plaintiff, and inquired about his present circumstances, means of support, and intentions; and finding that he was without money, and looking for employment, told plaintiff that he (the said La Point) would furnish plaintiff money for his present expenses; told plaintiff he ought not to seek employment; that La Point had been told plaintiff was the best prospector that could be found, and proposed that plaintiff should enter into a partnership arrangement with La Point to go prospecting for mines; and that they agreed upon such partnership arrangement; and that said La Point induced plaintiff to go about the town of Anaconda with La Point to look for, and arrange to purchase, certain supplies to use in such prospecting business ; that during this time, and from the first meeting of said parties, plaintiff was encouraged by said La Point to drink -extensively of intoxicating liquors furnished by the latter; that plaintiff became intoxicated, and while in that state said La Point procured a deed from plaintiff conveying to La Point a one-fourth interest in said Ida Mine, in consideration of one hundred and four dollars in money, and two promissory notes made by said La Point for two hundred dollars each, payable to plaintiff.
*148The introduction of all such evidence relating to the conduct of said La Point prior to the time of executing the deed of conveyance to defendant was objected to, and exception reserved to the admission thereof, on the ground that the same was irrelevant and incompetent because defendant Berkin was in no way connected with said acts of La Point, and that said acts were not in any way connected with the transaction whereby defendant Berkin obtained the deed sought to be canceled by this action. The same objection was also urged in a motion to strike out said testimony, made at the time the plaintiff rested in the proof of his case; which motion was overruled, and defendant excepted thereto. This testimony related to alleged acts done in the absence of defendant by one alleged to be a conspirator co-operating with him to accomplish the purpose in question. Such testimony was permissible only on the ground that such prearrangement, conspiracy, or relation of principal and agent between said La Point and defendant had been shown.
What evidence was there before the court tending to prove the existence of such agency, prearrangement, or conspiracy? The answer of the defendant in the action admits that “the defendant went to Anaconda for the purpose of purchasing said interest, and took with him for that purpose the draft referred to, upon information sent him by La Point;” and again admits “that defendant, being a stranger, had La Point find plaintiff, and bring him to defendant, as a matter of convenience to him;” and, again, defendant’s answer “ avers that this defendant went to Anaconda upon information received by him from La Point that he could purchase said property.” It is true these admissions are innocent enough in themselves, but they do show some co-operation by said La Point with defendant in reference' to the object sought to be consummated.
In addition to those admissions in defendant’s answer, prior to the admission of the evidence under consideration, testimony had been introduced to the effect that on said 22d of March, said La Point sought and found plaintiff in a saloon at Anaconda, where he had been engaged at card-playing and drinking intoxicating liquors; that plaintiff was invited by said La Point to go to his house in Anaconda, and La Point accompanied plaintiff there; that plaintiff understood from La Point’s invi*149tation that the object of this visit to La Point’s house was to see his folks; that when the two entered said house, defendant Berkin was there, and La Point seemed surprised to see defendant, and inquired where he came from, and defendant replied that he had come from Ore Pino mining district, where he had been prospecting (which mining district is situated at a distance from the section where the Ida Mine is located); that La Point then introduced plaintiff to defendant Berkin; that La Point then explained to defendant that plaintiff and La Point had entered into an arrangement to go prospecting, and thereupon defendant expressed a desire to enter into such arrangement with them; that defendant and said La Point then went into another room, and held some conversation together; that defendant returned shortly afterwards to the room where plaintiff was, and again said he would like to get into the prospecting business mentioned; that La Point then mentioned the subject of the Ida Mine, saying he had a fourth interest therein, and thereupon defendant proposed to La Point to buy the interest which he owned in said mine, and also the fourth interest owned by plaintiff, offering one thousand dollars each for said interests; that La Point called plaintiff’s attention to said offer, and asked what he thought of it, and that plaintiff replied, saying, “We are partners, and whatever you do is satisfactory to me; ” that La Point thereupon accepted the offer, and defendant immediately paid to La Point and to plaintiff the sum of twenty dollars each to bind the bargain. The court, having before it evidence of that character, allowed inquiry to be made as to the representations and conduct of La Point in relation to the formation of said partnership arrangement for prospecting, and the acquisition by La Point of said fourth interest in the Ida Mine, which occurred two days before the transaction of defendant in question. In view of such testimony before the court, tending to prove the co-operation of La Point with defendant in his effort to procure the deed in question, we cannot bold that the court erred in allowing the introduction of said testimony objected to and urged as error. We think an ample foundation was laid to sustain the introduction thereof. (Code Civ. Proc. § 642; Wharton on Evidence, § 1205; Lincoln v. Claflin, 7 Wall. 132; Nudd v. Burrows, 91 U. S. 438.)
*150Among other matters assigned as ground for a new trial is a-specification that the finding of the jury to the effect that defendant and said La Point conspired together to obtain plaintiff’s interest in said mine “for a consideration far below its-value” is not supported by the evidence. In addition to admissions in the answer of defendant and the evidence above-referred to, it was disclosed by the testimony of both La Point and defendant Berkin that, about a week before the interest was obtained for defendant, he went to Anaconda in search of plaintiff, and not being able to find him, as defendant testified,, he “told La Point to look for Maloy, and let defendant know at once if he could find him, and that if he could buy in, or buy his interest in the Ida Mine for four or five hundred dollars, to-do so; he was to buy the interest for me; ” and that La Point “ said he would do it.” And, notwithstanding the fact that La Point first procured a conveyance of one-fourth interest in said mine to himself, it does not appear that he at all relinquished his effort to aid his brother-in-law, Berkin, in obtaining a deed from plaintiff for the remaining fourth interest in said mine j and that it was obtained for a consideration grossly out of proportion to its value does not admit of doubt, if the value oí said mine was forty thousand dollars, as found by the jury and court.
This brings us to the point raised by the counsel for appellant, that the court erred in admitting certain testimony as to the value of said mine, and that the finding that the value of said mine was forty thousand dollars is unsupported by evidence. Appellant’s counsel have not explained wherein the evidence introduced as to value does not conform to the views-expressed in Montana Ry. Co. v. Warren, 6 Mont. 275, and in the opinion of the Supreme Court of the United States affirming the same case, 137 U. S. 348. Neither is it explained wherein the witnesses were not shown to be fully competent to testify as to the value of said mine. In this case the mine was developed to such an extent as to have produced valuable ores, from which valuable returns had been derived. Not only so, the property appears, at the time, to have had a market value. About the-time in question a one-eightli interest in said mine had been sold for five thousand three hundred dollars, and a one-fourth interest *151for ten thousand dollars; and other interests were sought for, and contracts made to pay proportionate sums therefor. So much was shown concerning the market value of the property $ and the witnesses who testified to the value were first shown to be fully qualified to speak upon that subject, according to the views expressed in the case last above cited.
In the brief of counsel for appellant it is urged that the court erred in allowing witness Mclntire to testify on behalf of plaintiff that defendant’s father, William Berkin, worked a few days in said mine prior to the transaction in question. This point was not specified to the court below as error, on the motion for new trial, as appears by the record, and the same is therefore passed without consideration.
In this case it appears that defendant obtained the interest in question by paying about one tenth of its market value. From the evidence set forth in the record, there is scarcely room for a reasonable doubt, that when defendant undertook to find plaintiff, and obtain a deed for said property, defendant had knowledge of the value of the property which he sought to obtain for so small a consideration, and also had reason to believe that plaintiff was ignorant of the present value of the same. Defendant’s testimony convinces us of that, notwithstanding his great effort to conceal the fact that he had such knowledge. He admits that he heard it rumored that Al. Sheed had sold his eighth interest in said mine for four or five thousand dollars. This was the person from whom defendant borrowed the money with which to purchase plaintiff’s interest. Defendant says in his testimony that the fact which led him to make an effort to find plaintiff was that he (defendant), “like a good many others, was excited about this property.” “That is, ” he says, “my curiosity was excited. A good many were hunting for him, and I thought I had the same right, and that I would do the same. I thought there might be something in it, by reason of the inquiries that were being made about him. There were a good many around here hunting for him, and one man told me he would give me three hundred dollars if I could find him.” Defendant further testifies that the subject of this mine “ was in everybody’s mouth; ” that it had been reported to him that the plaintiff was lost; that plaintiff had been ad ver*152tised for in the local newspapers. It appears without dispute that plaintiff had neither seen nor received any information concerning said mine for about eighteen months, and in the mean time the mine had been developed from an unpromising “ prospect” to a paying mine, and had a present value in the market, as above set forth; that plaintiff was supposed to have been lost; and that defendant had been consulted about administering on plaintiff’s estate.
However, as counsel for appellant correctly argue, inadequacy of consideration alone is not sufficient cause for cancellation of a conveyance, except, perhaps, in extreme cases. Inadequacy of consideration is one strong element of the cause, and, if accompanied by circumstances which amount to fraud, the cause for relief is made out. Mr. Pomeroy, in his work on Equity Jurisprudence, states forcibly and succinctly the principles applicable to this subject, and accompanies his text with a multitude of authorities, bringing his research down to a recent date. We quote some of his observations. He says: “The rule is well settled that where the parties were both in a situation to form an independent judgment concerning the transaction, and acted knowingly and intentionally, mere inadequacy in the price or in the subject-matter, unaccompanied by other inequitable incidents, is never of itself sufficient ground for canceling an executed or executory contract. If the parties, being in the situation and having the ability to do so, have exercised their own independent judgment as to the value of the subject-matter, courts of equity should not, and will not, interfere with such valuation. In some of the earlier decisions, mere inadequacy, either in the price or the value of the subject-matter, was held to be a sufficient hardship, which might defeat the specific performance of an executory contract when set up as a defense. The doctrine, however, is now settled that mere inadequacy — that is, inequality in value between the subject-matter and the price — is not a ground for refusing the remedy of specific performance. In order to be a defense, the inadequacy must either be accompanied by other inequitable incidents, or must be so gross as to show fraud. In short, inadequacy as a negative defense, and as an affirmative ground for a cancellation, is governed by one and the same rule. Although the actual cases in *153which a contract or conveyance has been canceled on account <of gross inadequacy merely, without other inequitable incidents, are very few, yet the doctrine is settled by a consensus of decisions and dicta that even in the absence of all other circumstances, when the inadequacy of price is so gross that it shocks the conscience, and furnishes satisfactory and decisive evidence of fraud, it will be a sufficient ground for canceling a conveyance or contract, whether executed or executory. Even then, fraud, and not inadequacy of price, is the true and only cause for the interposition of equity and the granting of relief. If there is nothing but mere inadequacy of price, the case must be extreme to call for the interposition of equity. Where the inadequacy does not thus stand alone, but is accompanied by other inequitable incidents, the relief is much more readily granted. But even here the courts have established clearly marked limitations upon the exercise of their remedial functions, which should be carefully observed. The fact that a conveyance or other transaction was made without professional advise or consultation with friends, and was improvident, even coupled with an inadequacy of price, is not of itself a sufficient ground for relief, provided the parties were both able to judge and act independently, and did act upon equal terms, and fully understood the nature of the transaction, and there was no undue influence or circumstances of oppression. When the accompanying incidents are inequitable and show bad faith, such as concealments, misrepresentation, undue advantage, oppression on the part of the one who obtains the benefit, or ignorance, weakness of mind, sickness, old age, incapacity, pecuniary necessities, and the like, on the part of the other, these circumstances, combined with inadequacy of price, may easily induce a court to grant relief, defensive or affirmative. It would not be correct to say that such facts constitute an absolute aud necessary ground for equitable interposition. They operate to throw the heavy burden of proof upon the party seeking to enforce the transaction, or claiming the benefits of it, to show that the other acted voluntarily, knowingly, intentionally, and deliberately, with full knowledge of the nature and effect of his acts, and that his consent was not obtained by any oppression, undue influence, or undue advantage taken of *154his condition, situation, or necessities. If the party upon whom the burden rested should succeed in thus showing the perfect good faith of the transaction, it would be sustained; if he should fail, equity would grant such relief, affirmative or defensive, as might be appropriate.” (2 Pomeroy’s Equity Jurisprudence, §§ 926-928.)
The conclusion which we have reached, after mature consideration of the case, and the points, authorities, and arguments of counsel, is that none of the errors assigned ought to be sustained, and that the findings and decree are fully supported by the evidence. We are satisfied from the evidence that, when defendant set out in his endeavor to obtain said property, he knew full well the value thereof; yet if, with such knowledge, he had sought and obtained a transfer of the property for such small consideration compared to its value, and, to do so, hurried to take advantage of plaintiff’s ignorance of the late development of said property and the greatly increased value thereof, still the transaction might not have been set aside had defendant taken care to keep himself free from the use of means and agencies which tended to place the victim of his covetous design at a still greater disadvantage. Having a knowledge of the value of said property, it clearly appears that defendant contemplated and undertook the procurement thereof for a grossly 'inadequate consideration. Yet with only those facts in view, in a case like this, where no infirmity or weakness of plaintiff is shown, the law is slow to move, and often remains dormant when appealed to for the undoing of the transaction, “provided the parties were both able to judge and act independently, and did act upon equal terms, and fully understood the nature of the transaction,.and there was no undue influence or circumstances of oppression.” (Pomeroy, supra.) But, when gross inadequacy of consideration is shown, the law requires of the defendant the strict avoidance of all false, deceitful, or unfair means calculated to advantage his design; and therein the defendant’s conduct does not stand the test. When we speak of defendant’s conduct, we have in view not only what he personally did, but also what he did through the agency of La Point, Avhom defendant commissioned to “ buy in, or buy the interest ” of Maloy in, said property for defendant, and who aided defend*155ant in his transaction. The facts shown to the satisfaction of the court as to the conspiracy, or relation of principal and agent, between defendant and La Point in the consummation of the-transaction; as to the intoxication of plaintiff, from the influence of which the court found he was not free, when the conveyance was made to defendant; as to the use made of the partnership scheme to gain the trust and confidence of plaintiff, and distract his attention from the real object to be achieved; and as to the said La Point pretending to sell his fourth interest in said mine, for the same price, and at the same time, — each and all of those facts were potent elements in this case to taint with fraud and vitiate the transaction, when looked at in connection with the fact that defendant commenced his efforts to obtain said property, with the intention to, and did acquire it for a grossly inadequate consideration.
It is therefore ordered that the judgment and the order overruling appellant’s motion for a new trial be affirmed, with costs,.

Affirmed.

Blake, C. J., and Be Witt, J., concur.