Crane v. Bunnell

The court of chancery has concurrent jurisdiction with courts of law in cases of fraud. And where the complainant files a bill for relief against a fraudulent contract and for a discovery of the fraud, the court may proceed and grant relief, and make a final decree between the parties after such discovery has been obtained. But the court of chancery will not, in a case of concurrent jurisdiction, grant an injunction for the mere purpose of transferring the jurisdiction from a court of law, where no discovery is necessary, or after the defendant has fully answered the complainant’s bill. Where notes payable in specific articles were given upon an agreement alleged to be fraudulent, Held that the maker of the notes was not obliged to come into a court of equity for relief; as the notes were not negotiable, and the maker had a perfect defence at law, to a suit upon the notes in the name of the payee.

This case came before the chancellor upon an appeal from a decision of the vice chancellor of the fourth circuit dissolving an injunction. In 1836, the defendants sold to the complainant ten thousand acres of Texian lands for .the price or sum of $1250 ; for which the latter gave to them his promissory notes payable in building slate, in six annual instalments. At the time the notes were taken, the defendants executed a written agreement to obtain and deliver to the complainant, within twenty days, scrip of the Rio Grande and Texas Laud Company, entitling him to ten thousand acres of land of the said company. And within the time prescribed they procured and delivered to him a certificate purporting to be signed by Isaac A. Johnson as trustee, and Lemuel Sawyer as secretary of the company, and by J. C. Beals as empresario or founder of the colony or settlement, by which the complainant was declared to be entitled to one share in the estate and funds of the Rio Grande and Texas Land Company, each share of which contained ten thousand acres, besides surplus lands, and which was only transferable on the books of the company. The first note was paid by the complainant; and the other notes not being paid, suits at law were commenced thereon, against him, to recover the amount of such notes. The complainant put in a defence to the suit at law upon the notes, and after the cause was at issue and was about to be brought to trial, he filed the bill in this cause and obtained an injunction, restraining the plaintiffs in the suit at law from proceeding therein. The bill alleged that the defendants Bunnell and Boutwell falsely represented to the complainant that they were the owners in fee of 100,000 acres of Texian lands, and that they gave him an agreement to convey the same to him, by a good and valid conveyance, within twenty days; but that they afterwards improperly obtained from him the agreement, upon pretence that they were delivering to him a conveyance of the lands according to the terms of such agreement, when in fact they only gave to him the scrip purporting to be signed as above stated. The complainant also alleged, in the bill, that he had no means of proving the terms of the agreement, and the facts stated in the bill, except by the answer of the defendants. The defendants put in answers to the bill, so far as it prayed a discovery from them, and demurred to the relief, upon the ground that the complainant, if the .allegations in the bill were true, had a perfect defence at law in the suit upon the notes. By their answers they denied all the allegations of fraud in the bill, either as to the making of the original agreement and obtaining the notes for slate, or in the obtaining the possession of the agreement upon the delivery of the scrip according to the terms thereof. And they stated, in their answers, that by the terms of that agreement they were only to give to the complainant such scrip, signed by the persons who signed the scrip delivered. The vice chancellor dissolved the injunction with costs, for the reasons stated at length in the following opinion. Willard, V. C. There is nothing disclosed in the bill which should induce the court to withdraw the decision of the cause from the forum which the parties originally selected, and to which it properly belongs. The discovery sought is merely in aid of the defence interposed to the action on the note ; and it was for that purpose the injunction was allowed. The defendants having put in an answer to the discovery, which has not been excepted to, and from which it appears that the complainant has obtained no discovery, it follows, according to the settled practice of the court, that the injunction must be dissolved, and the parties be left to litigate the matter in a court of law. A different rule would lead to gross abuse. If under a pretence of discovery, any suit could be withdrawn from a common law forum to this court, the court itself would soon become an enormous grievance. (7 Paige, 451. 7 Cranch, 69. 1 Story*s Eq. § 71 to 74.) It is contended by the complainant’s counsel, that the defendants, by demurring to the relief, are estopped from their motion to dissolve the injunction, until the demurrer is decided in their favor. Whatever may be the rule where the answer to the discovery does not meet the equity of the bill, the position contended for cannot be supported with reference to a case like this. Even had the defendants demurred to the discovery as well as to the relief, they might have moved to dissolve the injunction on the matter of the bill. If the bill does not set forth such a case as entitles the complainant to the relief sought, the injunction should, of course, be dissolved, and the defendants be permitted to proceed with their action at law. (7 Paige, 157.) I will examine the case therefore upon the bill alone. The agreement, as consummated by the parties on the 13th August, 1836, was, that the defendants should, within twenty days from that day, procure a good and sufficient deed of conveyance from the Rio Grande and Texas Land Company to the complainant, in fee simple, of ten thousand acres of land situate in the tract of the said company in Texas; in consideration of which the complainant was to make and execute six promissory notes, payable in slate, at different periods, amounting in the aggregate to $1250. The bond to convey and the notes were simultaneously made and delivered on the same 13th August, 1836. The complainant obtained for his notes precisely such a contract to convey as he had agreed for, and there is, therefore, no fraud in the factum of the notes. It is not alleged that the defendants had more knowledge of the existence of the Rio Grande and Texas Land Company than the complainant. Nor is it alleged that the defendants knew or had reason to suspect there was no such company, at the time they entered into the bargain. Both parties in this stage of the transaction had equal knowledge, or the means of obtaining it; and there is no reason to doubt that the complainant was as eager to make the purchase, as the defendants were to obtain the notes.' Had the contract, as then closed, been carried out according to its terms, and had the complainant invoked the aid of this court to vacate it, and to have his notes cancelled, he must have alleged that there was no such company in being at the time of the contract, or that a deed of the company to him would convey no land, and that those facts were known to the defendants and not known to him. But the bill contains no such averments : and as the contract was after-wards varied, it is perhaps unnecessary to discuss the rights of the parties under the assumed hypothesis. Within the time limited for procuring the deed, the parties again met, and the defendants, in lieu of the deed, delivered to the complainant a scrip or certificate dated 18th August, 1836, purporting on its face to be issued by the Rio Grande and Texas Land Company, and entitling the complainant to one share (10,000 acres of land,) in the estate and funds of the said company, transferable only on the books of the company, and to be signed by certain oflicers of the company. It was an engraved certificate with a map attached, according to the custom and forms of that day. The complainant received the scrip and surrendered the bond for a deed to the defendants. It was competent for the parties to vary their contract, and, of course, for the complainant to accept stock in the company rather than a deed, if he chose. He might have received stock in a railroad, a bank, or canal company, or the cash. And his receipt of either, in lieu of the deed, operates, in the absence of fraud or mistake, as a discharge of the defendants under the original-contract. No mistake is alleged in the bill ; nor is there any fraud set up with reference to the substitution of the one contract for the other. The hurried manner in which the defendants took up the bond, and expatiated on the goodness of the scrip and the growing prospects of Texas, are not alleged to have been done -with a fraudulent design. The complainant never offered to return the scrip. Nor is there any evidence in the bill that he complained of his bargain until about three years after-wards. Although the complainant has stated in which hand he received the scrip, he is less particular when he comes to specify times. Thus he says from the hurried manner in which the transaction occurred, he was unable to tell whether the scrip was such an instrument of conveyance as was contemplated by the bond ; and that as soon thereafter as he conveniently could, he made inquiries in relation to said company and said scrip-, and became satisfied that it was not a deed, and that he had been imposed upon by the defendants, and so informed them, and requested them to give up the bond. It is to be remarked, that he did require them to give such deed as the bond contemplated ; but his object probably then was to repudiate the contract. It is fair to presume, in the absence of dates in the bill, that all this occurred in 1839, after he had paid one of the notes. It is hardly probable that he would have yielded to the advice of the defendants’ counsel, and paid a note obtained from him by fraud, as he now says, if he knew the defendants had palmed upon him an instrument which he did not intend to receive. It would require but a few moments to tell whether the certificate was a deed or something else. The complainant, in 1836, would have been satisfied with a deed from the company to himself. He held the scrip at least three years without objection. The bill is silent as to any suggestion of fraud during that period. From the history of the times, we may well conjecture that he was delighted with the exchange of Hoosic slate for an interest in the Rio Grande and Texas Land Company; that .he was proud of an association with men of such enlarged views and adventurous enterprize j that his imagination luxuriated in the boundless prospect of wealth and enjoyment in the bland atmosphere of the tropics. No doubt he often examined and pondered over the scrip and the map attached to it. He fancied the land divided into squares, and avenues and streets, adorned with perennial shrubbery and flowers, and covered with magnificent villas. The earth yielding its fruits spontaneously in unstinted abundance, the inhabitants, relieved from the curse of labor and toil, could repose on their sofas, fanned by slaves, and enjoy the contrast between their happy lot and that of the people of New-York. Such were probably the operations of his mind during the three years about which the bill is silent. He, at length, with the rest of the world, awoke from his reverie, and found his El Dorado among the marshes and fens of the Rio Grande, and in the exclusive occppancy of musquitoes, gallinippers and alligators. He then discovered fraud in the contract; began to think of not paying the notes; thought of his honest creditors; and in short, told one of the defendants, in the language of the bill, “ that he could not and would not pay the notes, that he meant to pay his honest debts, .and would make no promise to pay the said notes then or at any future time, for he had received no value for them,” &c. There can be no doubt that the complainant must be deemed to have accepted the scrip in lieu of a deed, and to have taken it at his own risk. His long acquiescence without objection amounted to a substitution of the latter for the former contract. It is not material, therefore, whether the defendants had title to lands in Texas or not, nor whether the company had such lands, since the scrip did not purport to convey any land, but only a share of the estate and funds of the company. Those funds may have amounted to a million of dollars for aught that appears to the contrary in the bill. Nor is it alleged that the scrip was without value at the time it was received. It is merely averred that it was so at the filing of the bill, in March, 1842, nearly six years after the transaction. It is true the complainant alleges his belief, on information, either that no such company ever existed as the Rio Grande and Texas Land Company, or if it did, that it was formed for the purpose of imposing upon and cheating the public. (See 7 Paige, 157.) When he was so informed, and by whom, does not appear; and which of the alternatives is to be taken as the truth, if either, is left to conjecture. The complainant was at any rate willing to become a member of the company and partake of its profits, by whatever means they were acquired. It is too late for him now to ask the aid of this court to discharge him from his contract. That the complainant has failed to realize from the bargain the expectations he had cherished, is probably true. That the stock of the company is valueless, may also be true. But it by no means follows that the complainant is entitled to relief either at law or in equity. In the changes and vicissitudes of this world, the value of property and the most cherished hopes of human enterprizes are constantly fluctuating. Fortunes are often made or lost by trusting to appearances, the fallaciousness of which can only be tested by the result. Each man confides in his own wisdom and sagacity when he makes a bargain. He relies upon the chances of success, which are often brilliant in prospect, and is stimulated to activity by the hopes they inspire. From the nature of things, all cannot become rich, however much they may make haste to become so. Time and chance happen to all men. No reproach should be cast upon either of these parties, from the mere fact that they were influenced by the mania of 1836. All were in a degree affected by it. It is not necessary to presume a man a fool or a rogue because he made a bargain which, seen through a different medium, indicates folly. Both may be honest. The bill does not disclose enough to taint the final contract with fraud, so as to entitle the complainant to the aid of this court. The motion to dissolve the injunction must be granted, with fifteen dollars costs.