Slothower v. Gordon

Contract, Construction of.' Sales by Trustees in Chancery: Notice; Caveat Emptos: Mistake. — Purchasers from a trustee in chancery sought by petition an abatement of the purchase money, on the ground of a defi-eiency in the quantity of land, and defects in certain machinery purchased,, which had been advertised and described by the trustee as “that valuable', cotton factory known as the Phcenix Factory, with 187 acres of land,, more or less, attached thereto,” with the further representation that “the machinery is in good running order, and now in use.” The advertisement-further stated that “persons desiring to examine the premises, can leave-Baltimore in the morning cars, and return the same day.” The petition* contained no allegation of fraud against the trustee,- actual or constructive»Held: 1st. That the purchasers were notified that quantity did not enter into the essence of the contract, and they were warned to ascertain the quantity at their own risk-. 9nd. Trustees will not be permitted to make representations which are untrue, knowing them to be so, or which they have no reason to believe to-be true; but if, acting in good faith,'they commit mistakes, such mistakes will not prejudice sales made by them more than those made by other vendors. 3rd. There is no relation of confidence and trust between the trustee and a purchaser; on the contrary, the doctrine of “caveat emptor” applies to all sales by trustees, acting under decrees of Courts of Equity.

Appeal from the Equity Side of the Circuit Court for Baltimore County. It appears from the record in this case, that in pursuance of a decree of the Circuit Court for Baltimore county, sitting as a Court of Equity, John M. Gordon, as trustee, offered at public sale, on the 14th of September 1852, the “Phoenix Factory, a large cotton factory in Baltimore county, and the appellants, being the highest bidders, became purchasers thereof. The sale was reported and finally ratified, and on the 8th of December 1854, a petition was filed by the appellants, praying that certain allowances and deductions should be made to them out of the purchase money then remaining unpaid, because of a deficiency in the quantity of land, and of the inferior condition of the machinery in the factory. The advertisement of sale offers “ that valuable cotton factory known as the ■ Phoenix • Factory, with 187 acres of land, more or less, attached thereto ;” and in describing the machinery, says: “ the machinery is in good running order, and now in use, consisting,” &c.; and adds: “persons desiring to examine the premises, can leave Baltimore in the morning cars, and return the same day.” The petition alleges that there was a deficiency of 53 acres in the quantity of land, and that the machinery was not in good running order. The trustee answered the petition, and evidence was taken under a commission, and the matter was then, by agreement, referred to an arbitrator, upon the terms that a pro forma order should be passed by the Court in accordance with his award, reserving to each party the right of appeal. The award of the arbitrator was against the appellants, and an order having been passed by the Court below, (Peice, J.,) dismissing their petition, they have appealed therefrom. So much of the evidence in the cause as is essential to a proper understanding of its decision, is stated in the opinion of this Court. I. In reference to tbe machinery, there was a gross misrepresentation, in a matter of substance, of its condition when sold, and the purchasers were misled by the false statement, and are entitled to relief. The rule is, that the vendor “shall make the representation good.” 1 Story’s Eq. Jur., sect. 191. 1 Story’s Rep., 190. Story on Sales, 165, 166. It is immaterial whether the vendor knew the representation to be false, or made the assertion without knowing whether it was true or false. The rule is the same, if the purchasers were misled. 1 Story’s Eq. Jur., sect. 193. The case put in sect. 195, is in point: “If a person should sell a ship, representing her to be of a certain tonnage, &c., and fully equipped and found with new sails and rigging, either of these representations, if materially untrue, so as to effect the essence or value of the purchase, would avoid it.” The application of these principles to amase like this, is admitted in Ely vs. Stewart & Speed, 2 Md. Rep., 415. II. In reference to the misrepresentation about the number of acres attached to the factory, the case differs materially in its facts from the cases of Jones vs. Plater, 2 Gill; Stull vs. Hurt, 9 Gill; and Hall vs. Mayhew, 15 Md. Rep. These cases all refer to and proceed upon the principle as announced by Judge Story, in 1 Story’s Eq. Jur., sect. 195. “It maybe laid down, as a general rule, that when the sale is fair, and the parties are equally innocent, and the thing is sold in gross, by the quantity, by estimation and not by measurement, a deficiency will not ordinarily entitle a party to relief, either by an allowance for the deficiency, or a rescission of the contract. Thus the sale of a farm, by known boundaries, containing by estimation a certain number of acres, will bind both parties, whether ⅛⅝⅛⅞ contains more'or less.” So tbis Court says in Sail vs. May-hew, 15 Md. Rep., 568: “Tbe. property was sold, not by tbe acre, but in gross. In Maryland, tbe law is well settled, tbat where quantity does not enter into tbe essence ■of tbe contract, in tbe absence of fraud and misrepresentation, tbe purchaser is not entitled to an abatement.” Tbe chancery rule in. Maryland, in reference to tbe. use of tbe words “more or less,” is clearly and fully laid down in Soffman vs. Johnson, 1 Bland, 109'; and Andrews vs. Scot-ton, 2 Bland, 645. It will be seen, tbat all tbe cases in Maryland and elsewhere, proceed on tbe ground tbat both parties are equally innocent, and that tbe misrepresentation is in no degree tainted by fraud, actual or constructive. Tbe fraud which would affect tbe case, is'described (see Story, Vol. 1, sect. 187) in the sense of a Court of Equity, as properly including all acts, omissions and concealments which involve a breach of legal or equitable duty, trust or confidence justly reposed, and which are injurious to another. Now, if in this case (as in all tbe previously decided cases) tbe deed to Cordon bad described tbe land as containing “187 acres, more or less,” be would have been innocent in mating tbe representation, as be was not bound to have tbe land surveyed, so as to confirm tbe statement. But when tbe deeds to and from himself, and all tbe previous deeds and tbe proceedings in tbe cause, in which be was trustee, described tbe land as containing “134 acres, more or less,” he was guilty of culpable negligence in not looking at them, and cannot be excused, either as vendor or »sas an officer of tbe Court, in making a false statement of bis own title. Stébbins vs. Eddy, 4 Mason, 419. Nelson ■vs. Matthews, 2 Sen. <& Man., 167. Duvall vs. Ross, 2 Man., 292. His omissions “involved a breach of equitable duty, trust and confidence justly reposed,” and were injurious to another, and were, therefore, in tbe sense of a Court of Equity, fraudulent in their character. Tbe law in Maryland is, that in such cases the Court is the vendor, and tbe trustee only its officer and agent. Bolgiano vs. Ooóke, 19 Md. Rep., 375. No case can be found where tbe Court, having tbe power to grant relief, has refused it, where its purchaser has been injured by the gross negligence and wholly unauthorized false representations of its agent, the trustee. The general rule about sales in gross, and not by the acre, has never been carried so far. The trustee could not sell more or other land than that described in his deed and in the decree. Real vs. Hughes, 10 G. & J., 10. III. If the purchasers are entitled to relief, they can claim it by way of abatement from the purchase money, as well as by a rescission of the contract. Marbury vs: Slone-sireet, 1 Md. Rep., 147. Kent vs. Careaud, 11 Md. Rep., 300. IV. Gordon was not merely trustee of the Court for (he sale in this case; he was also complainant and mortgagee, and entitled to the proceeds of sale. There was not, by the conditions of his title, any restriction upon his right to confrol those proceeds. By his agreement with the purchasers, he gave them the right to look to these proceeds for their indemnity, if they could establish their claims. This he could uot have done as trustee under the decree, but only as the complainant in the cause. The issue raised by Mm with the purchasers, (rightly interpreting his answer, as modified by his subsequent admission of tbe character of tbe agreement between him and them,) presented only the questions of fact, whether he had made false representations or not, and whether they had been injured by them, if false, and to what extent. It will be observed that all the evidence offered on his part, had reference to these issues of fact only. He must be considered, therefore, as having conceded their right to an abatement, provided they proved the injury done them. It will be seen, therefore, that this case, in many respects, presents peculiar features, which distinguish it from the cases cited for the appellee. I. Tbe sale made by tbe trustee was of a “ cotton factory, with 18*7 acres of land, more or less," and was made in gross, and not by tbe acre, and it is contended for tbe ap-pellee, that quantity was not of tbe essence of tbe .contract, and that even if tbe alleged deficiency in tbe number of acres is sufficiently and properly proved, tbe appellants are not entitled to any deduction therefor. See Nall vs. May~ hew, 15 Md. Rep,, 551. Stull vs. Nurt, 9 Gill, 146. Jones vs. Plater, 2 Gill, 125. Nurt vs. Stull, 3 Md. Gh. Deo., 26. Broom’s Max., 366. II. Tbe appellants are not entitled to any deduction from the purchase money, on the ground that tbe machinery was not “in good running order," for tbe following reasons: 1st. The words “in good running order,” in tbe trustee’s advertisement, were but the expression of bis opinion and belief, and are too indefinite and uncertain to raise a warranty or constitute a binding representation. They do not mean in the best, or in perfect order, but in order reasonably fit for running. Tbe actual condition of tbe machinery was a matter of fact, but whether that condition did reasonably constitute “ good running order," was purely a matter of opinion. 1 Story’s Eq.- Jur., secs. 191 and 197, Story on Qontracts. secs. 529,530. Naqins vs. Plymp-ton, 11 Pick., 97. 2nd, These words, “in good running order," in tbe advertisement, were not intended by tbe trustee, or understood by tbe public, as a warranty or binding representation, and were not relied on as such by tbe appellants. Tbe words are found in an advertisement of sale by a trustee, not professing to be an expert in matters of machinery, and who, in the same advertisement, invites an examination of tbe premises, and gives full time and opportunity therefor. He had a right to presume, as matter of fact and law, that all bidders bad availed themselves of tbe opportunity, and made such examination. McKenzie proves that the defects in the machinery were perfectly visible, and were, there-lore, not Latent defects. If the appellants meant to depart so far from the usual course of business and their legal duty, as to buy a thing proffered for their inspection with* out looking at it, and upon the faith of the trustee’s opinion, they should and would have askell for an express warranty, and would not have relied on implying a warranty from laudatory language in the advertisement. There is no proof in the record that the appellants ever read or heard the advertisement before their purchase. Mr. Slothower was at the sale, hut it does not appear whether he was present at the moment when the advertisement was read by the auctioneer. The proof is, that he made the purchase, not on the faith of the advertisement, hut on information obtained from the witness, McKenzie, to whom he was referred as a person who had worked the mill, and knew all about it. That this was so, is further proved by the fact that on the day after the sale, that is, on the 15th September 1852, the appellants, with McKenzie as their manager, took possession of the factory, examined the machinery; and commenced running the mill, and that although McKenzie informed them the machinery would require $1,500 to $2,000 to put it in good running order, they made no complaint. So far from then complaining, on the 21st and 23rd of the same September, they made to the trustee the cash payment due on their purchase. 1 Story’s E ¡. Jur., secs. 200 a, 202, 208. Ely vs. Stewart, 2 Md. Hep., 408, 413, 414. F. & F. Bank vs. Martin, 1 Md. Rep., 342. JDtiffie vs. Mason, 8 Oowen, 25. Atwood vs. Small, 6 Glarke & Finally, 316. 3rd. The evidence does not satisfactorily establish that the machinery was not in good running order, whether that be regarded as matter of fact or of opinion. IV. The appellants have been guilty of laches in making their claim and filing their petition. This is not sufficiently excused by the admission or agreement of the trustee. He had returned from Europe twelve months, and the fund had been distributed by an account finally ratified before the petition was filed. His agreement in no degree admitted the validity of the claim, and merely consented to what he could not prevent, viz: that a petition might be filed at any time before distribution of the proceeds.