Clark v. Reeder

158 U.S. 505 (1895)

CLARK
v.
REEDER.

No. 262.

Supreme Court of United States.

Argued April 22, 23, 1895. Decided May 27, 1895. APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF WEST VIRGINIA.

Mr. Joseph S. Clark and Mr. Richard C. Dale for appellant.

Mr. James McColgan and Mr. Bernard Carter for appellee.

MR. CHIEF JUSTICE FULLER, after stating the case, delivered the opinion of the court.

The theory of the original bill was that the complainant was entitled to a rescission of the contract of February 29, 1884, on the ground of a mutual mistake of himself and Reeder in regard to the alleged fact that the larger part of the land embraced in the Dillon survey was covered by the Rutter and Etting survey; but any such mistake was denied by the defendant, and was not sustained by the evidence; and by his amendment to his second supplemental bill complainant in effect abandoned the ground of mutual mistake and asked for the rescission of the contract on the ground of fraud only. The charge of fraud is that before and at the time of making and executing the agreement, Reeder and Watts knew of the existence of the Rutter and Etting survey, of its location with reference to the Dillon survey, of the interlock between the surveys and very nearly the extent of such interlock, and that the Rutter and Etting survey was the older of the two; that they, and each of them, intentionally and with intent to defraud Clark, withheld and concealed from him and from his agent and from his attorney knowledge or information of these matters, and thereby fraudulently induced the agent and attorney to make and execute the agreement on behalf of Clark; that Watts on his own behalf and as the agent of Reeder, with intent to defraud Clark, falsely represented to Clark's agent and attorney at the time of the making of the agreement that there was no older title than the Dillon patent to any part of the land embraced therein, and that the only claims that could or would be set up adversely to Reeder's title would be grants for parts of the lands junior to the Dillon patent; and that the agent and attorney, believing the statements to be true, entered into and executed the contract on behalf of Clark, which they would not have done except for the statements and their belief in their truth; and that the agreement was procured to be made and executed by and through the alleged fraudulent concealments and false representations, but for which the contract would not have been made.

In entering into the contract, Watts assumed to act not only for himself but for Reeder, and we accept the ruling of the Circuit Court that in approving the contract Reeder assented to Watts' agency, and in taking the benefit of the contract would be bound by any conduct on his agent's part which might entitle Clark to a rescission.

In Farrar v. Churchill, 135 U.S. 609, 615, we said: "The general principles applicable to cases of fraudulent representations are well settled. Fraud is never presumed; and where it is alleged the facts sustaining it must be clearly made out. The representation must be in regard to a material fact, must be false and must be acted upon by the other party in ignorance of its falsity and with a reasonable belief that it was true. It must be the very ground on which the transaction took place, although it is not necessary that it should have been the sole cause if it were proximate, immediate, and material. If the purchaser investigates for himself and nothing is done to prevent his investigation from being as full as he chooses, he cannot say that he relied on the vendor's representation." And in Farnsworth v. Duffner, 142 U.S. 43, 47: "This is a suit for the rescission of a contract of purchase, and to recover the moneys paid thereon, on the ground that it was induced by the false and fraudulent representations of the vendors. In respect to such an action it has been laid down by many authorities that, where the means of knowledge respecting the matters falsely represented are equally open to purchaser and vendor, the former is charged with knowledge of all that by the use of such means he could have ascertained. . . . But if the neglect to make reasonable examination would preclude a party from rescinding a contract on the ground of false and fraudulent representations, a fortiori is he precluded when it appears that he did make such examination, and relied on the evidences furnished by such examination, and not upon the representations." In the latter case, the syllabus of Ludington v. Renick, 7 W. Va. 273, was quoted as follows: "A party seeking the rescission of a contract, on the ground of misrepresentations, must establish the same by clear and irrefragable evidence; and if it appears that he has resorted to the proper means of verification, so as to show that he in fact relied upon his own inquiries, or if the means of investigation and verification were at hand, and his attention drawn to them, relief will be denied."

The contract was that Reeder agreed to sell and convey, with covenants of special warranty, a tract of land containing 50,096 acres, more or less, which tract was granted by Virginia to Edward Dillon by patent dated April 16, 1796, and claimed and owned by Reeder by regular chain of title, the first being a tax deed to Ward and Lawson, dated December 22, 1857; the sale to be a sale by the acre and not in gross; that the amount of the purchase money was to be $1.70 per acre; that from the number of acres within the boundaries of the grant as it had been surveyed by Sarver, with which survey Clark was satisfied, should be deducted such number of acres as should be ascertained by actual survey to be held by persons by better title than that of Reeder, by reason of adverse title and possession; and it was further provided that the contract of sale should be void unless James H. Ferguson should within thirty days from the date of the agreement "certify the title of said Reeder to said land to be good and valid," and if within the thirty days Ferguson should certify that the title was good and valid, then $35,000 of the purchase money was to be paid and the remainder as soon thereafter as the surveys needed to ascertain what lands within the boundaries were held by a better title than that of Reeder, by reason of adverse title and possession, were made. The question submitted to Ferguson and to be determined by him was whether Reeder had a good and valid title to all of the land which by the patent had been granted to Dillon, except those parts which should afterwards be found to be in the actual possession of persons who denied Reeder's title, so that Ferguson was to examine into the validity of the title and his certificate was to be conclusive as to that. The amendment setting up the fraud relied on to set aside the contract did not allege that the certificate as to the title was given because of the reliance on the silence of Watts and Reeder as to the interlock between the two surveys, or reliance on any affirmative representations of Watts, and if Ferguson before giving the certificate was aware of the fact of the interlock, what he believed when the contract was made would furnish in itself no sufficient ground for rescission. The certificate stated that Ferguson had made a full examination of the matter pertaining to the title to this tract of land, and that "The only title which can be found older than the Dillon patent is a grant from the Commonwealth of Virginia to Rutter and Etting, dated the 9th day of January, 1796. There is from the best information I can obtain a small portion of the Rutter and Etting survey embraced within the Dillon survey, but the Rutter and Etting survey was forfeited long prior to 1837 to the State of Virginia for the non-payment of taxes thereon and for the non-entry thereon in the land books of the proper county, and was sold by the commissioner of delinquent and forfeited lands some forty or more years ago. At the time of that sale, the taxes on the Dillon survey had always been paid, and for that reason the title to the whole thereof became good and valid, so far as the Rutter and Etting survey is concerned." And the certificate concluded with these words: "I therefore do certify that in my opinion the title of Charles Reeder to the said Dillon survey is good and valid, except as to such parts of said tract of land as may be affected by the claims of the occupants aforesaid, which may or may not be superior to the title of said Reeder." It thus appears that Ferguson had ascertained that at least a part of the land was included in the older grant, and that he nevertheless certified that the title to the land covered by the Dillon survey was good and valid because he knew and declared that the Rutter and Etting grant had been forfeited long prior to 1837, and determined that because of the forfeiture and the fact that the taxes on the Dillon land had always been paid, the title had become vested in the holder of the Dillon grant. It is true that Ferguson testified that he obtained the information that a portion of the land covered by the Dillon grant was included within the Rutter and Etting grant from Watts between the time of the execution of the agreement and the giving of his certificate, and that Watts represented the interference as but small; yet it would seem that if Ferguson considered the question of the existence of the interference material he would have examined into its extent, and his certificate shows that he considered the Rutter and Etting grant altogether null and void, and that by its forfeiture the Dillon title had become perfected, so that, knowing as he did that there was an interlock, it cannot be assumed that Ferguson was affected by the failure of Watts and Reeder to tell him of its existence or by the assertion of Watts that no older title interfered with the Dillon grant. Moreover, it does not appear that Watts had any particular information as to the extent of the interference which was not open to every one, and probably reliable information upon the subject depended upon the surveys of the two tracts.

The record shows that Mr. Ferguson had had a large experience in the examination of land titles in West Virginia, their forfeiture and validity, the overlapping of different grants for the same land, and the construction of the laws of Virginia and West Virginia in regard to land titles; and that he had practised many years in the counties where the land was situated. He testified that when he first commenced to practise in that locality these surveys were in the counties of Fayette and Logan as he now understood their boundaries, and that, in the course of his practise in Logan County, he became acquainted with the existence of both of the surveys and with the fact that the Rutter and Etting survey had been sold as forfeited and delinquent by General Albert Beckley, commissioner of delinquent and forfeited lands for Fayette County. That sale took place in 1840, and the report of General Beckley, made to the Circuit Court of Fayette County, stated that the Rutter and Etting grant had been carefully resurveyed, and that the survey showed that within the boundaries of said Rutter and Etting grant nearly the whole of the 50,096 acres patented to Edward Dillon was included. The matter of such a claim was of record then as early as 1840, and the certificate refers to the sale, so that no matter what was the opinion about it expressed by Watts, if the question of the extent of the interlock was material, a survey might well have been had before the certificate was given.

The record further discloses that copies of both the Dillon and the Rutter and Etting grants were sent to Watts by Reeder and delivered to Clark's agent for Ferguson, and Clark says in his second amended and supplemental bill that he is informed by his said counsel that when the fact that the Rutter and Etting survey covered a portion of the Dillon survey came to his knowledge after the execution and approval of the contract and after examination and investigation, he, as far as was then possible, looked into the matter and was satisfied that if there was any interference between the two surveys it was so small and unimportant as not to seriously impair the value of the Dillon survey even if it should prove the better title, and in this belief he gave his certificate; a statement quite different from asserting that he acted on the statements of Watts as to the extent of the interference.

Apart from all this, we cannot consistently hold that the evidence sustains the amendment to the second supplemental bill to the effect that Reeder and Watts knew of the extent of the interference of the Rutter and Etting grant, and that it included the larger part of the Dillon grant, and wilfully and fraudulently withheld the information, because they believed that if known to Clark or his agent or attorney it would prevent the sale of the land, or that Watts affirmatively represented that there had never been any older grant which affected the Dillon grant.

We entirely concur with the statement of Mr. Justice Harlan in his opinion on the circuit, that: "I am satisfied that no one connected with this business knew the full extent of this interlock." It is not pretended that Reeder made any representation to Clark or his agent or attorney, and his testimony shows that in the course of the survey of 1873 by Sarver, the survey which by the agreement was declared to be taken as ascertaining satisfactorily the boundaries of the land, Sarver discovered that there was some interference between the two surveys, and pointed out the place where the south line of the Rutter and Etting survey crossed the western line of the Dillon survey; and Reeder testified that "exactly how much land was embraced in the interlock was not known, and I did not consider it important to know, as I was advised, by my counsel, and had other good authority for believing, that the Dillon title would unquestionably hold as against the Rutter and Etting, and consequently as against titles derived from the Rutter and Etting." And he said in his answer to the interrogatories of the second supplementary bill: "I did not then nor do I now know to what extent the Rutter and Etting survey laps on the Dillon, nor do I think that any one else knows, because from the facts which have come to my knowledge I do not think that any more than the first line of the Rutter and Etting survey was ever run by the surveyor originally." There appears in the record a letter from Watts to Reeder under date of November 8, 1873, in reply to one from Reeder enclosing him a sketch from the Sarver survey, which sketch showed that the larger part of the Dillon tract was included in the Rutter and Etting grant, (also called the Duval, Duval having made the original entry,) in which Watts not only gave his own reasons for believing that the sketch did not truly represent the relations of the two tracts, and that in his judgment it would be impossible for the Duval to lap on the Dillon survey, but advised Mr. Reeder that he had showed Judge Ward the sketch and plats Reeder had sent, and Judge Ward told him the Dillon survey was perfect, the best in West Virginia; and that the Duval had never been run; and Watts added that he was satisfied that this was true, and that the Duval was only gotten up for a speculation. We think it does not admit of reasonable doubt that Mr. Reeder believed that there was nothing in the Rutter and Etting grant which impaired his title to the Dillon grant, although, nevertheless, he sent, with all his title-papers, the copies of the surveys of both tracts to Watts at the time a sale of the land was contemplated "for examination, and in order that it should be a full and thorough examination."

And notwithstanding a serious conflict of evidence, we are not persuaded that the specific statements of Watts in his answers, and his testimony, as to his knowledge of the extent of the interlock, and as to what he communicated to Ferguson and Bell, in denial of any fraudulent concealment or fraudulent representation, can properly be treated as overcome, the documentary and undisputed evidence being considered, and due regard being had to the infirmities of human memory. It was known at the time the certificate was given that the Rutter and Etting patent was older than the Dillon patent, and that there was an interlock, but the parties had agreed to take the exterior boundaries of the Dillon survey as made by Sarver, and Clark was given the right by a survey at his own expense to ascertain what lands within those boundaries were held by a better title than Reeder's, by reason of adverse title and possession. And if the Rutter and Etting survey had been forfeited long prior to 1837, and the title to the Dillon survey had become good and valid so far as the Rutter and Etting survey was concerned, or this was believed to be so by all parties, it is not extraordinary when afterwards the extent of the interlock was raised as an objection to complying with the contract, that there might be a want of precision of recollection as to exactly what did pass in reference to that particular matter. It is remarkable that nowhere in the pleadings or in the testimony is it alleged or suggested that the Rutter and Etting title is good and valid as against Reeder under the Dillon title. The result of the report of the special master was that the only portion of the whole of the Dillon survey now in the possession of persons claiming title adverse to Reeder was 7397.75 acres, out of a total of 54,907.5 acres, and 7379.75 was by the final decree adjudged to be the number of acres actually held by better title than that of Reeder by reason of adverse title and possession, and for this Clark was not required to pay; and in relation to this matter we cannot do better than to quote from the opinion of the Circuit Court, as follows: "The utmost shown is that most of the Dillon survey is within the lines of the Rutter and Etting survey; but, as already said, this might be true, and yet Reeder's right be the better in law. Can it be a sufficient ground to set aside the contract for the plaintiff to show that a large part of the lands in question are within the lines of a patent older than the one under which Reeder claims and that they are claimed adversely to Reeder, especially when Reeder only agreed to convey with special warranty, and when the plaintiff agreed to pay for all the lands covered by the Sarver survey, except such as were shown by a survey, had at his expense, to be held `by adverse title and possession,' constituting a better title than Reeder's? I think not."

We are of opinion that the Circuit Court was right in concluding that complainant was not entitled to a rescission of the contract.

By the interlocutory decree the court directed the ascertainment of the number of acres of land within the exterior boundaries of the Dillon grant as run by Sarver to which there was shown to be a better title than Reeder's, "by reason of adverse title and possession," and this included any who were in adverse possession claiming title under the Rutter-Etting patent, and who by reason of such adverse title and possession had a better title than Reeder; and, this having been done, the final decree on the cross-bill adjudged and decreed the amount to be paid to Reeder by Clark, and on failure of Clark so to do, the sale of the land. We see no reason to question the correctness of that course. The Circuit Court held, and we have arrived at the same conclusion, that Clark was not entitled to rescind the contract on the ground of fraud; and this involved holding that Clark was bound by the contract according to its terms, and consequently to pay for the number of acres embraced within the exterior bounds of the Dillon grant, as surveyed by Sarver, less the number of acres within those boundaries held by a better title than that of Reeder by reason of adverse title and possession. This being so, and the number of acres having been ascertained in accordance with that contract, Reeder was entitled to a decree for a sale of the land for the sum due him as the balance of the purchase money.

A court of equity may sometimes refuse to decree specific performance in favor of one party when it would also refuse to rescind in favor of the other. But this is not a case to which that principle is applicable. Nor is it a case in which a vendor asks the court to compel a purchaser to accept a doubtful title. It is a case where the decree gives to the purchaser what he purchased, in accordance with the terms of his contract, and the vendor is entitled to have the property devoted to the payment of the purchase price if the purchaser declines to pay.

Decree affirmed.

MR. JUSTICE GRAY was not present at the argument and took no part in the decision of this case.