Conner v. Groh, Doub & Co.

Pearce, J., delivered the opinion of the Court. The bill in this case was filed by the appellees against the appellants in the Circuit Court for Washington County in Equity, to cancel and reform a certain written contract between the appellees and Ashby P. Conner for the purchase by the appellees of a hardware store and the good will of the business, and also to restrain Conner and the Peoples’ National Bank of Hagerstown, to which he had assigned his interest in the contract, from the further prosecution of an action at law instituted in said Circuit Court by Conner, for the use of the Bank, upon the same contract. Answers were filed and testimony taken, and an opinion ⁶⁸⁰ was rendered that the plaintiffs were entitled to the relief prayed, and saying “ a decree can be framed directing the payment of the residue of the purchase-money, less the proper amount to be credited to the plaintiffs as 'compensation for damages suffered from the representations of the vendor. Such a decree I am ready to sign in this case.” Thereupon a decree was passed directing “that the papers and proceedings in the cause be, and they are hereby referred to the auditor to state an account of the indebtedness due from the plaintiffs to the defendants on the purchase of the stock of goods, in accordance with the opinion of the Court,’ ’ and from that decree this appeal was taken.

We will first dispose of the motion to dismiss the appeal, which is based upon the contention that it is merely an interlocutory order, and determines no question of right between the parties. We think it is clear however, that the decree does determine that the contract did not truly set out the agreement between the parties, and that the plaintiffs were entitled to a credit of thirty-three and a third per cent upon the inventoried value of the stock of goods, and were not bound by the contract to pay the specific sum named therein as the consideration. This was the essence of the question of right involved; and the reference to the auditor is merely to enable the Court to measure the credit to be allowed. Resort to the opinion is not necessary to sustain this conclusion.

It is apparent upon the face of the decree, and in such case an appeal lies under Code, Art. 5, sec. 25. Moreover, while the decree does not in very terms continue the injunction which had been granted, the case was heard on motion to dissolve, and the purpose and the direct effect of the decree is to continue the injunction, and is in fact a refusal to dissolve. Certainly in the present status of this case, the defendants cannot prosecute the action at law. The only remedy open for the securing of that right, is the appeal which has been taken, and the Code expressly allows an appeal from an order granting an ⁶⁸¹ injunction, or refusing to dissolve one.

The motion to dismiss must therefore be overruled. The agreement which it is sought to cancel and reform is a brief sealed instrument, as follows : “ This agreement made this 31st day of December, A. D. 1897, by and between Ashby P. Conner of Hagerstown, Maryland, and John C. F. Groh, Frank L. Doub, and D. Webster Groh of Washington County, Maryland: Witnesseth, that the said Ashby P. Conner does hereby agree to sell and does sell unto John C. F. Groh, Frank L. Doub, and D. Webster Groh, all his hardware store, situate on West Washington Street in Hagerstown, Maryland, together with all fixtures and good will connected with said business (except iron safe, sleigh, bicycle, team, and all plumbing materials and supplies), at and for the sum of $5,750 to be paid in cash on or before January 15th, 1898. Possession to be given January 1st, 1898. All insurance policies to be transferred to the purchasers without extra compensation, and lease of store room to April 1st, 1899, at $500 rental per year.

The said Conner to transfer the said stock of goods free and clear of all claims and liens. Witness our hands and seals. Ashby P. Conner, [Seal.] John C. F. Groh, [Seal.] Frank L. Doub, [Seal.] D. Webster Groh, [Seal.]” The bill alleges that the plaintiffs were induced to enter into this agreement by the fraudulent representations of Conner, and that as written, it does not truly represent the agreement of the parties ; that Conner represented, as an inducement to the purchase, that the stock of goods would inventory at cost price between $9,000 and $10,000, and that the agreement of purchase was that one-third of the inventoried value was to be deducted therefrom, and the balance was to be the price paid ; that the sum of $5,750 mentioned in the contract, represented the inventoried value ⁶⁸² as asserted by Conner, after deducting one-third therefrom, and also $250, to cover sales made between the date of the offer of purchase and the execution of the written agreement ; but that an inventory taken immediately after entering into possession, showed only a total value of $5,345.06, and that they had paid $1,500 on the contract before completion of the inventory and discovery of the fraud, and that a suit at law had been brought upon the contract by Conner, for the use of the bank, to recover the balance due thereon upon its face. The relief prayed was for the cancellation and reformation of the contract, for an injunction to restrain the prosecution of the suit at law, and for such further relief as the case should require.

It is. contended by the appellants that the appellees had a full, complete, and adequate remedy at law by a plea “ for defense upon equitable grounds ” under sec. 83, Art. 75 of the Code, by means of which they could show fraud if it existed, and recoup the damages shown to have resulted therefrom; and though conceding that Courts of Equity and Law have concurrent jurisdiction in cases of fraud, yet as the Court of Law in this case, first assumed jurisdiction, it should be allowed to retain it, and the bill should therefore be dismissed. But without expressing any opinion upon this question, we may inquire whether such plea is available in the suit at law in the present case. It appears from the record that before the bill was filed, the appellees had pleaded to the suit at law ; .1st. That the alleged deed was not their deed ; 2nd.

That it was procured by the fraud of Conner. These pleas were pleaded as a common law defense to an action on a contract under seal. There was no plea for defense on equitable grounds. In Zihlman v. Cumberland Glass Company, 74 Md. 303 , which was also an action for breach of a contract under seal, a plea was filed which sought to vary and contradict the express terms of the sealed contract itself, by verbal proof and by an alleged verbal agreement, made before the contract sued on was ⁶⁸³ executed.

To this plea there was a demurrer, which this Court held was correctly sustained, but declined to express any opinion as to the effect of the plea, if it had been pleaded as a defense on equitable grounds, that question not having been argued by counsel for the appellant. Here, however, that question has been argued and considered, and it is proper we should decide it. Courts of Law have concurrent jurisdiction with Courts of Equity over questions of fraud and misrepresentation, but have no power to reform contracts alleged to have been procured by fraud. Refining Company v. Campbell & Zell Company, 83 Md. 56 and 57.

But a cause of action which is under seal, when impeached at law on the ground of fraud, must be set aside in toto, or sustained as it stands, for such judgment upon that very contract as the proof may require. Groff v. Hansel, 33 Md. 169 . In dealing with contracts under seal, even where questions of fraud in procurement are involved, all questions of pleading and evidence must be determined by reference to the contract, as presented to the Court, not as it may be contended it should have been written. Evidence not admissible under a plea, made as a common law defense, would not become admissible, merely by making the same plea for defense upon equitable grounds, because, as the Court of law is without jurisdiction to cancel or reform a contract, it is unreasonable, if not impossible, to suppose that the Legislature in permitting pleas in suits at law for defense on equitable grounds, intended that the power of cancellation or reformation should be the result of the mere operation of a plea.

A consideration of the narrow and rigid lines within which Courts of law are confined in rendering judgments, and of the liberal and elastic powers conceded to Courts of Equity in moulding and enforcing their decrees, forbids that we should give to section 83 of Article 75 the effect which would necessarily result from upholding the contention of the appellants in this regard. In Taylor & Bradford v. Miller, 73 Md. 222 , where section 83 of Article ⁶⁸⁴ 75 was under consideration, the present Chief 'Justice, speaking for the Court, said : “ That statute was designed to prevent circuity of actions in many instances, and to allow numerous defenses at law, which before its passage, could only have been availed of in equity, but was never intended to destroy the distinctions which exist betweeii the jurisdiction of a Court of law and a Court of Eqidty.” If we should now hold that this statute has so enlarged the jurisdiction of Courts of law as to confer upon them the power of cancelling and reforming contracts, we should destroy, by construction, one of the fundamental distinctions between the jurisdiction of law and equity, and this we are not prepared to do. Moreover, sec. 69, Art. 16 of the Code (Act of 1888) provides that no Court shall refuse to issue a mandamus or injunction on the mere ground that the party asking the same has an adequate remedy in