McShane v. Hazlehurst

Alvey and Robinson, J., dissented, and the former filed the following dissenting opinion: In regard to the legal principles announced in the •opinion of the majority of the Court I entirely agree; but ¹³² as to the conclusion from the facts of the case, I must dissent. I cannot resist the conviction that the facts show-such a degree of deception of the appellee as to entitle him to relief from the contract, even according to the most stringent legal rules for which the appellants have-contended; and I therefore think the decree appealed from should he affirmed. Bartol, C. J., delivered the opinion of the Court. It appears from the record in this case, that the appellee being desirous of disposing of a tract of land with the improvements, farmin g utensils and personal property thereon, situated in Howard County, employed John R. D. Thomas, a broker in the City of Baltimore, who entered into negotiations with John K. White, .another broker employed by the appellants, for an exchange of the farm and personal property thereon, for certain leasehold estate in the city.

These negotiations led to a written contract dated March 17th 1876, and signed by the brokers, as agents for their ¹¹⁵ respective principals, marked “exhibit A” (antep. 108.) The appellee not being satisfied with the contract, and denying the authority of Thomas to make it, further negotiations were had, resulting in agreement “B” (antep. 109,) whereby the appellee agreed to take in exchange for his farm and the personal property thereon, estimated as of the value of $10,000, certain leasehold estate in Baltimore City, belonging to the appellants, consisting of two dwelling houses on Oliver Street, two on Fremont Street and two on G-ilmor Street, estimated at $15,000, and a large hotel situated on Pratt Street and Market Space, known as “ The Centennial Hotel,” estimated at $25,000. This agreement is dated March 21st 1876, and was signed by the appellee and appellants, and was carried into effect on the 6th day of April following, by the execution of deeds of conveyance between the parties, which were delivered on the 7th day of April. On the 4th day of May ensuing, a bill of complaint was filed by the appellee praying that the contract and the deeds be annulled and set aside, upon the ground of fraud. The fraud is alleged with reference to the hotel; as regards the other property the appellee makes no complaint.

The hotel is described in the contract as “now occupied by Mr. Stuart as proprietor, under a lease of five years from its daté at $5000 per annum; the same being subject to a ground-rent of $2826.40 per annum.” Under the hotel were four stores not occupied hy Stuart under his lease, but included in the contract of exchange. With respect to these, the bill alleges that “it was averred that they would rent though then unoccupied, for the sum of $1200 per annum.” It is not statéd in the bill by •whom this alleged representation as to the rental value of the stores was made; and there is no proof in the case that any such representation was made by the appellants or their agent. It may therefore be dismissed from our consideration. ¹¹⁶ With respect to the hotel proper, the frauds charged in. the bill are of the most serious and flagrant character.. They are substantially as follows: It is alleged that it was represented that the hotel was-under a lease to a good tenant for five years, producing a. rental of $5000 per annum, payable monthly, with liberty to the tenant to renew his lease for other five years, and also-to buy out absolutely the interest- of the lessors, for thesnm of $35,000, at any time during his lease.

That, induced by these statements and confiding therein, theappellee visited and inspected the premises, and found Stuart in the occupancy thereof, ostensibly carrying on the business of a hotel well equipped with suitable furniture and apparel, of which he seemed to be the owner,, and that no statements were made inconsistent with the-visible appearance of things, but on the contrary were-concealed. That deluded by said appearances, and fully confiding in the statements that the hotel did produce such rental,. and that the occupancy was realty deemed by the parties, sufficiently valuable to be worth redemption, or buying-out for the large sum above specified, by reason of the profitable business done upon the premises, and that the-said lease was in no respect a sham, but represented a real valid and subsisting lease, producing in reality the rental therein called for; that the appellee confided in these-statements, and had a right so to confide in the representation so made, and having no ability or opportunity to discover any thing to the contrary, he accepted the offer of the several pieces of property in exchange for his farm,, and consummated the said exchange by interchanging-deeds. The bill then charges that shortly thereafter and within a few days past, (prior to the filing of the bill,) the appellee had discovered that in the transaction he had been grossly deceived, and defrauded by the appellants, John. ¹¹⁷ McShane and Henry McShane, in the following manner to wit: 1. That so far from the hotel producing the rental of $5000 per annum, in monthly payments of $4Í6.66, that ■Stuart’s term as appeared hy the lease, had commenced •on the first day of August 1875, that up to April 1st 1876 •eight months rental had accrued viz: the sum of $3333.33-|- and which to accord with the representations, ought to have heen paid by Stuart in monthly payments, hut that he had paid only $817.17 in small sums, and at irregular intervals, and had settled the balance $2515.45 hy giving his note at 90 days; and that to frustrate any discovery that such rent was in arrear, should any intending purchaser inquire, the appellants had receipted the hill with the words “Rec’d Payment,” when in fact Stuart’s note at 90 days was taken, the appellants stating to Stuart that the payment of the note would not he exacted of him.

The hill charges that such pretended settlement was designedly made as a part of a fraudulent condition of things, intended to dupe and deceive the appellee, and to give color of truth to the other representations so made as aforesaid. 2. The hill further charges, on information and belief "that in January 1876, Stuart had informed the appellants or one of them, of his inability to pay the rent, that the business of the hotel barely sufficed to pay its •ordinary expenses; that Stuart’s accounts of the business of the house, which were faithfully kept, were at that time examined hy the appellants or one of them, and ■Stuart was informed hy them that the terms of the lease might he considered as practically to be disregarded; and therefore when the appellee was assured that the hotel was leased at a rental of $5000, the appellants knew that this assurance was false, and that the tenant was barely meeting his expenses and unable to pay rent. 3. The hill further alleges that when the appellee visited the hotel he found it well equipped with furniture ¹¹⁸ suitable for the business, and Stuart in the occupancy, ostensibly the owner thereof; that within a few days past, he had discovered that the appellants had been heretofore sole owners of the furniture, and had merely entered into some contract for the sale thereof to the tenant, he to pay for the same by instalments. That the tenant being unable to pay any thing on account thereof, the appellants had informed him, (the tenant,) that his not owning the furniture had twice frustrated a sale of the hotel, and that for the purpose of avoiding any future frustration of a sale, Stuart might consider the furniture as his property, and gave the same to him, so that he might not only appear, but be really the owner thereof; and that the appellants having so used the furniture and equipment of the hotel, for the deception of the appellee, and to accomplish the exchange, afterwards denied their gift of the same to Stuart, and threatened to take the same away claiming it as their projDerty.

The bill charges that these doings of the appellants were-intended to dupe and deceive the appellee, and did so-dupe and deceive him, and instead of getting a property producing a rental of $5000 per year, as stated, he has discovered that he has palmed off upon him property producing no rental whatever. The appellants in their answer, admit the employment of White to dispose of their property, the execution of contract A, by the brokers, White and Thomas, and its rejsudiation by the appellee, and aver that after repudiate ing “contract A,” the appellee took charge of the whole matter, carefully examined and inquired as to the whole property, that he acted with great deliberation and caution in the transaction, and that “ contract B ” was then entered into, being the appellee’s own offer, that it was faithfully carried out on both sides. They deny all the allegations of fraud contained in the bill, and aver that the appellants’ action in the transaction was in entire good faith throughout. ¹¹⁹ The rules which govern Courts of equity in cases of this kind are well settled. Where a party has been induced to enter into a contract of sale by the fraudulent misrepresentations of the other party, or his agent, of material facts upon which he relied and had a right to rely, a Court of equity will grant him relief by refusing to decree a specific' performance, or by annulling the contract after it has been carried into execution by the delivery of deeds to the purchaser; but in such case the onus is on the complainant to establish the allegations of his bill by clear and conclusive proof. “ The Court will not rescind the contract without the clearest proof of the fraudulent misrepresentations, and that they were made under such circumstances as show that the contract was founded upon them.” 1 Story’s Eq.

Jur., sec. 200; Atwood vs. Small, 6 Cl. & F., 233. In the language of Justice Strong in Atlantic Delaine Co. vs. James, 4 Otto, 214 , “cancelling an executed contract is an exertion of the most extraordinary power of a Court of equity. The power ought not to be exercised except in a clear case, and never for fraud, unless the fraud be made clearly to appear; never for false representations, unless their falsity is clearly proved, and unless the complainant has been deceived and injured thereby.” These principles being well settled, it is unnecessary to refer particularly to the numerous cases cited in the argument, in which they have been applied. The cases all depend upon their special facts and circumstances, and can afford, but little aid in governing our judgment in the present case, which must be decided upon the proof as it appears in the record.

In framing the allegations of the bill, it is obvious that the complainant has proceeded mainly upon the representations made to him by Stuart, the tenant, some weeks after the contract had been made and carried into effect. Upon these representations, almost exclusively, ¹²⁰ are based the averments contained in the bill, charging the appellants with fraudulent and dishonest concealments, and contrivances for the purpose of deceiving and deluding the appellee, and inducing him to enter into the contract. To support these charges the appellee relies on the testimony of Stuart, which it is our duty to examine with some care and particularity. His statement is to this effect, that in January 1876, the appellant Henry McShane was informed by him that he was unable to pay his rent, that the business of the house did not pay current expenses, that the books of the hotel were then examined by Henry McShane who told him a few days afterwards “ never mind, not to say anything about this, to go on and run the house, and say nothing about it, that they wanted to sell it, and that I should not lose anything by it; if any person should ask me about the business of the house, to tell them it was good, and that I was doing very well.

A few days after that he came up, and proposed to give me the furniture.” (Ans. to 12th Int.) In answer to the 8th Interrogatory he says, “ most of the furniture, belonged at one time to Mr. McShane. In the latter part of Eebruary, he was at the hotel, and told me that his ownership of the furniture in the hotel had upset two trades or sales of the property. He said, I am going to give it all to you, and if anybody should ask who it belonged to, I was to tell them it was mine and everything in the house belonged to me.” He further states, in effect, that McShane at the same time agreed to give up all claim for arrears of rent, and that when he gave his note in settlement on the 5th day of April 1876, it was understood the payment of the note would not be required of him. The effect of this testimony, if it is to be credited, is to prove that the appellants entered into a fraudulent conspiracy with the witness (Stuart) to cheat and impose ¹²¹ upon any person who might desire to purchase the hotel, and if a sale should he effected, he, Stuart, was to receive for his participation and assistance in the fraud, $2515,45 in rent due, and over $4000 worth of furniture belonging to the appellants; whose high character and reputation in the community for honesty and business integrity is shown by the evidence in the cause.

With regard to the testimony of this witness, we concur entirely in the opinion expressed by Judge Hayden, contained in the record, that it is wholly unreliable, and ought not to he considered in disposing of the case. The decision of the Circuit Court was not based upon the testimony of Stuart, hut rested on other grounds. The majority, in disposing of the case, expressed no opinion as to the credibility of his testimony, considering it unnecessary in the view taken by them of the case, to go into that question. The testimony if true, would conclusively establish the appellee’s case.

We have examined the evidence in the record most carefully, and are convinced that the testimony of this witness is not entitled to credence. Besides its intrinsic improbability, it is given by a witness whose story tends to discredit himself. His statements made in the course of his examination, are inconsistent and contradictory in themselves, and are expressly contradicted and discredited, not only by the testimony of Henry McSbane, the appellant, with whom he professes to have had all his dealings, hut also by several disinterested witnesses who have testified in the case. To point out these many inconsistencies and contradictions would extend this opinion to too great length.

The result of our examination of the evidence in the cause, has convinced us that the several allegations of the hill, which had their origin in the first instance, in the representations made by Stuart to the appellee, and which rest entirely upon his statements, must he altogether disre ¹²² garded as unsupported, and the case must be disposed of as if Stuart’s testimony in this respect, was not in the record. Treating the case in this way, we are to consider whether there is any sufficient ground or cause shown for annulling the contract, and cancelling the deeds executed by the parties. And first as to the alleged fraud, or imposition practiced on the appellee, with regard to the ownership of the furniture in the hotel. The evidence, shows that the parties dealt exclusively for the leasehold estatethe furniture in the hotel formed no part of the subject-matter of the contract.

The proof shows that $1200 worth of it belonged to Stuart, put in by him when he leased the property, for the purpose of affording better security for the payment of the rent. The balance ,,of it, worth over $4000, belonged to the appellants, was in the hotel when Stuart rented it, and left in the house under a separate contract made between the appellants and Stuart; he agreeing to pay for the use of it, and having the privilege of purchasing it. The fact that this contract was not disclosed to the appellee could give him no just cause of complaint, or furnish any ground for imputing fraud to the appellants, or impeaching the transaction. According to his own testimony, he made no inquiry about the ownership of the furniture, and there was no obligation on the part of the appellants to inform him.

But in addition to this, it appears from the testimony both of White and Thomas, that the appellee was informed before the contract was made, that the furniture, most of it, belonged to the McShanes. Their testimony on this subject must be considered as counterbalancing that of the appellee, who no doubt testifies honestly according to his belief and recollection, but who without at all impeaching his integrity, may have failed to notice particularly, or to have remembered, what was said to him at that time about the ownership of the ¹²³ furniture, as that did not enter into, or form any part of the property included in the exchange. Secondly. As to the transaction which took place on the 8th day of April 1876, between the appellants and their tenant,