£3 per share on the agent's representation that he can procure them for that price: the agent has, in fact, just bought them for £2 a share; the principal having sold the shares before the discovery of the fraud cannot rescind the contract, but may sue the agent for the difference between £3 and £2 per share. (g) § 719. The second effect of fraud on the contract is this: it "operates," as expressed by Lord Lyndhurst, "as a personal bar to the relief. (7) This is an operation independent of the rescission of the contract; and though there can be no doubt that, where the defrauded party has elected to be bound by the contract, he has also waived the right to insist on the personal bar; it does not follow that he has also lost the right to set up that bar where rescission has become impossible from the interests of third persons, or from the impossibility of restitution arising either from the act of God or of third persons or from his own act before knowledge of the fraud. In all these cases, it is conceived that the defendant might still urge the fraud as a bar to specific performance just as at common law he might, after having lost his right to rescind in any of the ways last indicated, maintain an action of deceit against the defrauding party.(¿) An innocent misrepresentation may, as well as a fraudulent one, constitute a personal bar to relief.(j) § 720. Where it appears that the execution of a contract in the manner insisted on by the plaintiff will result in a fraud upon the public, the court will not enforce the performance of the defendant's part of the contract. Thus, in a case where the plaintiffs sought to compel the defendant to perform an alleged contract by him to edit a guide-book with a title-page, stating it to be the work of K. (a wellknown editor of such books), who, in fact, had nothing to do with it; it was held, that the defendant was justified in staying his hand and breaking off the delivery of "copy" of his manuscript, on the ground that such a title-page was calculated to deceive the public. (k)' (g) Kimber v. Barber, L. R. 8 Ch., 6 Clermont v. Tasburgh, 1 J. & W., 112. k) Post v. Marsh, 16 Ch. D, 395. Cf. Oldham v. James, 15 lr Ch R, 81. Parol proof to invalidate written contract in case of fraud.] The operation of a deed or other written contract, complete and intelligible in itself, will be con trolled by parol evidence, where fraud is alleged and proved. Where a party applies to a court of equity for the enforcement of a written contract, the adverse party is entitled to show that the instrument never contained the true contract between the parties. Nelson v. Wood, 62 Ala., 175; Rearich v. Swineheart, 11 Pa St., 233; Atlantic Delaine Co. v. James, 4 Otto, 207. Fraudulent use of a written instrument] "It is enough that, though the parties acted in mutual good faith at the inception of the transaction, an attempt is made to invest the instrument to a different purpose not contemplated, or to use it in violation of the accompanying agreement. It is as much a fraud to obtain a paper for one purpose, and to use it for a different and unfair purpose, as to practice falsehood or deceit in its procurement. The primary honesty of purpose but adds to the moral terpitude of the subsequent efforts to escape from it; or, when moral guilt cannot be imputed, a legal delinquency attaches upon an attempted abuse of the writing, sufficient to subject it to the influence of the oral evidence." Bell, J. in Rearich v. Swineheart, 11 Pa. St., 233; see, also, Parks v. Chadwick, 8 Watts & Serg., 96; Archer v. McCray, 59 Ga., 546. "All the cases show that, to pave the way for the reception of oral declarations, it is not necessary to prove that a party was actuated by a fraudulent intention at the time of the execution of the writing. His original object may have been perfectly honest and upright; but if, to procure an unfair advantage to himself, he subsequently deny a parol qualification of the written contract, it is such a fraud as will, under the rules, operate to let in evidence of the real intent and final conclusion of the contractors." Per curiam, in Rensham v. Gauz, 7 Pa. St., 117; Murry v. Duke, 46 Cal., 644; see, also, Neal v. Speigle, 33 Ark., 63; Young v. Peachey, 2 Atk., 256; Campbell v. McClanachan, 6 Serg. & Rawle, 172; Lyon v. Huntington Bank, 14 id., 283; Oliver v. Rowland. 4 Rawle, 141; Hultz v. Wright, 16 Serg. & Rawle, 345; Thompson v. White, 1 Dallas, 424; Archer v. McČray, 59 Ga., 546. Fraud as to third person's rights] "Where once a fraud has been committed, not only is the person who has committed the fraud precluded from deriving any benefit from it, but every other person is so likewise, unless there has been some consideration moving from himself If there has been consideration moving from a third person, and he was ignorant of the fraud, such third person stands in the ordinary condition of a purchaser without notice. But where there has been no consideration moving from himself, a third person, however innocent, can derive no sort of benefit or advantage from the transaction." Wood (V. C.), in Scofield v. Templer, Johns., 156; Berry v. Whitney, 40 Mich., 65. Gross inadequacy of consideration may be evidence of fraud.] Gwynne v. Heaton, 1 Bro. C. C., 8; Janes v. Morgan, 1 Lev., 111; Butter v. Haskell, 4 Dessau.'s Eq., 651 Haygarth, v. Wearing, L. R., 12 Eq., 320; Osgood v. Franklin, 2 John.'s Ch., 1; Gifford v. Thorn, 9 N. J. Eq., 702: Coffee v Ruffin, 4 Coldw., 507; Judge v Wilkins, 19 Ala., 765; Warner v. Daniels, 1 Woodb. & Minot, 90; Byers v. Surget, 19 How., 303; Wright v. Wilson, 2 Yerg., 294; Hardiman v. Burge, 10 id., 202; Morris v. Phillibar, 30 Mo., 145; Deaderich v. Watkins, 8 Humph., 520. Fraud as against creditors.] “Distributees have no right whatever to intermeddle with the personal estate of the deceased, for any other purpose than to do such acts as may be necessary to preserve it until an administrator can be appointed Any other acts of control by any person, constitute him an execu tor de son tort, and subject him as a penalty to the payment of the debts of the deceased When, therefore, this bill shows that the children of William Simons, Sr., instead of subjecting this property to the payment of his just debts in a due course of administration, made an agreement that no administration should be taken; that they would wholly disregard the rights of creditors, and treat the property as their own, it shows an agreement which a court of equity cannot enforce. It is not based on any equitable rights of the parties. It is a violation of the common law. It tends to defraud creditors. It is plainly forbidden by public policy." Curtis, J., in Allen v. Simons, 1 Curtis, 122; McKewan v. Sanderson, L. R.. 20 Eq, 65; Forsyth v. Clark, 3 Wend.. 637; Bird v. Aiken, 1 Rice's Ch., 73; Clemens v. Davis, 7 Pa. St., 263; Thornton v. Davenport, 1 Scam., 296. Fraud as evidenced by voluntary conveyance] “Upon a full examination of all the cases, the legal principal appears to be established, that when a voluntary conveyance is made and received with an actual intent to defraud the then existing creditors of the grantors, it is not a bona fide conveyance which can protect the grantee against the claims of subsequent creditors." This is the rule as laid down by Walworth, Ch., in Kings v. Wilcox, 11 Paige's Ch., 589. In Day v. Cooley, 118 Mass., 524, Morton, J., said: "It is well-settled that if a debtor makes a conveyance with the purpose of defrauding either existing or future creditors, it may be impeached by either class of creditors.' Shand v. Hanley, 71 N. Y., 319; Case v. Phelps, 39 id., 164; Dewey v. Moyer, 72 id., 70; Cole v. Tyler, 65 id., 73; Curtis v. Fox, 47 id., 300. 64 Defense of bona fide purchaser without notice.] In order that the defense of a bona fide purchaser, without notice, may be perfect, such purchaser must have paid in full before notice of the vendor's fraud. Florence Sewing Machine Co. v. Ziegler, 58 Ala., 221. Stone, J., said in this case: We do not sanction the extreme doctrine that a purchaser, no matter how innocent he may be, acquires no rights against a latent equity until he pays, in full, and receives a conveyance. We hold that he acquires an equity pro tanto to the extent he pays before notice." Fraud may be waived, and how?] Where a party has been defrauded in a contract, he may waive the fraud and adopt the contract. He may do so by positive act, or his conduct may show that he acquiesces. Vernol v. Vernol, 63 N. Y., 45; Atwood v. Small, 6 Cl. & Fin., 432; MacBryde v. Weeks, 22 Beav., 533; Dougherty v Dougherty, 3 Halst.'s Ch., 627; Moffatt v. Winslow, 7 Paige's Ch., 124; Crawley v. Timberlake, 2 Ired.'s Eq., 460. Voluntary conveyance in fraud of creditors.] Where a conveyance of property is made in trust for the use of the party making the transfer, it is void as against creditors. Where the transfer is of all the property belonging to the debtor, the grant is conclusive evidence of fraud as to indebtedness then existing. A grantee in a voluntary conveyance does not occupy the position of a bona fide purchaser for value, that he is innocent of fraudulent intent, will not protect his title. Young v. Hermans, 66 N. Y., 382; see cases cited. Equity will relieve against a judgment on the ground of fraud.] A gross exageration of value, knowingly and willfully made in the absence of the adverse party, would be sufficient evidence of fraud to invalidate the assessment of damages. Jordan v. Volkening, 72 N. Y., 300; Hunt v. Hunt. 72 id., 217; State of Michigan v Phoenix Bank, 33 id., 9. Kent, Ch, said in Foster v. Wood, 6 John.'s Ch., 87, "that chancery would not relieve against a judgment at law on the ground of its being contrary to equity, unless the defendant in the judgment was ignorant of the fact in question pending the suit, or it would have been received as a defense, or unless he was prevented from availing himself of the defense by fraud or accident unmixed with negligence or fault on his part.' Fraud of a party who assumes to act for a third person.] Equity will deprive a party of the benefit he may have derived from his own fraud, imposition or undue influence, by preventing acts intended to be done for the benefit of a third person Story's Eq. Jur., § 256; Shadda v. Sawyer, 4 McLean, 181; Bellamy v Sabine, 2 Phil., 425; Hunter v. Griffin, 19 Ill., 251; Johnson v. Coun, 22 Wis., 329. "In cases of fraud, equi y will sometimes imply a trust, and treat the perpetrator of the fraud as a trustee ex maleficio for the purpose of administering a remedy against the fraud, and in such a case the fraud gives the jurisdiction.' Earl, J., in Wheeler v. Reynolds, 66 N. Y., 227: see, also, Anthony v. Leftwick, 3 Rand., 238; Jackson v. Gray, 9 Geo., 77; Ambuchon v. Bender, 44 Mo., 560; Mendenhall v Treadway, 44 Ind., 131; Aldridge v. Dana, 7 Blackf, 249; Dugan v. Vattier, 3 id., 245. CHAPTER XV. OF MISTAKE. § 721. There being two parties to every contract, it follows that mistake may be: 1st, the mistake of the defendant alone; or 2ndly, the common mistake of both plaintiff and defendant; or 3rdly, the mistake of the plaintiff alone. The first and second species will require discussion, as grounds of defense to an action for specific performance; the second and third will both raise the question how far the plaintiff may enforce performance with a correction of the error. It will be necessary to consider mistake not only as a defense to a specific performance, but, also, to some extent as giving a plaintiff a right to a rescission or rectification of the contract1 1 Mistake is thus defined by Mr. Kerr] "Some unintentional act, omission, or error, arising from unconsciousness, ignorance, forgetfullness, imposition or misplaced confidence." Kerr on Fraud and Mis, 396. Equity relieves against a mistake, as well as against fraud, in a deed or contract in writing; and parol evidence is admissible to prove the mistake, though it is denied in the answer; and this, either where the plaintiffs seeks relief affirmatively, on the ground of the mistake, or where the defendant sets it up as a defense to rebut an equity. And, it seems, that a party may show a mistake in an agreement of which he seeks the specific performance. Gillispie v. Moon, 2 John.'s Ch., 585; see, also, Hutton v. Edgerton, 6 S. C, 485; Hayne's Outlines of Eq., 132; Mason v. Armitage, 13 Ves., 25; Jeremy's Eq. Jur., book 3. pt. 2, p. 358. "The English courts have repeatedly expressed a strong inclination not to decide in favor of plaintiff's seeking; not to set aside the agreement, but to enforce it, when it is reformed by parol evidence. They affirm that the difference of right and condition as to the plaintiff and defendant, relating to evidence offered for the purpose of obtaining a decree or resisting it, exists in the code of every civilized nation. The ground of the distinction is this: when a party has entered into a written agreement, and seeks, as plaintiff, a specific performance of it, he must rely on the agreement as it stands. He can neither add to, vary, or explain any of its terms by parol proof. If he cannot enforce the true contract, he still retains all he was ever in possession of. He may suffer disappointment, which, as the consequence of his want of caution and explicitness, he must bear. But not so with the defendant. He might encounter not disappointment only, but sustain ruinous loss, if compelled specifically to execute an agreement different from that which he contemplated." Lumpkin, J., in Rogers v. Atkinson, 1 Kelly, 12; see. also, Peterson v. Grover, 10 Me., 363; Bellows v. Stone, 14 N. H., 175. Lord Eldon said in Marquis of Townshend v. Stangroom, 6 Ves, 328: "It cannot be said that because the legal import of a written agreement cannot be varied by parol evidence intended to give it another sense, therefore, in equity, when once the court is in possession of the legal sense, there is nothing more for it to inquire into. All the doctrine of the § 722. Mistake may be of such a character as, in the view of a purely common law court, to avoid the contract on the ground of want of consent or of total failure of consideration. (a) But equity does not confine the defense of mistake to these cases. The principle upon which it proceeds is this-that there must be a contract legally binding, but that this is not enough-that to entitle the plaintiff to more than his common law remedy, the contract must be more than merely legal. It must not be hard or unconscionable : it must be free from fraud, from surprise, and from mistake: for where there is mistake, there is not that consent which is essential to a contract in equity: non videntur qui errant consentire. (b)' § 723. In some cases, mistake furnishes an absolute bar to specific performance: in other cases it affords no such ground, if the plaintiff be willing to make a reasonable compensation to the defendant for the mistake made: whether a given case falls within one or other of these categories depends on all its circumstances. (c) § 724. Again, the Statute of Frauds has not affected the situation of a defendant against whom specific performance is sought, (d) and it, therefore, leaves it open to him to produce any evidence for his purpose, which is not to establish a contract, but to rebut an equity which the plaintiff insists has arisen out of a contract. (a) Raffles v. Wichelhaus, 2 H. & C, 96; Kennedy v. Panama, etc., Mail Co., L. R. 2 Q. B., 580. (b) Dig. Lib. 50, tit. 17, t. 116. v. Winter Cr. & Ph, 57, 62; McKenzie v. Hesketh, 7 Ch. D., 675 (d) Per Grant, M. R., in Clarke v. Grant, 14 Ves., 519. courts as to cases of unconscionable agreements, hard agreements, agreements entered into by mistake or surprise, which the court will not execute, must be struck out, if it is true that because parol evidence should not be admitted at law, therefore it shall not be admitted in equity upon the question whether, admitting the agreement to be such as at law it is said to be, the party shall have a specific execution, or be left to that court in which it is admitted parol evidence cannot be introduced." Lord Redesdale in Clinan v. Cooke, 1 Sch. & Lef., 39. says: "No person shall be charged with the execution of an agreement who has not, either by himself or his agent, signed a written agreement; but the statute does not say that if a written agreement is signed, the same exception shall not hold to it that did before the statute." It is a matter, of course, for courts of equity to grant relief on the ground of mistake. Chamberlain v. Thompson, 10 Conn., 243; Elmore v. Austin, 2 Root, 499. But in Massachusetts the court has no jurisdiction in equity, in cases founded only in mistake. Gould v. Gould, 5 Metc., 274. And in Maine this head of jurisdiction has been expressly conferred on the court. Robinson v. Sampson, 23 Me., 388. |