Mather v. Barnes, Keighley & Greer

• Citation: 146 F. 1000
• Decision Date: 09 August 1906
• Docket Number: 10.
• Parties: MATHER v. BARNES, KEIGHLEY & GREER.
• Court: U.S. District Court — Western District of Pennsylvania

146 F. 1000

MATHER v. BARNES, KEIGHLEY & GREER.

No. 10.

United States Circuit Court, W.D. Pennsylvania.

August 9, 1906

[Copyrighted Material Omitted]

Hermon A. Kelley and Horace Andrews (of Hoyt, Dustin & Kelley), for plaintiffs.

A. Leo Weil and D. M. Hertzog, for defendants.

ARCHBALD District Judge.

^[1] This is a bill to set aside a purchase of coal lands, on the ground of misrepresentation and fraud. In the spring of 1902 the plaintiffs, who were extensively engaged in the manufacture of iron at Cleveland and Youngstown, Ohio, were on the lookout for a body of coal lands on which they could erect a plant for the making of coke on a large scale. This was mentioned by Murray, one of their number, to R. M Haseltine, an experienced coal man, at one time state inspector of mines in Ohio, who was commissioned to look over the different bituminous fields; and not long after, being at Uniontown, Pa., he brought up the subject in turn to Barnes and to Keighley, with whom he was acquainted, and was told by them that they had about what he wanted in the neighborhood of Masontown, Va. At that time the defendants held a large number of options, which they had taken up on lands in that vicinity, amounting, in conjunction with a tract of 1,800 acres, known as the 'Falls Tract'--which they had in prospect, and which they secured in the course of the summer-- to some 5,800 acres; all, as it was asserted, being underlaid with the Upper Freeport vein, a recognized coal of the highest coking qualities. Having gone to Masontown shortly afterwards with Barnes and Keighley, and examined two or three openings about there, and being satisfied from this and the representations which were made with regard to the character of the property, Haseltine, on June 23, 1902, took an option in writing, in his own name at $25 an acre; $10 to be paid down, and the balance in three equal annual payments, an advance of $13 on the amount which the defendants were themselves to pay. This action was communicated to the plaintiffs, but, owing to the absence of certain of their number in Europe, was not able to be considered by them until September; the option being twice renewed to meet that emergency. It was not, therefore, until September 9th, two weeks before the last extension would expire, that Murray, on behalf of the plaintiffs, was able to go and look at the property. He was favorably impressed with it, and so expressed himself to Barnes and Keighley, and on September 29th he visited it again, in company with Campbell and Wheeler, two other of the plaintiffs; the three being shown certain parts of the property by the defendant Barnes. The extent of the field, the coking qualities of the coal, and the required railroad facilities, were discussed on this visit, it being asserted by Barnes with respect to the former that the Upper Freeport vein underlaid the whole property, making a continuous body of coal of about 6,000 acres, and that there was also an under vein, the Kittanning, which would be thrown in. Meantime a more extended and critical examination had been insisted upon by Murray, and steps were accordingly taken to have it made. A map was necessary, and McMillan, the county surveyor, who was engaged in surveying the property for the defendants, was directed by them to prepare it; and, not being able to complete his survey until the latter part of September, the option was extended another 15 days. George W. Shaffer, a resident of the neighborhood, who represented the defendants locally, and had assisted in getting together the options which they held, was introduced as one who was thoroughly acquainted with the property, and would show it to the parties who were to be sent to look at it, and it was under his guidance that the examination by experts which followed was made. Their reports were favorable, and on the strength of them the plaintiffs closed the bargain and took the property, paying some $139,000 for it. Upon putting on a corps of engineers, however, to trace the outcrop and plan for its development, it was discovered that the Upper Freeport vein, on the strength of which it had been taken, underlaid but about one-third of the field, and, in addition by reason of being cut into by deep ravines and gulleys, it was left in such a detached, irregular, and strung-out condition as to make the profitable mining of it a question. Feeling that they had been imposed upon, the plaintiffs, after some further investigation, took steps to rescind the purchase, tendering a reconveyance with reasonable promptness, and demanding back their money, and finally filing the present bill. This is the case in outline. The further particulars will be given in the course of the discussion to follow

The general principles upon which a suit of this kind proceeds are too well settled to need the citation of authorities. A misrepresentation with regard to material facts, by which a purchase of property is intentionally induced, amounts to a fraud which vitiates the transaction, and entitles the purchaser to be relieved. As a qualification of this, however, it is at the same time universally held that, where the means of knowledge are at hand, and are equally open to both parties, if the purchaser does not avail himself of them, he will not be heard to say that he has been deceived by the misrepresentations of the vendor, being charged with the knowledge of all that could have been so readily ascertained. And the same rule obtains where, not resting on the statements of the vendor, he undertakes to make, and does make, an independent investigation and verification of his own. Slaughter v. Gerson, 13 Wall. 379, 20 L.Ed. 627; Farnsworth v. Duffner, 142 U.S. 43, 12 Sup.Ct. 164, 35 L.Ed. 931; Smith v. Curran (C.C.) 138 F. 150. It is obvious, however, that in order to have this effect the examination must be an untrammeled one, and that this is not the case where fraud or concealment is practiced in the course of it, or misrepresentations made which would themselves afford occasion for relief. An examination perverted in this way by the act of the vendor is the same as no examination at all. Neither does it matter, if misrepresentation be proved, that the bargain, even so, was a good one, from which the purchaser is likely to sustain no loss. In an action of deceit, no doubt, this would be relevant on the question of damages, in order to show that there were none (Sigafus v. Porter, 179 U.S. 116, 21 Sup.Ct. 34, 45 L.Ed. 113; Pittsburg Life & Trust Co. v. Northern Central Ins. Co. (C.C.) 140 F. 888), although to this the authorities are not all agreed (Walker v. Walbridge, 136 F. 19, 68 C.C.A. 569); but not so upon a bill to rescind (Hansen v. Allen, 117 Wis. 61, 93 N.W. 805; Clapp v. Greenlee, 100 Iowa, 586, 69 N.W. 1049). The purchaser is entitled to the bargain which he supposed and was led to believe that he was getting, and is not to be put off with any other, however good. It is of no consequence, in the present instance, therefore, that the plaintiffs got coal lands of intrinsic value, which are worth, perchance, all that was paid for them, if they were fraudulently induced to believe, by representations for which the defendants are responsible, that the Upper Freeport vein, for which they negotiated, underlaid the whole property, whereas in fact it extends over but a comparatively limited part.

Turning then, more immediately to the case in hand, it is not necessary to hold, as charged in the bill, that the plaintiffs are the victims of a scheme deliberately concocted by the defendants to get off onto them property which was known not to be of the character which they were led to suppose. It would, indeed, be difficult to so find. The evidence is not that bay; however, there may be circumstances calculated to arouse suspicion, looking back upon the transaction and having regard to the sequel. It may be, for instance, that 'Jos.' Barnes (one of the original parties who took up the options, but who sold out to Greer during the negotiations), as well as Greer himself, if not, other of the defendants, had reason to believe that the Upper Freeport vein, by which the property was being sold, was of limited range over the Falls Tract, which constituted one-third of the whole acreage, and yet allowed it to be represented that it extended unbroken throughout the entire field, constituting, as it was declared, a body of coal of 5,000 acres, reaching over to the Cheat river. 'Jim' Barnes' remarks, also, to McMillan: 'Oh, let's call it all Freeport. We want the coal to go'-- may seem to disclose a certain willingness to amplify, if not misstate, the facts; and it would no doubt inspire greater confidence in their honesty of purpose if the defendants, one and all, instead of clinging to the bargain after knowing the means by which it had been obtained, had followed the lead set them, and conceded the right of the plaintiffs to rescind. But giving due allowance to this and other circumstances which have been brought forward, and having regard not only to their individual but their collective weight, they are too inconclusive to justify the charge of intended fraud on the part of the defendants themselves. The declarations of the defendants with respect to the extent of the Upper Freeport vein may have been expressed with greater positiveness than was warranted, particularly in view of the distinct intimation to the contrary which they had. But they were at the same time accompanied with the qualification that they themselves had never been over the property, and were not much acquainted with it; and the statements could not therefore have been understood as anything more than the usual commendatory expressions which are accustomed to pass at such a time-- 'trade talk'-- by...