Du Bois v. Nugent

• Decision Date: 17 March 1905
• Citation: 69 N.J.E. 145,60 A. 339
• Parties: DU BOIS v. NUGENT et al.
• Court: New Jersey Court of Chancery

60 A. 339

69 N.J.E. 145

DU BOIS

v. NUGENT et al.

Court of Chancery of New Jersey.

March 17, 1905.

Bill by Helen E. Du Bois against Elizabeth A. Nugent and another to rescind an exchange of real estate. Bill dismissed.

On September 8, 1902, the complainant, Mrs. Du Bois, and the defendant Mr. John A. Nugent entered into a written contract for the exchange of lands, which was carried out on October 1, 1902, by deeds of that date. The land conveyed to the complainant in the exchange was a farm owned by Nugent near Clyde, in Somerset county, on which were extensive orchards, and which was valuable mainly as a fruit farm, and the lands conveyed to Nugent were houses and lots in Jersey City. The bill is filed to rescind the contract of exchange, and for a reconveyance of the properties, on the ground of alleged false representations made by Nugent during the negotiations as to the condition of the trees, which representations were relied on by complainant and induced the contract These representations were made by circulars offering the property for sale, in which the trees, over 8,000 in number, were described as "fine, healthy, and mostly bearing," and also by personal statements of Nugent to the husband of complainant, who acted for her in the negotiations, that the trees were all in sound and healthy condition, and increasing in value. There was as the bill alleges, a further representation made by Nugent, in answer to a special inquiry by Du Bois, that he had never had the San Jose scale upon his trees. All of these representations are alleged to be false, and it is claimed that, at the time of the contract and conveyance, seven-eighths of the trees were, and had been for a long time, badly infested by the San Jose scale, and were therefore practically worthless. The bill further charges that Nugent at the time of making the representations knew that his fruit trees were, and had been for several months, infested by this scale, and that the representations were made with the fraudulent purpose and intention of inducing the contract of exchange. There is a further allegation of misrepresentation as to the number of trees, but relief on this ground was not insisted on at the hearing. In reference to the representations, the defendants allege that the circulars describing the trees and their condition were issued in the summer of 1901, and at the time were in all respects correct, but deny that any of these circulars came to the complainant's notice until after the negotiations for the exchange were practically consummated, and deny that during these negotiations Nugent stated at all that the trees were all in sound and healthy condition and increasing in value, and that, in answer to an inquiry, he said to Du Bois that he had never had the San Jose scale upon his trees. They further allege that the scale, although not easily distinguishable on the trees, as alleged in the bill, was in fact seen on the trees by Du Bois before the agreement of exchange was entered into, and that the existence of the scale on the trees on the farm was known to complainant at the time of the exchange. In reference to the existence of the scale on his trees, the defendant says that in the early part of 1902 he learned from Prof. Smith, the entomologist of the State Agricultural College, that some of his trees were infested with the scale, and that he also learned of the existence of scale on his trees and the method of treatment from a neighbor, Mr. Mortimer Whitehead, owning the adjoining farm, and an expert in such matters. As to communication of his information to Du Bois, the defendant says that during all of the negotiations he gave to Du Bois all the information and knowledge he had respecting the existence of San Jose scale on the trees, and especially his information from Prof. Smith and Mr. Whitehead that it was on the trees; that the subject of the scale and its treatment was discussed between defendant and Du Bois, and the necessity of treating the trees by spraying during the winter was particularly discussed; that Du Bois claimed to be familiar with the San Jose scale; that he had read about it, and knew that, if taken in time, they could be doctored all right with oil; and that defendant and Du Bois both believed that the scale could be exterminated in the winter following the exchange. The lands conveyed to Nugent were subsequently conveyed to his wife, as was also a mortgage for $8,000 given by complainant to Nugent upon the farm to equalize the values of the properties exchanged, and secure part of the consideration. These transfers to the defendant Mrs. Nugent are, however, admitted by the answer and on the hearing to have been purely voluntary, and the case is to be considered as if Nugent still held title to the lands and mortgage.

Alan H. Strong, for complainant. Randolph Perkins and Gilbert Collins, for defendants.

EMERY, V. C. (after statement of issues). The points to which the arguments were principally directed at the hearing were, first, the representations made as to the condition of the trees, and the existence of the scale on them, during the treaty for purchase or exchange, and whether the charges of the bill in this respect were proved; second, the truth or falsity of the representations made; and, third, whether the complainant has not, by his action and conduct since the exchange, and since the time of his alleged discovery of the falsity of defendant's representations, deprived himself of the equitable remedy of rescission of the contract, not only by an election to ratify and stand by the exchange, but by such neglect of proper treatment of the trees and orchards as to make rescission of the contracts now inequitable and unjust.

The extent to which the trees were actually infested by the scale at the time the exchange was made, and when complainant took possession under the agreement (October 15, 1902), was another point to which considerable evidence (expert and other) was directed. The dispute between the parties on this evidence, however, is whether, as complainant claims, at that time the condition of the orchards was such that a large part of them was practically worthless, by reason of the existence of the scale, or whether, as defendant claims, the orchards, although infected by the scale to an extent requiring thorough treatment as soon as practicable, could have been freed from the pest by proper treatment, and at a comparative small expense. But there can be no doubt, I think, that the existence of the scale in the orchards, even to the extent shown by defendant's evidence, so affected the value of the orchards as to make any representation that they were free from it material, as well as false.

Certain principles controlling courts of equity in relation to the rescission of contracts which have been entered into and executed in reliance upon representations of fact which are material, and which are subsequently found by the complaining party to be untrue, seem to be entirely settled. In these cases the mere falsity of a material representation entitles the injured party to the equitable remedy of rescission, if applied for with the promptness required by all the circumstances of the case. Proof of the defendant's knowledge of the falsity of the representation is not considered as essential to the right of rescission; nor is the honest belief of the defendant in making the representation a bar to this relief, as it may be in a common-law action for damages for deceit. At law, fraudulent intent, or, as is sometimes said, moral fraud, must be shown to have existed, while in a court of equity the complainant may succeed, although the representation was innocent. Cowley v. Smith (Sup. Ct. 1880) 46 N. J. Law, 380, 393, 50 Am. Rep. 432; Eibel v. Von Fell (1897) 55 N. J. Eq. 670. In Cowley v. Smyth (Sup. Ct. 1886) 46 N. J. Law, 380, 393, 50 Am. Rep. 432, it was decided that, in an action for deceit for false representations as to the solvency of a bank of which the defendant was a director, fraudulent intent must be proved, and it should be left to the jury to say whether the defendant made the representations with a fraudulent purpose, or whether he made them in good faith, and in the honest belief that they were true. This decision has since been considered as establishing the broad rule that in such common-law actions the fraudulent intent to deceive must be proved. Eibel v. Von Fell (Sup. Ct. 1899) 63 N. J. Law, 3, 4, 42 Atl. 754, affirmed on writ of error in 64 N. J. Law, 364, 48 Atl. 1117, for the reasons given in the Supreme Court (1899). In the early case of Snyder v. Findley (1791) 1 N. J. Law, 48, 51, Chief Justice Kinsey, at nisi prius, ruled that at law a false representation inducing the contract in that case (taking the note of a third person in payment for goods sold, on the representation that the note was good) was fraudulent, whether innocent or not; but this ruling, if inconsistent with the later cases, must be considered as overruled, and as important only for its bearing on the question debated in Derry v. Peek, infra, and elsewhere, as to the original doctrine of the common law. Newbigging v. Adam, 34 Ch. Div. 582, 594 (Lord Bowen, 1886); Sir F. A. Pollock in 5 Law Quart. Rev. 410, and cases cited; 2 Pom. Eq. Juris. § 884 (2d Ed.); cases cited in note 15 Cent. Law Jour. 327. The rule settled in Cowley v. Smith, supra, is that of the leading case—Derry v. Peek, 14 App. Cases, 337 (1889), decided in the House of Lords—in which, after great consideration, it was finally settled in England that, in a common-law action for deceit, an honest belief of the defendant in the statements made was a defense, and that the fact that the belief was not, in the opinion of a court or jury, founded on reasonable grounds, did not of itself make the representation actionable, although the reasonableness of the grounds of belief might be considered on the question of honesty in...