Gordon v. Butler

• Citation: 105 U.S. 553,26 L.Ed. 1166
• Parties: GORDON v. BUTLER
• Decision Date: 01 October 1881
• Court: U.S. Supreme Court

105 U.S. 553

105 U.S. 553

26 L.Ed. 1166

GORDON v. BUTLER.

October Term, 1881

Error to the Circuit Court of the United States for the Northern District of New York.

The facts are stated in the opinion of the court.

Mr. Leslie W. Russell for the plaintiffs in error.

Mr. Harry Bingham and Mr. A. X. Parker for the defendant in error.

MR. JUSTICE FIELD delivered the opinion of the court.

This was an action for alleged fraud upon Butler, the plaintiff below, in obtaining from him a loan of $10,000 upon insufficient security. The facts of the case, so far as necessary to present the questions involved for our consideratlion, are briefly as follows:——

Near the town of Potsdam, in New York, there are sandstone quarries, situated on the west bank of Racket River. The land containing them, when the loan was made, was divided into lots, varying in size from seven to thirty-six acres. Previously to 1873 the quarries, although generally supposed to consist of stone valuable for building and other purposes, had not been opened sufficiently to show their extent and value. A quarry similar in external appearance, situated on the river below and adjoining them, called the Parmeter quarry, had been worked for thirty or forty years, and furnished stone of a valuable quality in large quantities. For some years prior to 1872 the defendant, Gordn , a resident of Potsdam, had been assiduously trying to get possession of the quarries, in the belief that on development they would prove valuable, like the Parmeter quarry. His letters to Butler, the plaintiff, written at the time, indicated a confident belief that a fortune was to be made out of them; and he invested in them whatever means he could raise.

The plaintiff, prior to 1872, had frequently visited Potsdam, where he became acquainted with Gordon, a lawyer in practice there, and often employed him professionally. During these visits he learned something of the quarries, and that Gordon desired to obtain possession of and develop them. In that year there was much correspondence between them on the subject. Gordon expressed a strong conviction that the stone would be very valuable, and find a ready market, and stated what he had heard of the buildings on which it had been used, and of those for which it would probably be wanted. He desired to organize a stock company to work the quarries, and to have the plaintiff join in the enterprise. Failing to secure his co-operation, and being advised by him that he had better work the quarries himself, Gordon applied for a loan for that purpose. After much correspondence and negotiation, the plaintiff promised to loan him $10,000, to be secured by mortgage on some of the lots, and advised him against investing a larger sum in them. The plaintiff, as is manifest from the correspondence, was fully aware at the time of the slightly developed condition of the property; but an estimate of its probable value was furnished by the following certificate obtained by Gordon from the defendants Watkins and Foster, well-known gentlemen of the place, and sent to him:——

'Each of the undersigned hereby certifies that he is and has been for more than twenty years last past a resident of Potsdam, St. Lawrence Co., New York, and acquainted with the sandstone quarries south of Potsdam village; that he is acquainted with the quarry lots there owned by S. B. Gordon, and situate on the westerly shore of Racket River; that said lots are roughly represented on the annexed diagram; have on them the buildings, and in his best judgment contain the quantity of land, and are would the sums severally below cited, to wit:

"No. 1—Falls Lot about 8 acres, worth $8,000

" 2—Orchard Lot about 4 acres, worth 5,000

" 3—Cox Lot about 16 acres, worth 8,000

" 4—Hicks Lot about 15 acres, worth 5,000

" 5—Meacham Lot house and

barn about 7 acres, worth 5,000

" 6—Hale Lot about 10 acres, worth 1,000

" 7—Parmeter Lot 2 houses

and barns about 17 acres, worth 8,000

" 8—Train Lot about 26 acres, worth 8,000

------ --------

Total, 8 lots. 103 48,000

'Dated Potsdam, Dec. 12, 1872.

'H. WATKINS.

'E. W. FOSTER.'

No oral representations on the subject were made to the plaintiff by Watkins or Foster. Their connection with the loan consisted merely in furnishing this certificate at the request of Gordon. The loan was made on the first of the following January, and a mortgage taken as security for it upon four of the lots mentioned in the certificate, the aggregate value of which, as there stated, being $26,000. Watkins and Foster were at the time interested in the proposed enterprise; and their estimate of value was placed upon the lots, not as agricultural lands, but as lands containing sandstone quarries not yet opened.

After receiving the loan Gordon proceeded to open the quarries, and his operations had not progressed far when the financial crisis of 1873 came, and in it his enterprise was engulphed. The work on the quarries was stopped, and the value of the property rapidly depreciated. The mortgage to the plaintiff contained a clause declaring that the whole amount of the loan should at once become due if the interest was not punctually paid. Taking advantage of this clause, he commenced proceedings to foreclose the mortgage, and pressed them to a decree under wi ch the premises were sold and bid in by him for the sum of $1,500. He then commenced the...