Rugan v. Sabin

• Decision Date: 06 December 1892
• Docket Number: 164.
• Citation: 53 F. 415
• Parties: RUGAN et al. v. SABIN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

53 F. 415

RUGAN et al. v. SABIN et al.

No. 164.

United States Court of Appeals, Eighth Circuit.

December 6, 1892

Statement by SANBORN, Circuit Judge:

The appellants brought suit in the court below to set aside a sale of 80 acres of land made by their father to the appellees Robert W. Sabin and Gabriel Beachley, and to recover of them and Mary L. Sabin, the wife of Robert, a portion of the land which they still hold, and the proceeds of a portion that has been sold. The appellees interposed demurrers to the bill. The court below sustained the demurrers, and dismissed the bill, and this is the supposed error of which appellants complain. The following is the state of facts disclosed by the bill:

The appellants are the only heirs at law of Charles B. Holt, who died intestate March 4, 1889. Holt resided in Illinois, and owned 160 acres of land near Beatrice, Neb., upon which there were certain tax liens, and in the fall of 1880 he went to Nebraska, and conveyed an undivided half of this land to the appellee Robert W. Sabin, for the benefit of himself and his partner, J. A. Smith, who agreed to institute and carry through the courts of Nebraska an action against the holder of the tax liens for the recovery of the land. They commenced the action, and on December 24, 1883, obtained final decree for its recovery upon the payment of $403.55 on account of the tax liens, which was then paid. On April 13, 1882, after this action for the recovery of the lands had been described in their favor in the trial court, and while it was pending on a writ of error in the supreme court of the state, Sabin with the knowledge of appellee Beachley, and for the purpose of obtaining a conveyance of Holt's undivided half interest in said land, represented to him that it was doubtful which side would be successful in said action; that if they succeeded, they would be compelled to pay $1,000 for taxes and $300 for improvements; that he had tried to find and had finally obtained, a purchaser for Holt's interest in the land, who would give $800 for his quit-claim deed, and relieve him from all further cost, liability, or trouble in the matter; that this purchaser was Beachley, and that he thought the offer a good one, and advised him to accept it,-- while the facts, which Sabin well knew, were that the title of Holt and Sabin to the land was perfect; the issue of the action was not doubtful; the aggregate amount of the liens they would have to pay if successful did not exceed $335.87 as the jury on the trial had found that they were entitled to recover of the defendant $515.16 as rents and profits; that the $800 was not a good offer, but a grossly inadequate price for Holt's interest in the land, which was worth $4,000; and that Sabin had not tried to find a purchaser, and was not acting for Holt in selling his land, but was jointly interested with Beachley in its purchase from him, but concealed this fact from Holt, and pretended to be acting in his behalf. At this time Holt was about 70 years old, and the bill alleges that for 10 years prior to March 4, 1889, he was so feeble in mind and body that he was entirely unfit and unable to transact any business whatever, and from age and weakness possessed such a disposition that he was easily imposed upon, and implicitly trusted those he thought his friends, and that he relied upon Sabin as his attorney, friend, and adviser; but it also alleges that he walked all the way from Illinois to Beatrice, Neb., and made the contract for the commencement of his suit in the fall of 1880. Holt, who was ignorant of the value of his land, and of all the facts misrepresented by Sabin, was induced by his false representations to convey his interest in the land to Beachley for the $800, and under this conveyance the appellees hold a portion of the land and the proceeds of that not held by them.

After Holt made this conveyance, J. A. Smith, who was also one of his attorneys in prosecuting the action for the recovery of the land, wrote him three letters, the last of which was dated May 18, 1882, in which he stated to him that Beachley had purchased the land for the joint use of himself and Sabin; that the consideration paid by Beachley was inadequate; that it appeared from the records that Sabin had sold his own 24 acres of said tract for $500; that Smith himself had paid L. W. Billingsley $700 for the 40 acres of said tract owned by the latter; that Smith himself would have paid Holt $1,400 for the interest in said tract which was conveyed to Beachley, expecting to have doubled his money by such purchase; that Smith did not believe that Holt ever parted with his interest in the land for $800 with a knowledge of all the facts in the case, and inquired of Holt whether or not Sabin had ever notified him that, besides winning the land in the lower court, Sabin and Holt had been awarded $515 by the jury for the rents and profits or the premises in question.

On the 15th day of May, 1882, Sabin wrote and mailed Holt a letter, of which the following is a copy:

'Beatrice, Neb., May 15, 1882.

'Charles B. Holt, Esq., Flora, Ill.-- Dear Sir: Since writing, I heard that there were some parties here that intend to try and get you into some kind of litigation, and get the money you have away from you. I don't know that it is so, but I fear it; and I write to put you on your guard as a friend, and be watchful and careful. I would not have anything to do with any other parties here, because I think they want to find out where you are, and may get you into trouble. If I know anything certain I will write you. I would keep out of their way. I don't like to mention names at present, but if I think it necessary will write you more particular. If you get any letters you might send them to me, and I will write you what is best to do.

'Your friend, as ever,

R. W. Sabin.'

The appellants knew nothing about these transactions until these letters of Smith and Sabin were discovered, after the death of Holt, in 1889. They offer to return to the appellees the $800 paid to Holt in 1882, with interest, and all taxes paid by them upon the land since that date, with interest, and ask to recover of them that portion of the land they still own, and the proceeds of the portion sold.

Nathan K. Griggs, Samuel Rinaker, Robert S. Bibb, and Julius A. Smith, for appellants.

Leander M. Pemberton, for appellees.

Before CALDWELL and SANBORN, Circuit Judges, and SHIRAS, District Judge.

SANBORN Circuit Judge, (after stating the facts.)

The basis of this suit is the fraudulent misrepresentation which induced the sale and conveyance of May 15, 1882. The relief sought, so far as these appellees are concerned, is the rescission of the conveyance and contract of sale, and the restoration of the parties to the condition in which they would have been if the contract had never been made. An attorney or agent cannot hold property in which he becomes interested as a purchaser, while he pretends to negotiate the sale as the agent and friend of the vendor; and the glaring fraud the bill discloses entitled Mr. Holt to return the purchase price he had received, and to recover back the land he had conveyed, immediately upon the discovery of the fraud. This discovery, however, while it gave him the privilege, also imposed upon him the duty of electing then whether he would rescind or ratify his contract. When a vendor discovers that his purchaser has induced him to part with his property by fraud, he has the option to return the purchase price, and recover back his property, or retain the price and ratify the sale. To him the law justly gives the choice of the course he will pursue, but it demands of him that he make his election with diligence, promptly; and declares that such election, when once made, cannot be revoked or modified. He cannot speculate upon his option. He cannot hold his election in abeyance, so that he may subsequently rescind if the property rises, and ratify if it depreciates, in value. Indeed, he cannot, under the law, if he would, avoid an immediate election. If he would avoid his conveyance and repudiate his contract, he must promptly announce this intention, and return the consideration he received, to the end that the parties may be put in statu quo before subsequent transactions render such action impossible. If he does nothing; if he remains silent and takes no action,-- his very silence and his retention and use of the purchase money for any considerable length of time after the discovery of the fraud constitute a complete, irrevocable ratification of his contract, and make it as binding and effectual as though he had deliberately entered into it after full knowledge of all the facts, uninfluenced by any fraudulent practices. Thus, in Grymes v. Sanders, 93 U.S. 55, 62, Mr. Justice Swayne said:

'Where a party desires to rescind upon the ground of mistake or fraud, he must, upon the discovery of the facts, at once announce his purpose, and adhere to it. If he be silent, and continue to treat the property as his own, he will be held to have waived the objection, and will be conclusively bound by the contract, as if the mistake or fraud had not occurred. He is not permitted to play fast and loose. Delay and vacillation are fatal to the right which had before subsisted. These remarks are peculiarly applicable to speculative property like that here in question, which is liable to large and constant fluctuations in value. Thomas v. Bartow, 48 N.Y. 200; Flint v. Woodin, 9 Hare, 622; Jennings v. Broughton, 5 De Gex, M. & G. 139; Lloyd v. Brewster, 4 Paige, 537; Railroad Co. v. Row, 24 Wend. 74; Minturn v. Main, 7 N.Y. 220; 7 Rob.Pr.p. 432, c. 25, Sec. 2; Campbell v. Fleming, 1 Adol. & E. 41; Sugd. Vend. (14th Ed.) 335; Diman v. Railroad

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