Scott v. Empire Land Co.

• Decision Date: 21 May 1925
• Docket Number: No. 149.,149.
• Citation: 5 F.2d 873
• Parties: SCOTT v. EMPIRE LAND CO.
• Court: U.S. District Court — Southern District of Florida

5 F.2d 873 (1925)

SCOTT v. EMPIRE LAND CO.

No. 149.

District Court, S. D. Florida.

May 21, 1925.

W. M. Toomer, of Jacksonville, Fla., and Johnston & Garrett, of Kissimmee, Fla., for complainant.

Wilson & Swearingen, of Bartow, Fla., and James F. Glen, of Tampa, Fla., for defendant.

JONES, District Judge.

The bill of complaint in this case, after the necessary jurisdictional allegations, charges in substance that the complainant, on the 13th day of May, 1904, conveyed to the defendant, by warranty deed duly executed and delivered, certain described lands in Lee county, Fla.; that this deed set forth a consideration in the sum of $46,080, receipt of which by the complainant is acknowledged in the deed; that the defendant went into possession, recorded the deed, mortgaged the property to the Girard Trust Company, collected and appropriated all the rents, issues, and profits from the lands for more than 20 years, and has never paid to the complainant the consideration set forth in the deed, nor any part of it; that it was understood between the parties at the time of the conveyance that the lands were to be mortgaged as set forth above for the purpose of securing certain bonds to be issued by the defendant, and that the defendant was to pay the purchase price of said lands, either by delivering some of the bonds to the complainant, or paying the complainant in cash out of the proceeds of the sale thereof; that the bonds were duly issued, certified by the Girard Trust Company as trustee, and delivered to the defendant; that the complainant made repeated demands upon the defendant for the payment of the consideration, or the delivery to him of a portion of the bonds as agreed, but defendant failed and refused to do so; and the complainant "is advised and believes that the defendant is now negotiating a sale of said lands, and is threatening and about to convey the same to parties unknown to your orator." The bill then alleges:

"That repeated promises, extending through the years that followed, were made by said defendant to deliver unto your orator the bonds described, or the cash consideration of said deed, but that none of said promises were kept, while, upon the contrary, the defendant sold said bonds, appropriated the proceeds thereof, and has not paid your orator for his lands, either in money or in bonds.

"Your orator, upon the premises hereinabove recited, charges that a deliberate fraud was perpetrated upon him in this: That at the time of the execution, delivery, and receipt of said deed, and the representations made to your orator with respect to the delivery of money or bonds, the defendant did not intend either to pay your orator in money or to deliver to him the bonds mentioned, but upon the contrary intended to utilize your orator's lands as one of the bases of its bond issue, to sell said bonds and appropriate the proceeds thereof, all of which it has done, without the payment of compensation or delivery of the bonds contracted for unto your orator.

"Your orator further alleges that throughout the years that intervened since the making of the said deed, to wit, since May 13, 1904, he continued to rely upon the promises of the defendant to pay him said consideration for said deed either in money or in bonds, and that he continued in this belief until it came to his knowledge, which was in the last three months, that the defendant was endeavoring to dispose of said lands, without having notified or informed your orator or paid the consideration aforesaid."

The bill thereupon, based upon the allegations of fraud set forth above, prays the cancellation of the deed, an accounting and injunction. The defendant has filed a motion to dismiss, and the cause comes on for hearing upon this motion.

While there are five grounds set out in the motion, there are in fact only two objections raised: First, that the claim is stale and barred by laches; second, that the bill of complaint does not set forth facts which would entitle the complainant to the relief sought, or in fact any relief.

It is a well-settled rule that a bill in equity must aver facts on which the complainant bases his right to the relief sought: "Thus, before cancellation can be decreed for fraud practiced in the procurement of a deed, the bill must aver facts from which fraud may be legally deduced; averments which merely amount to conclusions on the part of the pleader, as to its existence, being insufficient." 4 R. C. L. 518; Pratt Land & Improvement Co. v. McClain, 135 Ala. 452, 33 So. 185, 93 Am. St. Rep. 35.

Therefore the complainant in the instant case must be held to the strict rules of pleading, and only allegations of facts, and not conclusions of the pleader, will be considered as admitted under this motion to dismiss. We will first take up the question of laches:

The bill of complaint shows on its face that it seeks relief from an alleged fraud charged to have been perpetrated more than 20 years before the filing of this complaint. The general doctrine of laches is well set forth in Ruling Case Law, under the subject of "Equity," as follows:

"It is a familiar doctrine that, apart from any question of statutory limitation, courts of equity will discourage laches and delay in the enforcement of rights. The general principle is that nothing can call forth the court of chancery into activity but conscience, good faith, and reasonable diligence. Where these are wanting, the court is passive and does nothing. The doctrine is founded principally on the equity maxims, `he who seeks equity must do equity,' `he who comes into equity must come with clean hands,' and `the laws serve the vigilant, and not those who sleep over their rights,' and is based on considerations of public policy. Its object is in general to exact of the complainant fair dealing with his adversary, and the rule was adopted largely because after great lapse of time, from death of parties, loss of papers, death of witnesses, change of title, intervention of equities, or other causes there is danger of doing injustice, and there can be no longer a safe determination of the controversy." 10 R. C. L. 395; Hendrickson v. Hinckley, 17 How. 443, 15 L. Ed. 123; Slaughter v. Gerson, 13 Wall. 379, 20 L. Ed. 627; McLean v. Fleming, 96 U. S. 245, 24 L. Ed. 828; Sullivan v. Portland, etc., Railroad Co., 94 U. S. 806, 24 L. Ed. 324; Hammond v. Hopkins, 143 U. S. 224, 12 S. Ct. 418, 36 L. Ed. 134; McKnight v. Taylor, 1 How. 161, 11 L. Ed. 86; Johnson v. Toulmin, 18 Ala. 50, 52 Am. Dec. 212; Patterson v. Northern Trust Co., 231 Ill. 22, 82 N. E. 840, 121 Am. St. Rep. 299; McElrath v. McElrath, 120 Minn. 380, 139 N. W. 708, 44 L. R. A. (N. S.) 505; Comans v. Tapley, 101 Miss. 203, 57 So. 567, Ann. Cas. 1914B, 367; Calhoun v. Millard, 121 N. Y. 69, 24 N. E. 27, 8 L. R. A. 248; Pendleton v. Galloway, 9 Ohio, 178; Powers' Appeal, 125 Pa. 175, 17 A. 254, 11 Am. St. Rep. 882; Selden v. Kennedy, 104 Va. 826, 52 S. E. 635, 4 L. R. A. (N. S.) 944, 113 Am. St. Rep. 1076, 7 Ann. Cas. 879.

Another well-established rule in this connection is to the effect that a party, desiring to rescind a contract on the ground of fraud, must at once, upon discovery of the fraud, announce his purpose to rescind, and notice of facts or circumstances which would put a man of ordinary intelligence on inquiry is, in the eye of the law, equivalent to knowledge of the facts. Grymes v. Sanders, 93 U. S. 55, 23 L. Ed. 798; Wood v. Carpenter, 101 U. S. 135, 25 L. Ed. 807; McLean v. Clapp, 141 U. S. 429, 12 S. Ct. 29, 35 L. Ed. 804; Hoyt v. Latham, 143 U. S. 553, 12 S. Ct. 568, 36 L. Ed. 259; Shappirio v. Goldberg, 192 U. S. 232, 24 S. Ct. 259, 48 L. Ed. 419; Patterson v. Hewitt, 195 U. S. 309, 25 S. Ct. 35, 49 L. Ed. 214; Davis v. Read (C. C.) 37 F. 418; Rugan v. Sabin, 53 F. 415, 3 C. C. A. 578; Scheftal v. Hays, 58 F. 457, 7 C. C. A. 308; Miller v. Rush (C. C. A.) 276 F. 641; Dill v. Camp, 22 Ala. 258; Young v. Arntze, 86 Ala. 116, 5 So. 253; Memphis & C. R. Co. v. Neighbors, 51 Miss. 422; Roemer v. Conlon, 45 N. J. Eq. 234, 19 A. 664. These rules, together with what constitutes "reasonable diligence," and what facts or circumstances are necessary to put a party upon notice of a fraud, have been elucidated in numerous cases, and it will be of assistance to examine some of them.

The Circuit Court of Appeals for the Eighth Circuit, in the case of Rugan v. Sabin, 53 F. 415, 3 C. C. A. 578, after quoting the Supreme Court of the United States in Grymes v. Sanders, 93 U. S. 55, 23 L. Ed. 798, to the effect that, "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, * * *" says:

"Nor can a vendor industriously close his eyes, stop his ears, or refuse to believe the evidence of his senses, when notice of the fraudulent practices of a purchaser is placed before him, and thus escape from the application and effect of this principle of law. Notice of facts and circumstances which would put a man of ordinary intelligence and prudence on inquiry is, in the eye of the law, equivalent to knowledge of all the facts a reasonably diligent inquiry would disclose."

In Wood v. Carpenter, 101 U. S. 135, 25 L. Ed. 807, the Supreme Court of the United States, speaking through Mr. Justice Swayne and referring to time of notice of a fraudulent transaction or practice, says:

"`Whatever is notice enough to excite attention and put the party on his guard and call for inquiry, is notice of everything to which such inquiry might have led. When a person has sufficient information to lead him to a fact, he shall be deemed conversant of it. * * * The presumption is that if the party affected by any fraudulent transaction or management might, with ordinary care and attention, have seasonably detected it, he seasonably had actual knowledge of it.' * * * A party seeking to avoid the bar of the statute laches on account of fraud...