Sipola v. Winship

• Decision Date: 07 May 1907
• Citation: Sipola v. Winship, 74 N.H. 240, 66 A. 962 (N.H. 1907)
• Parties: SIPOLA v. WINSHIP.
• Court: New Hampshire Supreme Court

66 A. 962

74 N.H. 240

SIPOLA

v. WINSHIP.

Supreme Court of New Hampshire. Hillsborough.

May 7, 1907.

Bill by Henry Sipola against Adron Winship for the rescission of a sale of real estate on account of fraud.Bill dismissed, without prejudice.Transferred from the superior court.Case discharged.

The plaintiff purchased a farm of the defendant in 1904, for the price of $2,500, of which he paid one-half in cash and gave his note secured by a mortgage of the farm for the balance, payable in annual installments of $100 each.The first installment having become due, and its payment being refused by the plaintiff, the defendant brought a writ of entry to foreclose the mortgage, which action is pending.The bill alleges fraudulent misrepresentation as to the quantity of wood and timber on the farm and as to the extent of the tillage land, and the plaintiff's reliance upon the representations.The prayers of the bill are for a stay of the action at law during the pendency of this suit, for an injunction restraining the defendant from assigning the note and mortgage or any interest therein, for a decree rescinding the contract of sale or canceling the note and mortgage and enjoining the further prosecution of the writ of entry, for a decree for the damages to which the plaintiff is entitled in equity, and for such other relief as may be just.The defendant's answer, besides denying the fraud and demurring to the bill on the ground that the plaintiff had a plain and adequate remedy at law, alleges that the statements complained of were mere expressions of opinion, and were so understood by the plaintiff, who carefully examined the premises and had equal opportunity with the defendant to make accurate estimates upon those matters.The defendant alleges, in an amended answer, that the property conveyed to the plaintiff included stock and farming utensils which the plaintiff had used, worn out, and disposed of, and that he had carried on the farm in an unhusbandlike manner and consumed the crops.The plaintiff bought the farm relying upon the defendant's assertions, and offers to warrant that the wood and timber on the farm were worth $1,000.They were not worth over $600, and this the defendant knew.The plaintiff's damages on account of this fraud are $400.The defendant also represented that there were 45 acres of tillage land, when there were in fact only 18 acres, and the defendant well knew there were much less than 40 acres.The plaintiff examined the tillage fully, and had every opportunity to judge of its extent; but he had no definite idea of the extent of an acre of land.He saw and understood what land was included in the tillage sold to him.He relied upon the statement in the defendant's advertisement that there were 45 acres of tillage, and upon the oral assurances of both the defendant and his agent that there were 40 or 45 acres, and honestly believed that the area was as represented.The defendant intended that the plaintiff should rely upon the representations.It was found from these facts that the charges of fraud relating to the tillage were not established, and this finding was based upon the ruling that, upon the facts found, the plaintiff is not entitled, as matter of law, to rescission or damages upon that ground.To this ruling the plaintiff excepted.After discovering the fraud as to the wood and timber, the plaintiff continued to occupy the farm, and so mismanaged that it has greatly deteriorated in value.His acts and his delay in bringing this suit were such as to make a decree of rescission inequitable.The bill was dismissed without prejudice, upon the ground that, as the case for equitable relief had failed, the court had no jurisdiction to retain the bill for the assessment of damages caused by fraud.To this ruling the plaintiff excepted.The plaintiff also excepted severally to the denial of these motions: That the defendant be enjoined from further prosecuting his action for a foreclosure of the mortgage, and be ordered to indorse $100 upon the note as of its date, and to pay the plaintiff the balance of the $400 damages above mentioned and his costs; that the defendant be ordered to indorse $400 upon the note as of its date, and prosecute his action no further, and to pay costs; and that the plaintiff have leave to amend by substituting for the hill in equity a declaration in case for deceit, and thereupon have judgment for $400 and costs.The motions were denied, because to grant them would deprive the defendant of his right to a jury trial.

Sargent, Remick & Niles, for plaintiff.George B. French, for defendant.

CHASE, J.The plaintiff seeks equitable relief for the defendant's fraud in making the sale of the farm to him, either by a rescission of the contract of sale, or by a cancellation of the note and mortgage which he gave in part payment for the farm, and which the defendant now holds and is attempting to enforce by an action at law.It appears that, in making the contract of sale, the defendant defrauded the plaintiff to the extent of $400 by false and fraudulent representations regarding the value of the wood and timber upon the farm.The effect of this fraud was substantial; and if the plaintiff, as soon as he discovered the fraud, had taken steps to have the contract of sale rescinded, and was able and willing to restore the defendant to his situation before the contract, no reason is perceived why the plaintiff would not be entitled to rescission.But the defendant, in his amended answer, set up, as a defense to the plaintiff's claim of rescission, the plaintiff's acts in consuming and disposing of portions of the property included in the sale and in carrying on the farm in an unhusbandlike manner.In other words, the defendant alleged that the plaintiff was not entitled to a rescission of the contract because by his own faulty acts he had disabled himself from restoring the defendant to his original situation.It was found by the superior court that, after discovering the fraud, the plaintiff continued to occupy the farm, and so mismanaged that it greatly deteriorated in value; and further, that the plaintiff's acts and his delay in bringing this suit were such as to make a decree of rescission inequitable.No question was transferred relating to the correctness of these findings.Consequently, they must be regarded as adequately supported by the evidence that was submitted to the court.The question of law, then, is whether a party is entitled to rescission of a contract when rescission would be inequitable because of great deterioration in the property to be returned by the plaintiff, arising from fault on his part after discovering the fraud and because of his delay in instituting a suit for obtaining rescission.The statement of the question unerringly suggests the answer.

It is true that there are cases in which rescission has been decreed when the plaintiff had disabled himself from restoring the property received under the contract in the condition it was in when received; but in such cases it was practicable to shape the decree so as to do equity between the parties.Thackrah v. Haas, 119 U. S. 499, 7 Sup. Ct. 311, 30 L. Ed. 486.There is nothing in the record showing that it was practicable to make such a decree in this case.It might be inequitable to require the defendant to take the farm back, greatly deteriorated in value, even in connection with the payment of a sum of money to compensate him for the deterioration, or to take it back after so long a delay.As the case stands, it appears that a rescission, absolute or conditional, cannot be made that will be equitable between the parties.Such being the fact, law or equity does not entitle the plaintiff to rescission.Equity will not order that to be done which in and of itself is inequitable.

The cancellation which the plaintiff seeks is not cancellation to effect rescission, but cancellation notwithstanding the contract of sale stands.His position, in substance, is that the note which the defendant received under the contract of sale, and which he now holds and is attempting to collect, is without consideration, in whole or in part, because of the defendant's fraud; and that equitable considerations require that the defendant should not be allowed to retain the note and accompanying mortgage as valid, subsisting claims against the plaintiff, and the farm.Story, in discussing the subject of the Cancellation of Instruments, independently of discovery or other equitable relief, says: "Whatever may have been the doubts or difficulties formerly entertained upon this subject, they seem by the more modern decisions to be fairly put at rest, and the jurisdiction is now maintained in the fullest extent, and these decisions are founded on the true principles of equity jurisprudence, which is not merely remedial, but is also preventive of injustice.If an instrument ought not to be used or enforced, it is against conscience for the party holding it to retain it, since he can only retain it for some sinister purpose.If it is a negotiable instrument, it may be used for a fraudulent or improper purpose, to the injury of a third person."1 Sto. Eq. Jur. (13th Ed.) § 700.In Hamilton v. Cummings, 1 Johns. Ch.(N. Y.) 517, Chancellor Kent reviews the early common-law authorities upon the subject, and concludes that the weight of authority and the reason of the thing are equally in favor of the jurisdiction of the court, whether the instrument is or is not void at law, and whether it be void from matter appearing on its face, or from proof taken in the cause; and that these assumed distinctions are not well founded.He says further (page 523): "But while I assert the authority of the court to sustain such bills, I am not to be understood as encouraging applications where the fitness of the exercise of the power of the court is not pretty strongly displayed.Perhaps the cases may all be reconciled on the...