$7. Where fraud is practised, a want of a deed is no ob- CH. 32. jection in chancery, and the case is not within the statute of Art. 13. frauds. As where A made a parol building-lease of ground, and when dying said, there should be one in writing; but his Gilb. Eq. R. heir told him he would supply it; whereby, and other fraudu- Foxcroft. leut practising, the lessee was hindered suing A, and getting Abr. Eq. 20. the lease executed. The Lords held this was out of the statute, and made it good to the lessee. 8. Many cases of contracts obtained by fraud, set aside in equity. See a. 29, s. 1, 2, &c., and above; also, 9 Vesey jr. 292, 473; 7 Br. P. C. 70; 2 Vern. 123; 2 Vesey 627; 2 Atk. 324; 2 Vern. 189, 206, 678; 3 P. W., 130, Osmond v. Fitzrov; see Bosanquet v. Dashwood, Ch. 114, a. 27, s. 11. 2 Atk. 254.11 Vesey jr. 638.-2 Ves. jr. 199. 362, 363 Osmond v. Fitzroy ; a weak man gives a bond, but no fraud New.on Con. or breach of trust: equity will not set it aside, for this only, 30. W. 130, being compos, there being no equitable incapacity, where there Griffin's case. is a legal capacity; yet great weakness of mind, though not legal incapacity, is ever considered, where connected with circumstances of fraud or surprise, to weigh in the case. 1 P. W. 203, Clarkson v. Hanway; 2 Ch. Ca. 103, James v. Graves; 2 P. W. 270. ART. 13. Equity, frauds in. Cases of frauds in equity have already come into view in several places. Frauds in equity, in matters of contract, are much mixed with those in law. 1. It is the object in this article to consider first, the kinds of fraud, as ably distinguished by Lord Hardwicke, as above, and by following these distinctly, and selecting principles and cases as they best apply to each, the whole may appear plain and easy to be understood: 1. Actual fraud arising from facts and circumstances of imposition. Second. Fraud apparent from the intrinsic nature of the subject of the bargain itself. Third. Such as arises from the circumstances and condition of the contracting parties. ick v. Brod 486.-2 Bro. Fourth. Such as may be collected from the circumstances See 1 P. W. and nature of the transaction, as being an imposition on others 229, Brodernot parties to the fraudulent agreement To the first descrip- erick.-2 Eq. tion belong suggestio falsi and suppressio veri, by each or both of Ca. Abr. 244, which a party may obtain a contract to his own advantage, and C. C. 150, to the disadvantage of the other party, or of a third person. As Evans v. if a devisee under a will defectively executed, assure the heir Llewellyn, at law and recite in the deed that the will is well executed, Webb, 2 Eq. and gets his release for a small sum, he being ignorant of the Ca. Abr. 479. defects, and then tell him a real sale is proper to pay debts, Clark, 2 Atk. and that the heir ought to join in it, and for another small sum 254.-3 Bro. Mead v. -Kirk v. C. C. 16 CH. 32. gets his release, and then gets a sale for himself in trust seArt. 13. cretly. Here the heir is deceived and defrauded, and both suggestio falsi and suppressio veri. In such case the heir is relieved repaying the sums he received with interest. The case of Evans v. Llewellyn will be found to have been decided on the same principle, see 1 Bro. P. C. 308; see also Insurance, Ch. 40, a. 11, Concealment; also Mortgages, Ch. 112; a prior mortgagee's suppressing or concealing his mortgage to a fraudulent purpose, see 2 Atk. 4; 2 Eq. Ca. Abr. 478 to 483, sundry cases. So if one solvent artfully act as if insolvent, and thereby procure his creditors to give up all or a part of his debt; this is a fraud, and equity will relieve the party injured. So if one make in a marriage settlement his Farmer--6 conditional estate appear to be an absolute one, equity will 547, James relieve against such fraud and deception, 2 Eq. Ca. Abr. 481; and Ch. 114, a. 17, s. 13, and 2 Vern. 307. Fraud cannot be proved in equity, unless put in issue by the pleadings. Webber v. Johns. R. 543, M'Kernon. 2 Bro. C. C. 179.-New. on Con 66, Day v. New v. man.-5 Ves. 485, Moth. v. Atwood.Bro. C. C. 167, 175. 2 Vern. 402. See Heath cote v. Poig non, Ch. 139, a, 7.-10 Ves. jr. 300. 1 Desaus. Ch. R. 160. White v. Damon,-7 Ves. 2. The second kind of fraud above, apparent from the intrinsic nature of the contract itself, is mainly on account of the inadequacy of the consideration; see Consideration, Ch. 1, a. 8 to a. 50, and especially a. 7, s. 37. It is well settled that mere inadequacy of consideration is not alone sufficient to invalidate the contract, unless very gross or great and manifest to common capacities; 1 Bro. C. C. 9; New. 359; and then as it may prove fraud, mistake, misapprehension or undue influence; for if a man of a sound mind, well informed in the case, under no undue influence, and at his entire liberty to act for his own interest, will sell a thing for half or a quarter the value of it, equity cannot aid him, suspend, set aside, or rescind 9 Ves. jr. 234, his contract, 6 Ves. 274; 2 Salk. 449, Thornhill v. Evans; 1 Vern. 467, Bell v. Price; 2 Atk. 335; 1 Ch. 6, a. 276. jr. 10, Darby Several of these and like cases are frauds in mortgages, (see . Singleton. Ch. 112,) in which the creditor by undue influence in taking --1 Wight. 25, the advantage of the debtor's necessities obtains in the contract, C. 149, Bar- conditions in the nature of penalties, as five per cent. interest if he do not pay the four per cent. (the contract interest) punctuGregor v. Da- ally, and some say, if he contract for five and to take four punctually paid; but clearly this last position may be questioned, as it often has been. For when the creditor contracts for five, he contracts for just what the law (in England) allows, and his contract is unquestionably valid, then if he chooses to be liberal on punctual payment and to secure it, his just right, and to guard against debtor's negligence, to give up a part of his legal right, it is inconceivable how this can be objected to in law or equity. As the law has fixed five per cent. the best debtor has no legal claim to less. Also several cases to cover and conceal usury, see Ch. 153; many cases of sell 102.-Bro. C. ker v. Van sommer. nean, 2 De saus. Ch. R. 639-Deane r. Rastron, I Anstr .64. ing goods &c. at high prices to the borrower, when a loan only was the real object. Where goods worth £1000, or sold in shops a little more, were sold to a young necessitous borrower, and his note taken for £2224, he was relieved in equity on paying the £1000, the amount he sold them for, and interest thereon, and his note was discharged. Equity holding also, that the lender did understand how the borrower would sell them in all probability in the lump. In various other ways the inadequacy of the consideration will appear in equity to be the effect of fraud, imposition, undue influence, duress, overreaching, or of mistake, misapprehension, or some other circumstance, evidence of fraud or of mistake. It is obvious, that in each case old age alone is not a sufficient ground to presume imposition, inadequacy of price or consideration must be a matter of calculation and judgment, depending on its circumstances, and so the evidence of the accompanying fraud, imposition, undue influence, mistake, &c. See several cases on this head, Eq. Ca. Abr. 478 to 483; also Newland on Contracts. Cн. 32. Art. 13. The renewal of a lease obtained by the lessee for an inade- 1 Vesey jr, quate consideration, set aside on terms submitted to by the 286, Lord Abington v. answer. And a fraud in the delivery of a lease executed Butler 289, bona fide, affects it as much as if used in obtaining the execu- 290.-Ch. tion, delivery making it a lease. And a manufacturer must 226, a. 2. account who obtains by collusion an unfair price. As to inadequacy, see Barret v. Gomeserra, Bunb. 94; Lowther v. Lowther, 13 Ves. jr. 95; Western v. Russel, 3 Ves. & Beam., 187; Butler v. Haskell, 4 Desaus. Ch. R. 687. Bennett v. s. 8, Fane's 4 Munf. 313. 3. The third kind of fraud above, arising from the cir- 2 Atk. 324, cumstances and condition of the contracting parties. This consists mainly in the advantage taken by one party of the P. C. 137.weakness of mind or of the necessities of the other, putting Ch. 32, a. 12, him under the power of the former, see Osmond v. Fitzroy, case-1 P. 2 Vesey 408; 8 Vesey 65. The case of Bennet v. Wade is W. 130.a very strong case, cited in sundry books. So Fane's case; the maker of the deed was very sick, and his mind very weak, though legally compos, and he died in two hours after executing it. Set aside merely because the maker of the deed could not have a mind adequate to the business he was about, and so might the more easily be imposed on, and though it contained a power of revocation. Johnson v. But equity does not set a deed aside merely because the 3 P. W. 130, maker of it is drunk at the time; otherwise, if any advantage in a note, is taken of his situation, or if brought into it by the other Middlecott. party. 1 Vesey 19, Cory v. Cory; 1 Ch. Ca. 202, Rich v. Sydenham. Сн. 32. 1 Vern. 237, 239, Ard His necessities. Generally it is not sufficient to invalidate a contract that he who makes it is a distressed man, there must be also an inadequacy of price, or some contrivance, deception, art or cunning used, proving altogether an unfair and fraudulent advantage was taken of his situation at the time of glasse v. Mus- the contract, in order that equity may relieve. 4 Bro. P. C. champ, Same v. Fitt. 198, 222. A man may legally make a contract in jail, but it must be having proper assistance and advice, and in a fair manner. And even courts of law will set aside powers of Vesey 635.- attorney, signed by one in jail, if there be not an attorney attending on his part of his own procuring, employed by himself, and not procured by the person taking the warrant of attorney. 1 Atk. 409, Nichols v. New. on Con. 368. § 4. The fourth kind of frauds above, is collected from the nature and circumstances of the transaction, as being an imposition on third persons not parties to the contract, usually creditors, purchasers, and parties in articles of marriage. As to articles of marriage hitherto they have been of too little use in the United States, and probably for some time will be, to deserve must notice at present; and so differently situated are parties in England, that such English articles have but little application here, especially as the English policy to build up or to preserve families and family distinctions, estates tail, estates to the eldest son, &c. enters deeply into such articles there, but not here. 5. As to creditors and purchasers the two countries do not differ materially in their principles or practice. The cases are numerous in law and equity in which contracts are set aside, rescinded, or held void, because fraudulent, made to wrong purchasers and especially creditors. Such cases arise under various heads which respect contracts; but more especially in cases of agreements on the statutes of fraud, as Ch. 11; of Bankruptcies Ch. 18; Ch. 39 of Insolvencies; various parts of this chapter; in cases of Insurance, Ch. 40; of Evidence, Ch. 80, &c.; cases of Rescinding Contracts, Chs. 169, 122 and 139; Ch. 225, 226, Matters in Equity. To all which may here be added a few late cases. 6. As to creditors. Observing that in regard to frauds affecting contracts, I have but occasionally made law and equity distinct parts of this work, because it will be found as to them in a majority of cases law and equity have a concurrent jurisdiction, and as to very many which equity ought to set aside, the law ought not to carry into effect;-hence of the same final result, though in different ways; and hence cases decided in equity are often found under legal heads, and vice versa, as far as contracts are deemed void, for fraud or imposition &c. especially as to creditors and purchasers. CH. 32. Art. 13. Stone v. In regard to creditors the 13 El. is material; in force here as principles of our common law, cited at large Ch. 109, a. 9, (also 27 El.) These acts being in suppression of fraud are construed liberally, Twyne's case, ante. The consideration must be good and the contract bona fide, both are essential. Id.; Edwards v. Harben was at law, see ante a. 1, s. 16, a. 3, Bamford v. Baron, id. a. 1, s. 17. One may mortgage land and remain in possession and no evidence of fraud, New. on Grubham. Con. 72; otherwise if his deed be absolute. So if one con- Tarback . vey his lands to pay his debts, yet keeps the conveyance, Marbury. this is fraudulent, 2 Vern. 510; as it gives him the election to set it up or not, as it may suit his purpose; see Cadogan v. Kennet, table of cases as to goods not delivered &c., Haselington v. Gill, Ch. 19, a. 1, s. 2, Jarman v. Woolloton, id. To these cases, as to the wife's separate goods add, the deed 10 Ves. 150. may be fraudulent if the consideration be grossly inadequate, Dewley v. or the wife permit third persons to treat the property in ques- Bayntun. tion as the husband's; this may be evidence, the assignment to her was made to defraud creditors. -6 East 257, 374.-Pr. Ch. §7. Grantor's possession, no fraud, &c. When one abso- New.on Con. lutely sells land or goods, as on the face of his deed, or mort- 285, Bucknal gages goods; and yet remains in possession as owner, the pos- v. Roiston. session is inconsistent with the deed, and fraud is presumed : but the presumption may be repelled, 1. If the modified interest of the vendor under the deed, makes it consistent with it, he keeps possession: 2. If such possession necessarily arise out of the nature of the transaction between the parties, and they have in view an honest purpose. As where the supercargo of a ship, going on a voyage, made a bill of sale of the goods he had on board her, and of the produce thereof, to be made as security to repay monies lent by the vendee; held valid in a suit in equity between him and the vendor's creditor; as the trust of those goods appeared on the face of the bill of sale; the vendor being trusted by the vendee, to sell them to his advantage. It will be observed the trust appeared in the instrument of sale itself, and this appears essential in several other cases. This is the principle of every bottomry, where the mortgagor of the ship or goods, remains in possession for the voyage. So if A's goods are seized on scire facias, and sold to B, Cole v. Da1 Raym. 724. bona fide, for a valuable consideration; and B allows A to retain vies.-4 Dall. the goods in his possession, on condition he pays B the money as 208.-2 Bos. & P. 59, 60, he shall raise it, by the sale of the goods, this is valid, and not Kidd v. Rawfraudulent: like principle, Bul. N. P. 258; 1 Raym. 286. So linson. where A's goods were taken on execution, B, his brother-in-law, but no creditor, bought them under a bill of sale, and permitted A to continue in possession, in order that he might be able to carry on his business. A afterwards made a bill of sale to the deft., |