McDowell v. Simms, 45 N.C. 130, 1 Busb. Eq. 130 (1852)

Dec. 1852 · Supreme Court of North Carolina

45 N.C. 130, 1 Busb. Eq. 130

CHARLES McDOWELL & ANOTHER against A. H. SIMMS & OTHERS.

In sales at public auction, there must be good faith on both sides; and as soon as the purchaser finds out there has been bye-bidding, he must make his election to rescind or abide by the contract.

As, where at a sale by auction of land (sold as containing a goldmine,) a bye-bidder was secretly employed by the vendors to run up the land, and the vendees did not bring their bill for a recision of the contract until twelve months or more, after they had knowledge of that fact, and in the meantime, or a portion thereof, continued to work and explore the land : — Held that this was too long a delay in notifying the vendors of their wish to annul the contract.

(S. C. 6 Ire. Eq. 278 reviewed and approved.)

At August Terra, 1849, of this Court, the interlocutory order which had theretofore been granted in this cause in the Court below, dissolving the plaintiffs’ injunction, was affirmed, (6Ire. Eq Rep. 278) ; and the plaintiffs having retained ’ their bill as an original, and amended the same, and replied to the answer, the cause was, by consent, removed to this Court, from the Court of Equity for Burke County, at Spring Term, 1851.

The plaintiffs originally filed their bill on the 21st day of January, 1848 ; and the heirs at law of Littleton Simms, and Thomas Jefferson, (who is not an heir,) are made parties defendants.

The plaintiffs state, that in the month of May, 1848, the defendants being seised and possessed of a tract of land situate in Rutherford County, containing one hundred and fifty acres, advertised and exposed the same for sale at public auction, when they became the purchasers, at the price of two thousand and eight dollars ; for which sum they gave their bonds, payable in one and two years, and at the same time took from the vendors their obligation to make title, when the purchase money was paid. That said bonds for the purchase money were, at the instance of those who conducted the sale, and for what purpose the plaintiffs do not know, made payable to Thomas Jefferson and A. H. Simms, two of the defendants, as administrators of said Littleton Simms, deceased.

The plaintiffs then charge that at the time the said land was advertised for sale, the defendants, and others acting' as their agents, represented the same as containing a valuable gold mine j and that one of the defendants, Cowan, often urged one of the plaintiffs, McDowell, to attend the sale, assuring him that the land was worth ten thousand dollars and more, and that he would purchase it himself, if he were able — and that a portion of the low grounds would yield two dwts. of gold to the hand.

They further charge, that on said day of sale, the defendant, Jefferson, and some of the other defendants attended, and employed divers persons, among others one Preston Long, to puff up said land as containing a rich deposit gold mine ,• that said Long did accordingly represent it as such ; and furthermore, that he was secretly employed by the defendants and their agents, to act as a bye-bidder at the sale, and to run up the property greatly beyond its value — which he did. That from the connection of said Long with the defendants, (being son-in-law of one of them.) and from his intimate acquaintance with the tract of land, his bidding was well calculated to exert, and did exert, a great influence on their minds and the minds of others desiring to purchase ; and that but for these causes, the land would have sold for but comparatively a trifle.

That they reside some twenty-five or thirty miles from the land, and were entirely unacquainted with its capabilities ; that they desired it only for mining purposes, as was well known to tire defendants who sold it; that they were induced to purchase solely from the fraudulent representations of the defendants and their said agent Long ; and that the defendants and their agents well knew of the real value of said land, and concealed the fact from them. And they charge that the said tract of land is probably not worth more than four or five hundred dollars.

They further state that after diligently searching the said land, and operating thereon, at great expense, for several months, they found it entirely valueless for mining purposes, and abandoned the same in despair ; and that it is worth but little more for agricultural purposes. That they have frequently tendered the land back to the defendants, and with a view to avoid a law suit, have tendered a sum more than the value of the land, to induce them to rescind the said contract — which the defendants have refused, especially the defendant Jefferson, who, they allege, is to receive a large sum for his services in effecting the said sale ; and they suggest that it was in contemplation of this, their right to have the contract rescinded, that their said bonds were drawn payable to himself arid A. H. Simms, as administrators.

In their amended bill, filed at Fall Term, 1849, the plaintiffs further state that the facts of puffing and bye-bidding as above alleged, were wholly unknown and unsuspected by them at the time of their said purchase, and until long thereafter, when they had expended large sums of money on the land, and abandoned it as valueless. And they say that since they discovered the said alleged fraud, they have not worked on said land or claimed it, or authorized any one to occupy it as theirs, otherwise than to consent that it might be rented or worked by consent of the defendants, and to be accounted for to the party on whom the ownership might be thrown by the decision of this Court. And the prayer is for a recision of the said contract.

The defendants, in their answer, admit that Preston Long was employed by them to bid for the said land, and to ran it up to as much as two thousand dollars ; but they aver that their sole purpose was to prevent a sacrifice thereof. And they further aver their belief, that the plaintiffs were aware of this fact, or at least had sufficient means of ascertaining the same, as well whilst the bidding was going on, as after the sale, and before they executed their bonds for the purchase money. That it was generally known that said Long had not the means himself to purchase the property, and that one of the defendants, Cowan, his father-in-law, publicly declared on the day of sale, that the same should not be sacrificed; and they still further aver, that on said day of sale the plaintiff, McDowell, was told “ that the defendants intended to make the land bring more than it was worth,” or words to that effect, and that the plaintiff’s informant refused, on account of this alleged fact, to join them in their purchase, as he had designed doing.

The defendants further state, that the plaintiffs were familiar with the section of country in which said land is located, and that one of them owned gold mines in the vicinity, and a tract of land adjoining the one in dispute, which had been rich and produce five of gold ; and further, that the plaintiffs are persons of great skill and experience in mining, and not likely to be imposed upon in relation thereto.

They further insist, that at the time of said sale to plaintiffs, they honestly believed that said land was of great value as containing gold, and worth much more than the sum for which it sold; that a part of it had been worked for a short time, with profit; and they are still of opinion, that it might be made profitable, if properly worked and attended to. And they deny that there was any understanding or agreement between themselves or with others, either before or at the sale, to puff or run up the land, otherwise than to prevent its sacrifice as aforesaid ; or that they, or any of them, or their agents, made any false and frandu-lent representations in the premises, to mislead the plaintiffs or others. And they say that the said Preston Long ceased bidding for and on their behalf, when the price reached nineteen hundred and fifty dollar's j after which the competition was between the plaintiffs and one George Taylor, who was a stranger to them, and with whose bidding they had no connection. They further state that said land is worth a thousand dollars or more as a farm.

They also deny that the defendant, Jefferson, was to receive any sum whatever from the other defendants for his services in selling the land; and the said Jefferson and A. H. Simms, also deny that, in taking the plaintiffs’ bonds payable to themselves as administrators, they designed to procure any advantage thereby — they having intended to take them as the agents of the heirs; and they say that they mentioned the mistake to plaintiffs, when they discovered it sometime afterwards.

The defendants further insist, that the plaintiffs continued to explore and work the said mine, after they had knowledge of the fact of Long's bidding for the defendants, as aforesaid, or after they had received such information on the subject, as would have put them on inquiry, if they, in truth, objected to said bidding as fraudulent and deceptive. For they say that the plaintiffs’ overseer, one Weaver, boarded with one of the defendants about three months, whilst superintending the said mine — that he had knowledge of that fact, the subject having been frequently mentioned in his hearing and known to the neighborhood — and that the plaintiffs several times visited'the mine, whilst he was engaged in their employment there as aforesaid.

Many depositions were read at the hearing, the tendency and effect of which will be found in the opinion delivered by the Court.

The cause was argued at a former term at Morganton, by the late

James Iredell and N. W. Woodfin, for the plaintiffs, and by

Avery and Guión, for the defendants.

Nash, C. J.

This case is now before us for a final hearing. At August Term, 1849, 8 Ire. Eq. 278, the interlocutory order, dissolving the injunction which had been granted to stay the collection of the money due upon the bonds, given by the plaintiffs for the purchase money of the land, was affirmed. The original bill sought to set aside the contract, upon the grounds : first, that the defendants committed a fraud upon the plaintiffs in the sale, by representing that the land contained a valuable gold mine ; and secondly, because bye-bidders or puffers were employed by the defendants, without the knowledge of the plaintiffs, to run up the land, whereby they were induced to bid for it a price far beyond its value. In their answers, the defendants deny the first ground of fraud ; and the evidence in the cause does not sustain the allegations of the bill. Upon the second charge, the defendants admit that they did employ Preston Long to bid for them, without any intent to defraud the persons who were disposed to bid, but simply to prevent the land from being sacrificed. There is some contrariety of opinion on this question in the English Common Law Courts and those of Chancery. In Bexwell v. Christie, Cow. 395, Lord Mansfield declared — “ It was a fraud upon the sale and upon the public,” to employ a puffer or bye-bidder to run up the property, upon the principle that good faith ought to be the basis of all dealings between man and man. That case was followed by Howard v. Castle, 6 T. R. 643. That was an action on the case to recover damages for a refusal on the part of the defendant to complete a sale — there having been a re-sille in consequence of such refusal. On the trial, it was shown that the defendant, after he had bid .off the property at the sale, discovered that he was the only real bidder — all the others having-been puffers employed by the plaintiff. The defendant, upon making this discovery, immediately refused to comply with the contract. Lord Kenyon expressed in warm terms his admiration of the noble principles of morality and justice, announced by Lord Mansfield, and winds up by saying — l< he met the question fairly, and made a precedent which I am happy to follow. ’ ’ Ashurst, Justice, in a single sentence, expresses his opinion :— “ If one person is induced to bid at an auction sale, without exercising his own judgment, and that by the owner himself, the parties do not meet on equal terms.” This is of course said in reference to the case then before the Court. On the other hand, Lord Rosselyn, in Conolly v. Parsons, 3 Ves. Jr. 625, in note, declares that it was no objection to a sale by auction, that bye-bidders were employed, and expresses his disapprobation of both the cases at law referred to ; and in reference to the latter, says, “ it must have turned upon the fact that there was no real bidder, and the person refused instantly.” Judge Pearson, in delivering the opinion of the Court on the former argument, observes, upon the above authorities — “ we are not called upon to decide the question definitively, for, be it either way, it is certain that a purchaser who wishes to avail himself of such an objection, must do so as soon as the fact comes to his knowledge.” When the case went back to the Court of Equity, the plaintiffs, by permission of the Court, amended their bill. In it they stale, that “ at the time they purchased the mine, and gave their bond, the fact of the bye-bidding was entirely unknown and unsuspected by them ; and they did not come to the knowledge of it, or have cause to suspect it, until long after the sale.” If the plaintiffs had made good their allegation by their proofs, it would have become necessary for the Court to decide whether the facts disclosed in the case of the bye-bidding were faudulent or not; but they have not done so. The only witnesses who speak to this point are Gen. Bynum and James Weaver. The former states, that after the plaintiffs had abandoned the mine, and after the action was brought on the bond, Col. Jefferson, the agent, told him that a bye-bidder was employed at the sale ; and that he communicated the fact to one of the plaintiffs, Mr. McDowell, a short time before the bill was drawn, but sometime before it was filed. Mr. Weaver states that he was the overseer of the plaintiffs in working the Simms mine, and that he commenced working in October, 1845 ,• and that they worked there from five to seven weeks— when the hands were removed to another mine of the plaintiffs, half a mile distant, where he worked six months. That while working on the Simms mine, he boarded at the house of A. H. Simms, one of the defendants, who told him that Long was employed as a bye-bidder ; and that he communicated this fact to Mr. McDowell, either while he was working in the Simms mine, or soon after he went to the Collins mine, or it may have been six months after. The bill was filed January 21st, 1848 — for that is the date of the Judge’s fiat for the injunction. We wish now to ascertain from this testimony, as near as we can, when the plaintiffs received their first information that a bye-bidder had been employed. Weaver has given three starting points : The first is, while he was working in the Simms mine. He went there the 24th of October, 1845, and remained from five to seven weeks, say seven ; and let us take the medium time — that will bring us to the 29th November, 1845. If he communicated the information at that time, then two years and two months elapsed before the bill was filed. Let us now take the six months — after the removal of the hands to the Collins mine j and there will have passed a year and six months before the plaintiffs complained. This is the shortest time, according to this witness, which passed, after the information was communicated to the plaintiff, before they commenced operations. This we think was too long. We are inclined to think it was whilst the witness was working at the Simms mine that he communicated the information to Mr. McDowell; for he was in the employment of the plaintiffs, and was requested by McDowell to get information from the defendants upon the subject of the sale of the mines. If that was the fact, it makes the case still more conclusive against the plaintiffs on this point. For as they received the information, if they wished to rescind the contract, they ought, without any unnecessary delay, to have communicated to the defendants their wish to do so. Instead of so doing, they still continued to work the mine, and to test its value — “ so that, if it turned out not to be rich, they might fall back upon the objection that there was a bye-bidder ” — as observed by his Honor Judge Pears ow, in delivering the former opinion, above referred to. u There must be good faith on each side, and as soon as a purchaser finds out there has been bye-bidding, he must make his election.” It is said that the plaintiffs were entitled to take time to ascertain the facts, before they could be required to involve themselves in a lawsuit. That is true ; but as soon as they discover the fact of the bye-bidding, they must make their election, and notify the vendors of their wish to annul the contract on that ground. By so doing, they put it in the power of the latter to rescind, and thereby enable themselves to look oitt for another purchaser ; and not, as in this case, keep the property twelve or eighteen months, and then ask for a cancellation. A plaintiff in Equity recovers upon the allegations of his bill; and only when they are supported by sufficient evidence. Here the allegation of the time when they discovered tire alleged fraud is too indefinite. « Until long after the sale ” conveys no precise idea as to time, and no dates are given ; and according to the testimony of Weaver, viewed in any aspect, the plaintiffs delayed too long in making their election.

Per Curiam. Bill dismissed with costs.