Изображения страниц

and the printed copy of the constitution and by-laws copyrighted, and bearing in mind, also, that Beach, one of the complainants, drafted the assignment for Burk to execute, and thus became critically familiar with the language employed and all its limitations, it seems that there was no opportunity for misunderstanding the facts, or no actual misrepresentation or suppression of any of them. Reference to the assignment in question discloses that Burk intended to convey and complainants to acquire the right to exploit the copyright throughout the states of Wisconsin, Minnesota, North Dakota, South Dakota, Montana, Idaho, Washington, Oregon, and California, and this right only. Language cannot be plainer than that employed by the parties to this contract. The assignor, after reciting that he, on a date mentioned, had secured a copyright for the Harrison Mutual Burial Association, says that he has assigned to Johnson, Beach & Co. "all right, title, and interest for and within" the states named “in the said Harrison Mutual Burial Association as secured to him by said copyright; the same to be held and enjoyed by the said Johnson, Beach & Co. * * * to the full end of the term for which said copyright was issued, * as fully and entirely as the same would have been held and enjoyed by him had this assignment and sale not been made." Such was their contract-a clear and explicit assignment of such rights, and only such rights, as were conferred by the copyright. Any opinions expressed concerning what those rights were are opinions concerning the law, and, in the absence of any misunderstanding of the facts or bad faith, do not afford the basis of an action for deceit or for rescission of the contract.

* *

The Supreme Court of the United States in Upton v. Tribilcock, 91 U. S. 45, 50, 23 L. Ed. 203, says:

"That a misrepresentation or misunderstanding of the law will not vitiate a contract where there is no misunderstanding of the facts is well settled."

Then, adopting the language of Fish v. Cleland, 33 Ill. 243, the

court says:

"A representation of what the law will or will not permit to be done is one on which the party to whom it is made has no right to rely; and if he does so it is his folly, and he cannot ask the law to relieve him from the consequences. The truth or falsehood of such a representation can be tested by ordinary vigilance and attention. It is an opinion in regard to the law, and is always understood as such."

-Citing Starr v. Bennett, 5 Hill (N. Y.) 303; Lewis v. Jones, 4 B. & C. 506; Rashall v. Ford, Law Rep. 2 Eq. 750. In the same case the learned justice uses the following language: "The rule that a mistake of law does not avail prevails in equity as well as at common law”—citing Bank of U. S. v. Daniel, 12 Pet. 32, 9 L. Ed. 989; Hunt v. Rousmanier, 1 Pet. 1, 7 L. Ed. 27; Id., 8 Wheat. 174, 5 L. Ed. 589; Mellish v. Robertson, 25 Vt. 603. See, also, Travelers' Ins. Co. v. Henderson, 16 C. C. A. 390, 69 Fed. 762, and Patent Title Co. v. Stratton (C. C.) 89 Fed. 174.

We are aware that the rule just alluded to is not an inflexible one; it has been departed from in exceptional cases.

In Griswold v. Hazard, 141 U. S. 260, 284, 11 Sup. Ct. 972, 999,

35 L. Ed. 678, these exceptions are considered. After affirming the general rule just adverted to, the court says:

"Yet the rule that an admitted or clearly established misapprehension of the law does create a basis for the interference of courts of equity, resting on discretion and to be exercised only in the most unquestionable and flagrant cases, is certainly more in consonance with the best considered and best reasoned cases upon this point, both English and American."

In the light of what has already been said concerning the facts of this case, we cannot place it among the exceptions. The Griswold Case was based, in part, at least, upon an alleged mutual mistake of the parties. In that respect, also, it affords no parallelism to the case before us.

Another well-recognized rule precludes recovery by complainants. in this case. It was not reasonable prudence on their part to act upon the opinion of Burk concerning their legal rights under the assignment which they took. Burk, as disclosed by his letters and testimony, was an ignorant man. He was not a lawyer, and did not pretend to be versed in the law. He was interested adversely to complainants. There existed no occasion for immediate or hasty action. The papers involved in the transaction were left by Burk in Wichita for about two months in escrow before the transaction was closed by their interchange. Burk left Wichita immediately upon their execution and delivery in escrow. Complainants, who resided there, remained there. Ample time was afforded for consultation and information concerning their rights. No lawyers were consulted concerning them, and no other information apparently desired or secured.

In Slaughter's Administrator v. Gerson, 13 Wall. 379, 20 L. Ed. 627, the Supreme Court, by Mr. Justice Field, laid down the governing principles on this subject. He says:

"The misrepresentation which will vitiate a contract of sale, and prevent a court of equity from aiding its enforcement, must * relate to a matter respecting which the complaining party did not possess at hand the means of knowledge. * * A court of equity will not undertake, any more than a court of law, to relieve a party from the consequences of his own inattention and carelessness. Where the means of knowledge are at hand and equally available to both parties, and the subject of purchase is alike open to their inspection, if the purchaser does not avail himself of these means and opportunities, he will not be heard to say that he has been deceived by the vendor's misrepresentations. If, having eyes, he will not see matters directly before them where no concealment is made or attempted, he will not be entitled to favorable consideration when he complains that he has suffered from his own voluntary blindness, and been misled by overconfidence in the statements of another."

In Farnsworth v. Duffner, 142 U. S. 43, 12 Sup. Ct. 164, 35 L. Ed. 931, the Supreme Court, speaking by Mr. Justice Brewer, after referring with approval to the Slaughter Case, quotes from Atwood v. Small, decided by the House of Lords, and reported in 6 Cl. & Finn. 232, 233, as follows:

"If a purchaser, choosing to judge for himself, does not avail himself of the knowledge or means of knowledge open to him or to his agents, he can not be heard to say he was deceived by the vendor's representations."

In Clark v. Reeder, 158 U. S. 505, 524, 15 Sup. Ct. 849, 39 L. Ed. 1070, referring to Farnsworth v. Duffner, the court says:

"In respect to such an action, it has been laid down by many authorities that, where means of knowledge respecting the matters falsely represented are equally open to purchaser and vendor, the former is charged with knowledge of all that by the use of such means he could have ascertained."

See, to the same effect, 2 Pom. Eq. Jur. § 892; Southern Development Co. v. Silva, 125 U. S. 247, 8 Sup. Ct. 881, 31 L. Ed. 678, and Upton v. Tribilcock, supra, wherein it is said:

"Equity will not assist a man whose condition is attributable only to that want of diligence which may be fairly expected from a reasonable person."

The means of knowledge as to what Burk conveyed by the assignment of the copyright were as available to the complainants as to the defendant. It was a question of law pure and simple, and whether the plan of operation suggested by the copyright was one that subjected the operators to the provisions of the insurance laws of any state was also a question of law. Complainants had ample opportunity to submit these legal questions to competent counsel, and ample time within which to do it before their situation was at all changed. Their reliance upon what Burk said, under such circumstances, was not the act of a prudent person. It did not evince ordinary discretion or diligence, and does not justify their resort to a court of equity to right; the same to be held and enjoyed by the said Johnson, Beach relieve them against his alleged misrepresentations.

If the representations were material, and were made as charged in the bill, did not the complainants, on learning their falsity, elect to ratify the contract notwithstanding?

About August 1, 1902, both Johnson and Beach started into the new enterprise. They first went to Minneapolis, and were forthwith informed by attorneys that their business conducted under the articles and by-laws of the Harrison Mutual Burial Association would subject them to the provisions of the insurance laws of Minnesota. After becoming satisfied that such was the case, they proceeded to incorporate under the laws of Minnesota, and otherwise to conform thereto, so as to qualify them to prosecute business in that state. It also appears that they found two different companies or associations organized in Minneapolis for similar purposes as their own.

On September 19, 1902, complainants wrote Burk a letter, which, after some highly decorous observations against resorting to political influences to further their ends, reads as follows:

"Now don't conclude by this that we have given up the idea of succeeding with this meritorious business, for we have not. But we have got to add some of our own merit and money as well. We have found out by advising with the best legal talent that we will have to conform to the insurance laws of Minnesota to operate here. Now we inclose two ads. of so called Mutual Burial Ass'n, and copyrighted, too. What are they? People here say, why, if I can get this for $200 what do I want of the Harrison. Will you kindly send us some of their literature, that we may be advised and know how to meet these unusual and unlooked for propositions."

It is to be observed from the foregoing letter that although complainants, soon after starting out in their venture, were advised of facts clearly showing that the representations which they claim to have

relied on were false, they fail, in the first letter communicating those facts to Burk, to allude to any deception practiced by him, or to any claim of right to cancellation or modification of their contract.

Later, on November 19th, in a letter written by Johnson for his firm to Burk, he states that they had been having "the hardest time of their lives in Minnesota. * * ** We fought hard, but all of no avail. I have spent lots of time and money. I expect to do better out west." Still no complaint, but a determination to go on in the prosecution of their business. Beach was left in Minnesota to conduct the business there, and Johnson started westward. He subsequently went to all the principal places in his territory, Butte, Spokane, Seattle, Tacoma, Portland, and some other little towns. He says he had no trouble at Butte, but sold that territory to another. At Spokane he made satisfactory arrangements, and went on to Portland, where he received a letter informing him that a big undertaker at Spokane had organized an association identical with theirs called the Martha Washington, collecting money by assessment for burial purposes. He says he found the Martin brothers, from Illinois, had gone all over their territory, offering to sell it on about the same plan as Burk did. These are things which, on complainants' theory, should have moved Johnson to a most vigorous protest, and which, as will be later seen, demanded immediate action if rescission was contemplated. But such was not the case.

On November 29th, in a letter written from Tacoma, Johnson says to Burk:

"Please write me a good letter, stating how the H. M. B. Asso. is getting, along at different places, and if there are any other associations that are doing anything. This will help me in trying to sell this territory.


On February 17, 1903, Johnson writes to Burk, informing him that he had just sold two towns for $125, $45 cash and $80 on time. The correspondence shows no complaint until January 15, 1903, when Beach wrote Burk the following letter:

"Mr. W. A. Johnson writes me from Washington that there is a burial association organized at Spokane, Washington, practically the same plan as the Harrison. We request you to look after and it up at once as per your agreement with us."

On February 8, 1903, Beach wrote Burk another letter as follows: "There is an organization here in Minneapolis called the Friendly Aid, Society. Its sole purpose is the burial of its dead, and it workings are practically the same as the Harrison. I inclose some of their literature. Now we demand that you attend to this at once."

These letters, instead of indicating an election to rescind by reason of any representations, plainly recognize the contract as made to be in force. They call upon Burk to perform what complainants say was one of its stipulations. This and other reliable testimony establish the following facts: Complainants secured the right to sell and use the copyrighted articles through an extended territory and with it the advantage of the prestige which a large number of prosperous associations organized under them afforded. After they had received positive information of the existence of conditions different

from those claimed to have been represented by Burk, they took no action to rescind the contract, but proceeded to exercise its privileges, speculate upon its possibilities, and receive and enjoy its fruits. Not a word of complaint concerning defendant's conduct was made for about six months, and then, instead of a notice of a rescission of the contract, a demand for its performance followed. Nothing different is disclosed by the record until the institution of this suit in September, 1903. It was then too late. They had already waived all objections which they could have made by reason of the fraud, and elected to proceed in the execution of their contract notwithstanding it.

In the leading case of Grymes v. Sanders, 93 U. S. 55, 23 L. Ed. 798, the Supreme Court lays down the following rule:

"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."

In McLean v. Clapp, 141 U. S. 429, 12 Sup. Ct. 29, 35 L. Ed. 804, the doctrine of the last-mentioned case is repeated and reinforced. In Scheftel v. Hays, 7 C. C. A. 308, 58 Fed. 457, and in Stuart v. Hayden, 18 C. C. A. 618, 72 Fed. 402, this court has spoken in no uncertain voice on these questions. In the latter case it made use of the following:

"If one who is induced to make a trade or sale by fraud would rescind it, he must immediately, upon his discovery of the fraud, announce his intention so to do, and return all the consideration he has received, to the end that the parties may be put in statu quo before subsequent transactions have made action impossible. Silence, delay, vacillation, acquiescence, or the retention and use of any of the fruits of the sale or trade that are capable of restoration for any considerable length of time after the discovery of the fraud constitute a complete and irrevocable ratification of the transaction."

See, to the same effect, Pom. Eq. Jur., vol. 2, § 897, and E. Bement & Sons v. La Dow (C. C.) 66 Fed. 185, and cases cited.

Applying the doctrine of the foregoing cases, complainants must be held, under the facts disclosed by this record, to have elected to ratify the contract in question, even if it was procured by false and fraudulent representations.

It is urged in argument that the failure and inability of complainants to restore or offer to restore the consideration received by them or to place the defendant in statu quo is fatal to their right of relief. In the view we have taken of other and controlling issues, we deem it unnecessary to express our opinion as to the application of this principle. The deed executed, acknowledged, and deposited in escrow by Johnson and his wife was for the convenience and at the request of Burk executed in blank, the name of the grantee being omitted, with the agrement made at the time that Burk might thereafter direct what name should be inserted. Presumptively, as the consideration. for the assignment of the copyright was payable to Burk, he had a right to fill in his own name. He subsequently did so, and caused the

« ПредыдущаяПродолжить »