PART I. CHAPTER II. SECT. 1. 2. Classes of there is fraud. 2. Where no fraud. CHAPTER II. TRUSTEES BY VIRTUE OF A CONSTRUCTIVE TRUST. WHEREVER the circumstances of a transaction are such, that the person, who takes the legal estate in property, cannot also enjoy the beneficial interest, without necessarily violating some established principle of equity; the court will immediately raise a constructive trust, and fasten it upon the conscience of the legal owner, so as to convert him into a trustee for the parties, who in equity are entitled to the beneficial enjoyment. These constructive trusts may be separately considered under two distinct classes of cases: one where the acquisition of the legal estate is tainted with fraud either actual or equitable. And the other, where the trust depends upon some general equitable rule, independently of the existence of fraud. SECT. 1.-Where the Acquisition of the Legal Estate is In cases of fraud, whether constructive or actual, courts of equity have adopted principles extremely broad and comprehensive in the application of their remedial justice and especially where there is any fraud affecting the acquisition of property, they will interfere and administer a wholesome justice, and sometimes even a stern justice in favour of innocent persons, who are sufferers by it without any fault on their own side. And this is readily done by converting the offending party into a trustee, and making the property itself subservient to the proper purposes of recompense by way of equitable trust (a) *. (a) 1 Story Eq. Jur. 475. *A deed may be avoided at common law on the ground of its being obtained by fraud; and indeed the question of fraud or no fraud in obtaining a will of real estate can be tried in a court of law only. The jurisdiction of courts of equity therefore in cases of fraud is merely concurrent with that of the courts of law. But the proceedings in courts of equity are much better adapted for the investigation and trial of such questions; and there are many cases of fraud, wholly beyond the reach of courts of law, of which equity will take cognizance. The consideration of these questions therefore with the exception of wills is in practice almost exclusively vested in the Court of Chancery. 3 Bl. Comm. 431; 1 Fonbl. Eq. B. 1, Ch. 2, s. 3; 1 Mad. Ch. Pr. 341; 1 Stor. Eq. Jur. 159. A feme coverte is answerable for an act of fraud in a court of equity, as much as if she were a feme sole. Jones v. Kearney, 1 Dr. & W. 134, 167. PART I. Div. II. CHAPTER II. SECT. 1. The court has never ventured to lay down as a general proposition, what shall constitute fraud (b); nor can any invariable rule be established on this point. Fraud is infinite, and were the court to lay down rules, how far it would go in extending relief against it, the What constijurisdiction would be cramped, and perpetually excluded by new tutes fraud. schemes, which the fertility of man's invention would contrive. Therefore if a case of fraud, or presumption of fraud, should arise, to which no case previously decided, or even no principle already established, can be applied, a new principle would be established to meet the fraud; as the principles, on which former cases have been decided, have been from time to time established, as fraud contrived new devices (c). However we will now proceed to consider some of the principal cases, in which a constructive trust has been established on the ground of fraud. In Chesterfield v. Janssen (d), Lord Hardwicke distinguished the Four classes of cases of fraud, against which the court will relieve, into four classes. fraud. 1st, Fraud, arising from facts and circumstances of imposition, which is the plainest case. 2nd, Fraud, apparent from the intrinsic value, and subject of the bargain itself; such as no man in his senses, and not under delusion would make on the one hand, and as no honest or fair man would accept on the other. 3rd, Fraud, which may be presumed from the circumstances, and condition of the parties contracting; a rule which is wisely established by the court to prevent taking surreptitious advantage of the weakness or necessity of another. And 4th, Fraud, collected from the circumstances of the transaction, as being an imposition or deceit upon other persons not parties to the fraudulent agreement (d). arising from facts of imposition. We will now proceed cursorily to consider these several species of 1st, Fraud fraud, so far as they bear on the subject now under discussion. And 1st, Of fraud arising from facts or circumstances of imposition. Wherever a person is entrapped into the execution of an instrument Surprise, intithrough a conspiracy or combination for that purpose, or by surprise, midation, &c. oppression, intimidation, or any other practice at variance with fair dealing; that clearly comes within the first and plainest class of cases for equitable relief; and the court will not suffer the parties to avail themselves of the legal rights thus acquired, but will interpose and give redress (e). And so where a deed, or other instrument conveying an interest Misrepresen (b) Per Lord Eldon in Mortlock v. Buller, 10 Ves. 306; Lawley v. Hooper, 3 Atk. 279. (c) 1 Mad. Ch. Pr. 341, 3rd ed. (d) Chesterfield v. Janssen, 2 Ves. 155. (e) Earl of Bath and Montague's case, 3 Ch. Ca. 56; Bennet v. Vade, 2 Atk. 324; Neville v. Wilkinson, 1 Bro. C. C. 546; tation or con Evans v. Llewellyn, 1 Cox, 340; Willan v. cealment. PART I. Div. II. CHAPTER II. SECT. 1. in property, however formally and solemnly it may be executed, is obtained by means of some misrepresentation, or concealment of facts, or more strongly still, by both of those means together; the party taking under such an instrument will be treated as a trustee for the person, whom he has thus fraudulently induced to execute it; and at the suit of the injured party the instrument will be decreed to be delivered up, and a reconveyance executed (f). It has been laid down, that this equitable relief will be equally administered, whether the fraud consist of a positive misrepresentation, Suggestio falsi. or of a wilful concealment of fact, whether it be by suggestio falsi or suppressio veri (g). But first of those cases, where there has been suggestio falsi. Where the devisee under a will, which was defectively executed, represented to the heir, that the will was duly executed, and thus induced the heir to execute a deed of conveyance of the devised estates to him for a small pecuniary consideration, the court relieved against the effects of the conveyance on the ground of the fraud (h). So where an executor obtained a release from a legatee by means of a false representation to the legatee, that she had no legacy, the release was set aside (i). And on the same principle the court will not recognize an interest under a contract which has been acquired by means of a false statement, that the party was acting for another person; if it be proved that the false statement induced the other party to enter into the contract, or occasioned him any loss or inconvenience (k). In like manner where a party had obtained an agreement for an exchange of estates by a false representation as to part of the property, that the tenants consented to the exchange; it was held by Sir Thos. Plumer, M. R., that the agreement was altogether vitiated by this misrepresentation (1) *. It was decided moreover by this last case, that where a fraudulent misrepresentation applies to part only of the subject-matter of a trans (f) 1 Fonbl. Eq. B. 1, C. 2; 1 Mad. Ch. Pr. 348; Mitf. Eq. Pl. 128, 4th ed.; 1 Story Eq. Jur. 165, &c. 175. (g) Jarvis v. Duke, 1 Vernon, 19; Broderick v. Broderick, 1 P. Wms. 239. (h) Broderick v. Broderick, 1 P. Wms. 239. (i) Jarvis v. Duke, 1 Vern. 19; and see Murray v. Palmer, 2 Scho. & Lef. 474; James v. Greaves, 2 P. Wms. 270; Horseley v. Chaloner, 2 Ves. 83. (k) Phillips v. Duke of Bucks, 1 Vern. 227; Harding v. Cox, ib. n.; Scott v. Langstaffe, Lofft, 797, 8, cited Fellows v. Lord Gwydyr, 1 Sim. 63; S. C. 1 R. & M. 83; see 1 Sugd. V. & P. 211, 9th ed. (1) Clermont v. Tasburgh, 1 J. & W. 112. * In the case of Turner v. Harvey it was observed by Lord Eldon, that although a purchaser is not bound to give to a vendor information as to the value of the property, yet "if a word, if a single word be dropped, which tends to mislead the vendor, that principle will not be allowed to operate." Turner v. Harvey, Jac. 178. action; the party affected with the fraud cannot support the transaction as to the remaining parts, but the fraud will operate, if at all, to vitiate and destroy the contract in toto (m). It seems to be immaterial whether the misrepresentation be made with full knowledge of its being false, or in ignorance whether it be true or false; in either case, if it had the effect of deceiving the other party, it will equally affect the conscience of the party, by whom it is made (n); and it has even been decided to be immaterial, that the false statement is made innocently and by mistake, if the falsehood has been the inducement to the other party to act (0). The misrepresentation may be equally a matter of equitable cognizance, whether it be by deeds as by words; by artifices to mislead, or by positive assertions. A court of equity, said Lord Thurlow, would make itself ridiculous if it permitted a distinction between the two cases (p). PART I. Div. II. CHAPTER II. SECT. 1. sentation must be material. And of facts not equally known to both However it is not every misrepresentation, even though wilful or The misreprefraudulent, that will go to the extent of avoiding a conveyance or agreement: nor is it fitting; as that would occasion great uncertainty. The fact misrepresented must be something material, and such as goes to the essence of the contract (q). Moreover the truth or falsehood of the representation must lie exclusively within the knowledge of the person, by whom it is made; and it must have the effect of parties. deceiving the other party into the transaction. Thus where the subject of the misrepresentation is merely a matter of opinion, as for Nor a mere instance as to the value of the property; or facts which lie equally within the knowledge of both parties; or statements, which it is mere folly on the part of a vendor to give credence to; for instance the amount, which other parties would give for the property, or other similar assertions; the court will not interfere to relieve a party from the consequences of his own folly or carelessness (r). matter of opinion. between suits by and those fraudulent person. It is to be observed, that the effect of misrepresentation in vitiating Distinction a transaction has been most frequently considered in suits by the fraudulent persons for the specific performance of agreements, which against the had been obtained by the misrepresentations of the plaintiffs themselves. It is an universal rule, that a party coming into equity to enforce a specific performance, must appear with clean hands; and very slight proof of improper conduct, in obtaining the agreement, will be sufficient for the court to refuse to enforce its execution. (m) S. C. 1 J. & W. 120; but see Lane v. Page, Ambl. 235. (n) Ainslie v. Meddlicott, 9 Ves. 21. (0) Pearson v. Morgan, 2 Bro. C. C. 385; Burrowes v. Lock, 10 Ves. 470. (p) Neville v. Wilkinson, 1 Bro. C. C. 546; see Chesterfield v. Janssen, 2 Ves. 155; 1 Story Eq. Jur. 166; Huguenin v. Basely, (g) 1 Fonbl. Eq. Ch. 2, s. 8; 1 Stor. Eq. (r) 1 Fonbl. Eq. Ch. 2, s. 8; 1 Madd. Ch. Pr. 349; 1 Sugd. V. & P. 6; 1 Story Eq. Jur. 168; Vernon v. Keys, 12 East, 632. PART I. Div. II. SECT. 1. But where the court is required to interfere actively against the CHAPTER II. legal or equitable rights of a party, claiming under a deed or agreement, a much stronger case must be established; and the subject and extent of the false representation, as well as its other circumstances and consequences, must be such, as according to the foregoing observations will clearly and unequivocally amount to a case of fraud (s). Suppressio veri. What concealment of facts will raise an equity. It is undoubtedly true, that a concealment of facts, or suppressio veri will not of itself constitute so strong a case of fraud as where there has been suggestio falsi. Thus in the ordinary relation between a vendor and purchaser, it has been decided, that the mere concealment by the purchaser of a fact, tending materially to enhance the value of the property, as for instance the existence of a mine, will not of itself avoid the transaction as fraudulent; although, as has been observed by Lord Eldon, a word, a single word, tending to mislead the vendor, will have that effect (t). But where the concealment amounts to a wilful suppression of facts by a party for his own benefit, and the consequent injury of another, under circumstances, which render it his duty to have disclosed those facts to the other party, and in respect of which he could not innocently have remained silent, it is beyond all question, that such undue concealment will amount to a case of fraud, against the consequences of which the injured party will be relieved by a court of equity (u). Thus where a party, in treating for a purchase of a reversion after the determination of two estates for life, carefully suppressed the fact of the death of one of the tenants for life, and by that means obtained a much better bargain, Lord Eldon set aside the purchase (x). And in another case where the younger of two brothers disputed the legitimacy of the elder, an agreement between them for the division of the family estates was rescinded by the same eminent judge: the younger brother having been apprized at the time of the agreement, that the parents had been married before the birth of the elder brother, and not having communicated that fact to the elder brother (y). And in a later case a purchase by a managing partner of his copartner's share for a sum, which he knew to be inadequate from accounts which were in his possession, but which he did not communicate to his co-partner, was set aside by the Vice-Chancellor (Sir John (s) Willan v. Willan, 16 Ves. 83; Cadman v. Homer, 18 Ves. 10; Mortlock v. Buller, 10 Ves. 292. (t) Fox v. Macreth, 2 Bro. C. C. 420; Turner v. Harvey, Jac. 178; 1 Sugd. V & P. 6. (u) Fox v. Macreth, 2 Bro. C. C. 420; Gordon v. Gordon, 3 Swanst. 470, 7; Bowles (x) Turner v. Harvey, Jac. 169. |