3868. There are not many relations in social life where one man depends upon the judgment and integrity of another more than in the connection which subsists between principal and agent. Courts of equity, therefore, look upon contracts made between these parties with the same jealous care with which they watch the contracts made between other persons standing in a fiduciary situation. Secret agreements, by which agents become sellers or buyers of property which they are to buy or sell for their principals, and by which they are to derive any benefit unknown to the principal, will be declared void, as being opposed to justice and sound policy. If an agent, employed to purchase a piece of land for another, buys it for himself, the courts of equity will turn him into a trustee for his principal." 98 In the bargains openly made between them respecting the property which is the object of the agency the utmost good faith is required. The agent must disclose all facts within his knowledge which might in any degree influence the judgment of his principal as to the price or value; for when he does not, the parties do not deal upon equal terms and the agent obtains an unjust advantage, for which the contract will be set aside.99 Indeed, any unreasonable gifts from the principal, or advantages obtained by the agent when procured by an abuse of confidence, will be set aside.100 3869. In entering into the contract of suretyship, the surety has a right to rely with entire and full confidence on the representations of all the material facts upon the statements of the creditor, and any statements made to him, either by the creditor himself or by the debtor, with his knowledge, which are material and false, will avoid his contract. The creditor is bound in all things to act in good faith, not only in making the contract, but in all subsequent transactions with the debtor; he is also bound to act with good faith toward the surety.101 3870. Whenever the contracts of individuals operate substantially upon the rights and interests of third persons, or unconscientiously compromit the rights and injuriously affect the interests of the parties themselves, they will be considered as fraudulent, and for these reasons a court of equity will set them aside. Fraud assumes every shape, so that it is extremely difficult to classify those cases which affect third persons. This third kind of constructive frauds will be examined as they relate to catching bargains, to bargains with sailors for their wages, to agreements to delay or defraud creditors, to contracts where a person purchases with full notice of the legal or equitable title of another. 3871. The first kind of constructive frauds against the rights of third persons is a catching bargain. This is an agreement made with an heir expectant for the purchase of his expectancy at an inadequate price. A sale of an expectancy is considered fraudulent as regards third persons, and if such a right subsisted, it would be destructive of parental or quasi-parental authority. Such a contract may be clear of actual fraud, but it is always tinctured with constructive fraud, as being an imposition on persons not parties to it. To support such contract the purchaser is called upon to establish, not merely that there is no fraud, but that a full and adequate consideration has been paid, 98 Lees v. Nuttall, 1 Russ. & M. Ch. 58; Benson v. Heathom, 1 Younge & C. Ch. 326; Green v. Winter, 1 Johns. Ch. N. Y. 27; Church v. Marine Ins. Co., 1 Mas. C. C. 341; Barker v. Marine Ins. Co., 2 id. 369; Torrey v. Bank of New Orleans, 9 Paige, Ch. N. Y. 649; Ringo v. Binns, 10 Pet. 269. 99 Farnam v. Brooks, 9 Pick. Mass. 212. 100 Crowe v. Ballard, 3 Brown, Ch. 120; Massey v. Davies, 2 Ves. Ch. 318; Church v. Mar. Ins. Co., 1 Mas. C. C. 341; Barker v. Mar. Ins. Co., 2 Mas. C. C. 369. 101 This matter has been fully considered under the head of suretyship, before, 1410, et seq. VOL. II.-3 O 505 for a mere inadequacy of price is alone, in cases of this kind, a sufficient ground to set aside such a contract.102 3872. The same rule applies to the case of a reversioner or remainder-man, who has an estate, but no right of present enjoyment, and who, through necessity, or from mere giddiness and improvidence, sells his rights much below an adequate price. In cases of sale by such reversioners or remainder-men, or other persons similarly situated, the courts of equity assume that the party is defenceless, exposed to the demand of the opposite party, under the pressure of necessity; also, that there is an actual or implied fraud upon the parent or other ancestor, who is misled, in consequence of his ignorance, and induced to repose with a false confidence in the disposition of his property.103 3873. To constitute this constructive fraud there must be, first, ignorance of the transaction by the parent or person standing in loco parentis; and, secondly, the contract must have been made under some pressing necessity. When the transaction has been made fully known to the parent or other person standing in loco parentis, the contract will not be fraudulent, and a fortiori; it will be good when, knowing it, he approves of it; 104 or, The contract must have been made under a pressure of necessity, because the pressure and distress of the party dealing is the true ground of the court's interference. It is not requisite that both ignorance on the part of the ancestor and pressure should exist at the same time; to entitle the party to relief, the presence of one of them forms an essential ingredient in a case to give rise to a just presumption of constructive fraud.105 3874. There is another species of contracts made with heirs expectant, secured by an instrument called a post obit bond. A post obit bond is a written agreement, by which the obligor binds himself to pay a sum of money which is lent to him, with greater interest than the rate fixed by law, to be paid upon the death of a person from whom he has some expectation.106 Equity will, in general, relieve from these unequal contracts, not only because they are unfair with regard to the parties, but also because they are fraudulent toward the ancestor, by disappointing his intentions. But as it is a rule that he who seeks equity must do equity, relief will be granted to such an obligor only upon equitable terms.107 3875. It is known that sailors, that is, common mariners, in the mercantile or naval service, are extravagant and heedless, and apt to part with their rights to receive wages and prize money without sufficient reflection. Courts of equity, therefore, watch with a jealous care over their interests, and consider them in the same light that young heirs and expectants are looked upon. Contracts 102 1 Maddock, Chanc. Pract. 117, 118; Peacock v. Evans, 16 Ves. Ch. 512; Gowland v. De Faria, 17 Ves. Ch. 20; Chesterfield v. Janssen, 2 Ves. Ch, 149. 103 Shelly v. Nash, 3 Madd. Ch. 232; 1 Fonblanque, Eq. B. 1, c. 2, 12, note (k); Jeremy, Eq. Jur. 398, 399. 104 King v. Hamlet, 2 Mylne & K. Ch. 473; Fitch v. Fitch, 8 Pick. Mass. 480; Trull v. Eastman, 3 Metc. Mass. 123. 105 Postmore v. Taylor, 4 Sim. Ch. 182; Davis v. Marlborough, 2 Swanst. Ch. 139. It is highly probable the rules adopted by courts of equity in cases of this kind are borrowed from the Roman law. A decree called Macedonian, from Macedo, a noted usurer at Rome, was made by the senate, which forbid the loan upon a ruinous interest, as had been the case under that usurer. Before the passage of this decree, a loan was frequently made to children who were under paternal power, upon condition that they should pay exorbitant interest. This decree deprived the usurer of any action for such a loan. Dig. 14, 6, 1 to 7; Inst. 4, 7, 7; Code 4, 28; see Domat, Lois Civ. liv. 1, t. 6, s. 4; Fonblanque, Eq. B. 1, c. 2, 12, note (); Chesterfield v. Janssen, 2 Ves. sen. Ch. 158. But if the father, or person standing in loco parentis, consented to the loan, it might be recovered. Inst. 4, 7, 8. 106 Chesterfield v. Janssen, 2 Ves. sen. Ch. 157 Boynton v. Hubbard, 7 Mass. 119. 107 Fonblanque, Eq. B. 1, c. 2, 13, note (p). made by them for the transfer of their wages and prize money will be set aside, whenever any inequality appears in the bargain, or any undue advantage has been taken of them.108 3876. A third class of constructive frauds against the rights, duties, or interests of third persons, includes those agreements and contracts of parties which tend to delay, deceive, or defraud creditors. Courts of equity will relieve in all such cases, as being fraudulent, and within statutes passed in different reigns,109 the principles of which have been re-enacted or adopted in this country. The effect of these statutes having been considered when we were treating of contracts, it will not be requisite to do any thing further than to refer to what was then said.110 3877. There is a fourth class of constructive frauds, which consists of cases where a party buys with full notice that another has a legal or equitable title to the same property. By this means he becomes a particeps criminis with the fraudulent grantor, and, both at law and in equity, he will be postponed in the assertion of his rights to the true owner. In such cases courts of equity will treat the purchaser as a trustee for the person whom he intended to defraud. If, for example, a mortgagee, with a notice of a trust, should get a conveyance from a trustee, in order to protect his mortgage, he would be considered a trustee, and made responsible as such." In the sale of land, the recording of the deed is sufficient notice to all the world.112 The object of the recording acts is to prevent impositions upon purchasers and mortgagees through prior secret conveyances and incumbrances, and those who would be affected by them are notified by the registry. If a party, having obtained a mortgage or a conveyance, neglect to put it upon record, he is, for his neglect, postponed to another who has procured his to be registered. 3878. The notice which affects a man's contracts may be actual or express, by which the knowledge is brought home to him directly. It may also be constructive, that is, there may exist facts from which the presumption of notice arises with such force that the contrary cannot be proved, or even controverted." As a general rule, whatever facts have a reasonable certainty as to time, place, circumstances, and persons, are considered as sufficient notice in equity, and the person knowing those facts is bound to inquire into all other circumstances of which they are evidence, by which he may be affected in his interest; for example, notice of a lease is notice of its contents; notice that an estate which a man has purchased is in the possession of tenants, is notice that they have some rights of which he ought to inquire. But vague rumors and mere suspicions will not be sufficient notice; still, it is very difficult to say what extent of information will be such a notice as will affect a party. 114 108 Jeremy, Eq. Jur. 401; 1 Story, Eq. Jur. & 332; How v. Weldon, 2 Ves. Ch. 516, 518; 3 P. Will. Ch. 131, Cox's note (1); The Juliana, 2 Hagg. Adm. 504. 109 50 Edw. III, c. 6; 3 Henry VII, c. 4; 13 Eliz. c. 5; 27 Eliz. c. 4. 110 Before, 2014. Fonblanque, Eq. B. 2, c. 6, s. 2; Saunders v. Dehew, 2 Vern. Ch. 271. 112 Parkhurst v. Alexander, 1 Johns. Ch. N. Y. 394; see Wilt v. Franklin, 1 Binn. Penn. 522. 113 Plum v. Fluitt, 2 Anstr. Exch. 438. 114 Fonblanque, Éq. B. 2, c. 6, § 3, note (m); Smith v. Low, 1 Atk. Ch. 490; Mertins v. Jolliffe, Ambl. Ch. 313; Meux v. Maltby, 2 Swanst. Ch. 281; Chesterman v. Gardner, 5 Johns. Ch. N. Y. 29; Daniels v. Davidson, 16 Ves. Ch. 249; Baynard v. Morris, 3 Gill Md. 468; Dane v. Page, 2 Green, Ch. N. J. 143. 507 CHAPTER V. PECULIAR EQUITABLE RELIEF. 3880-3915. The specific performance of agreements. 3881-3889. The nature of the contract. 3882. The form of the contract. 3884. The fairness of the contract. 3885. The certainty of the contract. 3886. The consideration of the contract. 3888. The possibility of the contract. 3889. Certain contracts against public policy not enforced. 3890-3900. The subject matter of the contract. 3891 Contracts relating to personal property. 3894. Contracts relating to the performance of personal acts. 3901-3907. In whose favor specific performance will be decreed. 3902. When specific performance is sought by an original party. 3907. When specific performance is sought by a stranger to the contract. 3908-3910. Against whom a specific performance will be decreed. 3909. When a specific performance will be decreed against an original party. 3911-3915. When a specific performance will be refused. 3912. When there is no equity. 3913. When there is an adequate remedy at law. 3914. When the plaintiff is in default. 3915. When the plaintiff has been guilty of laches. 3916. Relief against forfeitures and penalties. 3920-3926. The cancellation and delivery of instruments. 3921. In cases of fraud. 3926. Where there has been no fraud. 3927. The confusion of boundaries. 3879. Having shown the concurrent jurisdiction of courts of equity with the courts of law, in relation to accidents, mistakes, and frauds, which are the causes why courts of equity interfere, in the present chapter will be considered certain kinds of relief peculiar to equity. In a court of law, when a contract has been broken, the remedy is to recover damages for the non-performance; in equity the courts will decree a specific performance. For the recovery of chattels, detinue and replevin may be had at law; in equity a specific delivery of the chattels will be awarded. In some cases of forfeiture equity will give a remedy when there is none at law; and in many cases when courts of law cannot bestow an adequate remedy, courts of equity will afford one. The matters of this chapter will be distributed into those which relate to the specific performance of agreements; to the relief against forfeitures and penalties; to the cancellation and delivery of instruments; to the confusion of boundaries. 3880. The remedy at law for the breach of a contract is, in general, by giving damages to the party injured commensurate with the loss he has susstained. In many cases, however, it is obvious that compensation of a pecuniary nature must be entirely inadequate to the damages sustained. Hence courts of equity resorted to the enforcement of the contract in the manner agreed upon, by decree and the attendant process, upon filing a bill and making out a sufficient case. Originally, equity interfered only after the complainant had established his rights by an action at law. In time, however, relief came to be granted without sending the parties to law, whenever a case clearly requiring the interposition of equity was made out; and it is now the established course to grant relief, by a decree for specific performance in equity, in favor of a party who establishes an equitable right thereto, whenever the remedy at law is inadequate, either from the nature of the contract or from the character of the subject matter, if the specific execution is possible and can be beneficially accomplished.2 The exercise of jurisdiction is not confined to cases where the remedy at law is inadequate; relief is granted in some cases where there is no remedy at law. For example, where a vendee has entered and made improvements upon land under an oral contract of purchase, a conveyance will, in general, be decreed, although there be no remedy at law. So also where a person has obtained possession of personal property, or the title to real property, under circumstances showing a trust, a specific execution of the trust will be enforced." The inadequacy of the remedy at law is the ground for equitable relief in all cases. In some cases, as in contracts for the purchase of land, this inadequacy is always considered to exist from the nature of the subject matter; in others, as in contracts relating to personal property, it may or may not exist, according to the particular circumstances of the case. Thus, a contract to deliver public stocks, which have an established and easily ascertainable value, and may be readily procured at any time, is not, in general, a subject of specific performance, while a contract for the sale of stock of a particular corporation, which has or may have a special worth to the purchaser, may be decreed to be specifically performed. Of course the grant of this kind of relief is subject to the general rules of equitable interference in other respects. 3881. The nature of the contract must be such that the party claiming rights under it is entitled to equitable relief. A fair and certain contract, upon a substantial consideration, for the performance of a lawful and possible act, must be established. The question of granting or refusing specific performance is addressed to the sound judicial discretion of the court; but where the case comes within the established rules, it is as much a matter of course in a court of equity to decree specific performance as it is to give damages in a court of law." There are cases where a party might recover damages at law in which this form of relief would not be granted; as, for instance, where a contract is founded upon a good merely as distinguished from a valuable consideration." 1 Dodley v. Kinnersley, Ambl. Ch. 406; Hollis v. Edwards, 1 Vern. Ch. 159, 11 Ves. Ch. 592; Wiseman v. Roper, 2 Freem. Ch. 217. 2 McClane v. White, 5 Minn. 178. 3 Jacobs v. Peterborough R. R. Co., 8 Cush. Mass. 225; Eaton v. Whitaker, 18 Conn. 222; Tilton v. Tilton, 9 N. H. 386; Malins v. Brown, 4 N. Y. 403; beyond, 3883. * 1 Story, Eq. Jur. 23 98, et seq. 5 White v. Damon, 7 Ves. Ch. 35; Hall v. Warren, 9 id. 608; Buckle v. Mitchell, 18 id. 111; Revel v. Hussey, 2 Ball. & B. Ir. Ch. 288. 6 Groves v. Groves, 3 Younge & J. 163; Hervy v. Andland, 14 Sim. Ch. 531; White's Appeal, 36 Penn. St. 134; Morris v. Lewis, 33 Ala. N. s. 53; Tomlinson v. York, 20 Tex. 694; Holland v. Hansley, 4 Iowa, 222; Cox v. Sprigg, 6 Md. 274; Ormsby v. Hunton, 3 Bibb, Ky. 298. |